Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7
CASE NO.:
Appeal (civil) 5196 of 2005
PETITIONER:
Government of India & Ors.
RESPONDENT:
Indian Tobacco Association
DATE OF JUDGMENT: 23/08/2005
BENCH:
S.B. Sinha & Dr. AR. Lakshmanan
JUDGMENT:
J U D G M E N T
[Arising out of SLP (Civil) No.15844 of 2004]
S.B. SINHA, J :
Leave granted.
Interpretation of the expression "substitute" falls for determination in
this appeal which arises out of a judgment and order dated 30.01.2004
passed by a Division Bench of the Andhra Pradesh High Court in Writ
Petition No.21674 of 2002.
Shorn of all unnecessary details, the fact of the matter is as under :
The Respondent herein is an Association of the cultivators of
tobacco. An incentive scheme was introduced by the Government of India
in the year 1997 as regard export and import in terms of the Duty
Entitlement Pass Book Scheme, whereby and whereunder 2% incentive was
provided out of the export carried from the notified container depots.
’Guntur’ was not mentioned in the notification dated 7.4.1997 issued
pursuant to or in furtherance of the said policy decision which came into
force with effect from 1.4.1997. In terms of the said notification exemption
was granted from payment of additional duty leviable under Section 3 of the
Customs Tariff Act to those who had been issued a Duty Entitlement Pass
Book by the Licensing Authority. Sub-clause (iv) of Clause (2) of the said
notification states :
"(iv) The said Duty Entitlement Pass Book shall be
valid for twelve months from the date of issue, for
import and export only, at the port of registration
which shall be one of the sea ports at Mumbai,
Calcutta, Cochin, Kandla, Mangalore, Marmgoa,
Chennai Nhava Sheva, Paradeep, Tuticorin and
Visakhapatnam, or any of the airports at
Ahmedabad, Bangalore, Mumbai, Calcutta,
Coimbatore, Delhi, Jaipur, Varanasi, Srinagar,
Trivendrum, Hyderabad and Chennai or any of the
Inalnd Container Depots at Bangalore,
Coimbatore, Delhi, Gauhati, Kanpur, Pimpri
(Pune), Pitampur (Indore), Moradabad, Ludhiana
and Hyderabad.
Provided that the Commissioner of Customs
may by special order and subject to such
conditions as may be specified by him, permit
imports and exports from any other sea port,
airport, inland container depot or through a land
customs stations;"
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7
Indisputably upon representation made by the Respondent-
Association, an amendment to the said notification was made on or about
27.11.1997, the relevant portion whereof is as under :
"(a) for the words "Tuticorin and Vishakhapatnam",
the words "Tuticorin, Vishakapatnam and
Kakinada" shall be substituted; and "
(b) for the words "Ludhiana and Hyderabad", the
words "Ludhiana, Hyderabad, Nagpur, Agra,
Faridabad, Jaipur, Guntur and Varanasi" shall be
substituted."
The Respondent made a representation before the appropriate
authority to the effect that the said notification dated 27.11.1997 would also
cover the period from 7.4.1997 to 27.11.1997 being clarificatory in nature.
The Central Government, however, rejected the said representation made by
the Respondent in terms of its letter dated 23.8.2001, stating :
"3. Therefore, exports of tobacco made during the
period 1.4.97 to 26.11.97 cannot qualify for DEPB
Scheme because it would mean granting retrospective
effect to the said customs Notification which is not
permitted in law.
4. In this regard, I would also like to draw your
attention to the letter of even number dated 10.1.2000 of
my predecessor wherein similar views were expressed."
A writ petition was filed by the Respondents herein questioning the
said order before the Andhra Pradesh High Court. The same was allowed by
reason of the impugned judgment, holding :
"\005In the said notification the place Guntur was not
included and subsequently by an amendment to the said
notification condition (iv) was amended and the place of
Guntur was introduced by way of substitution. The
word substitution would connote that the Government
intended to give benefit to the imports and exports from
Guntur and if really the Government wanted to introduce
and give benefit to the imports and exports from Guntur
from 27.11.1997 they could have issued a separate
notification which would operate as prospective in
nature, but the notification dated 27.11.1997 was only by
way of substitution. Since the legislature intended to
give retrospective benefit to the exports and imports from
Guntur, the said notification dated 27.11.1997 was issued
by substitution\005."
Mr. B. Dutta, the learned Additional Solicitor General appearing on
behalf of the Appellant(s), would submit that the notifications dated
7.4.1997 and 27.11.1997 providing for exemption from payment of
additional custom duty must be strictly construed. Relying on
Commissioner of Central Excise, Chandigarh-I vs. Mahaan Dairies [(2004)
11 SCC 798], the learned counsel would contend that a subordinate
legislation containing exemption from payment of duty would only have a
prospective operation.
Mr. L. Nageshwar Rao, the learned Senior Counsel appearing on
behalf of the Respondent, on the other hand, would urge that by reason of
the import policy for the period 1997-2002, the Union of India only sought
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7
to simplify the procedure for grant of exemption basing the same on the
quality of goods exported on freight on board and as Guntur Railway Station
had all along been an Inland Container Depot; there was no reason as to why
the said place should have been excluded from the purview of the
aforementioned notification.
The learned counsel would contend that having regard to the
representation made by the Respondent-Association, the Ministry of
Commerce, Director General of Foreign Trade in the Tobacoo Board had
requested the Ministry of Finance to pass appropriate orders so as to enable
the exporters of Inland Container Depot, Guntur to avail the facilities of
DEPB Scheme. It was submitted that in relation to the exporters of
embroidered silk garments, made-ups and fabrics, the Government had given
the benefit with retrospective effect, as would appear from the letter of
Ministry of Finance dated 20.12.2001.
An exemption notification, it is trite, must be construed having regard
to the object and purport which the same seeks to achieve.
It is also well-settled that an expression used in a statute should be
given its ordinary meaning unless it leads to an anomalous or absurd
situation.
In Mahaan Dairies (supra), a Division Bench of this Court observed :
"8. It is settled law that in order to claim benefit of
a Notification a party must strictly comply with the terms
of the Notification. If on wordings of the Notification the
benefit is not available then by stretching the words of
the Notification or by adding words to the Notification
benefit cannot be conferred..."
A similar view has been expressed by a Division Bench of this Court
in Tata Iron & Steel Co. Ltd. vs. State of Jharkhand and Others [(2005) 4
SCC 272], in which one of us was a party, stating :
"42. Eligibility clause, it is well settled, in relation to
exemption notification must be given a strict meaning."
However, the question which arises for consideration in this case is as
to what would be the effect of the subsequent notification.
The word "substitute" ordinarily would mean "to put (one) in place of
another"; or "to replace". In Black’s Law Dictionary, Fifth Edition, at page
1281, the word "substitute" has been defined to mean "To put in the place of
another person or thing". or "to exchange". In Collins English Dictionary,
the word "substitute" has been defined to mean "to serve or cause to serve in
place of another person or thing"; "to replace (an atom or group in a
molecule) with (another atom or group)"; or "a person or thing that serves
in place of another, such as a player in a game who takes the place of an
injured colleague".
By reason of the aforementioned amendment no substantive right has
been taken away nor any penal consequence has been imposed. Only an
obvious mistake was sought to be removed thereby.
There cannot furthermore be any doubt whatsoever that when a person
is held to be eligible to obtain the benefits of an exemption notification, the
same should be liberally construed.
The notification dated 7.4.1997 is an exemption notification whereby
and whereunder the export and import policy of the Union of India was
implemented. Exemption from payment of additional duty leviable under
Section 3 of the Customs Tariff Act, was to be granted to an exporter,
provided he possessed a Duty Entitlement Pass Book which was valid at the
ports of registration specified therein.
The proviso appended to sub-clause (iv) of clause (2) of the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7
notification dated 7.4.1997 empowers the Commissioner of Customs to
permit imports and exports from any other seaport, airport, inland container
depot or through a land customs station.
The Commissioner of Customs has advisedly not exercised its
jurisdiction under the proviso appended to sub-clause (iv) of clause (2) of
notification dated 7.4.1997. By reason of the notification dated 27.11.1997,
the only amendment made was the words "Tuticorin and Vishakhapatnam"
were substituted by the words "Tuticorin, Vishakhapatnam and Kakinada",
which are ’seaports’ and the words "Ludhiana and Hyderabad" were
substituted by the words "Ludhiana, Hyderabad, Nagpur, Agra, Faridabad,
Jaipur, Guntur and Varanasi" which are ’inland container depots’.
It is not in dispute that ’Guntur’ was one of the inland container
depots. It is also not in dispute that such duty exemption had all along been
granted for export from ’Guntur’. In terms of the policy decision, the
tobacco exporters had filed blue shipping bills which having not been
accepted and they had no option but to file normal white shipping bills, as
tobacco was a perishable item.
Had the intention of the Government of India been only to extend the
said benefit only to the exporters from any other seaport, airport or inland
container depot, recourse to the proviso appended to sub-clause (iv) of
clause (2) of the notification dated 7.4.1997 could have been taken. But by
reason of the notification dated 27.11.1997, one ’sea port’ and ’six inland
container depots’ have been added. The last two words in the category of
seaport, namely, "Tuticorin and Vishakhapatnam" had been substituted by
the words "Tuticorin, Vishakhapatnam and Kakinada. Similarly the last two
words, namely, Ludhiana and Hyderabad" in the category of inland
container depot had been substituted by the words "Ludhiana, Hyderabad,
Nagpur, Agra, Faridabad, Jaipur, Guntur and Varanasi. It, therefore, cannot
be said to be a case where some other seaports or inland container depots
have been added for the purpose of extension of the benefit but the newly
added seaports or inland container depots had been made a part of the
original notification. The Union of India while making a subordinate
legislation had advisedly used the word "substitution" in place of the word
"addition". The object and purport of the subsequent notification issued by
the Union of India was, thus, to grant the same benefit which had been
granted to the exporters who were registered at the other seaports, airports or
inland container depots as specified in the notification dated 7.4.1997 but
also to those exporters, who had been exporting from such seaports or inland
depots as specified in the amended notification dated 27.11.1997.
If the Central Government intended to extend the benefit to the
members of the Respondent-Association only with prospective effect, it
could have said so explicitly. Such a benefit could also have been extended
by taking recourse to the proviso appended to sub-clause (iv) of clause (2) of
the notification dated 7.4.1997. It may, therefore, be safely concluded that
by reason of the amended notification, the Central Government only
intended to rectify a mistake and, thus, the same will have retrospective
effect and retroactive operation.
In Ramkanali Colliery of BCCL vs. Workmen by Secy., Rashtriya
Colliery Mazdoor Sangh and Another [(2001) 4 SCC 236], a Division Bench
of this Court observed :
"\005What we are concerned with in the present case is the
effect of the expression "substituted" used in the context
of deletion of sub-sections of Section 14, as was
originally enacted. In Bhagat Ram Sharma vs. Union of
India, this Court stated that it is a matter of legislative
practice to provide while enacting an amending law, that
an existing provision shall be deleted and a new
provision substituted. If there is both repeal and
introduction of another provision in place thereof by a
single exercise, the expression "substituted" is used. Such
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7
deletion has the effect of the repeal of the existing
provision and also provides for introduction of a new
provision. In our view there is thus no real distinction
between repeal and amendment or substitution in such
cases. If that aspect is borne in mind, we have to apply
the usual principles of finding out the rights of the parties
flowing from an amendment of a provision. If there is a
vested right and that right is to be taken away, necessarily
the law will have to be retrospective in effect and if such
a law retrospectively takes away such a right, it can no
longer be contended that the right should be enforced.
However, that legal position, in the present case, does not
affect the rights of the parties as such."
In Zile Singh vs. State of Haryana & Ors. [(2004) 8 SCC 1] wherein
the effect of an amendment in the Haryana Municipal Act, 1973 by Act
No.15 of 1994 whereby the word "after" was substituted by the word "upto"
fell for consideration; wherein Lahoti, C.J. speaking for a three-Judge
Bench held the said amendment to have a retrospective effect being
declaratory in nature as thereby obvious absurdity occurring in the first
amendment and bring the same in conformity with what the legislature really
intended to provide was removed, stating :
"23. The text of Section 2 of the Second
Amendment Act provides for the word "upto" being
substituted for the word "after". What is the meaning and
effect of the expression employed therein - "shall be
substituted"?
24. The substitution of one text for the other pre-
existing text is one of the known and well-recognised
practices employed in legislative drafting. ’Substitution’
has to be distinguished from ’supersession’ or a mere
repeal of an existing provision.
25. Substitution of a provision results in repeal of
the earlier provision and its replacement by the new
provision (See Principles of Statutory Interpretation, ibid,
p.565). If any authority is needed in support of the
proposition, it is to be found in West U.P. Sugar Mills
Assn. v. State of U.P., State of Rajasthan v. Mangilal
Pindwal, Koteswar Vittal Kamath v. K. Rangappa Baliga
and Co. and A.L.V.R.S.T. Veerappa Chettiar v. S.
Michael. In West U.P. Sugar Mills Association case a
three-Judges Bench of this Court held that the State
Government by substituting the new rule in place of the
old one never intended to keep alive the old rule. Having
regard to the totality of the circumstances centring
around the issue the Court held that the substitution had
the effect of just deleting the old rule and making the new
rule operative. In Mangilal Pindwal case this Court
upheld the legislative practice of an amendment by
substitution being incorporated in the text of a statute
which had ceased to exist and held that the substitution
would have the effect of amending the operation of law
during the period in which it was in force. In Koteswar
case a three-Judge Bench of this Court emphasized the
distinction between ’supersession’ of a rule arid
’substitution’ of a rule and held that the process of
substitution consists of two steps : first, the old rule is
made to cease to exist and, next, the new rule is brought
into existence in its place."
We are not oblivious of the fact that in certain situations, the court
having regard to the purport and object sought to be achieved by the
legislature may construe the word "substitution" as an "amendment" having
a prospective effect but such a question does not arise in the instant case.
There is another aspect of the matter which may not be lost sight of.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7
Where a statute is passed for the purpose of supplying an obvious omission
in a former statute, the subsequent statute relates back to the time when the
prior Act was passed [See Attorney General vs. Pougette \026 (1816) 2 Price
381 : 146 ER 130]
The doctrine of fairness also is now considered to be a relevant factor
for construing a statute. In a case of this nature where the effect of a
beneficent statute was sought to be extended keeping in view the fact that
the benefit was already availed of by the agriculturalists of tobacco in
Guntur, it would be highly unfair if the benefit granted to them is taken
away, although the same was meant to be extended to them also. For such
purposes the statute need not be given retrospective effect by express words
but the intent and object of the legislature in relation thereto can be culled
out from the background facts.
The question has furthermore to be considered having regard to the
language and object discernible from the statute read as a whole. The
Respondents were not ineligible from obtaining the benefit. Once they are
held to be eligible for obtaining the benefit, the amended notification being
an exemption notification should receive the beneficent construction.
It is not a case where the Respondents, like the cases of Mahaan
Dairies (supra) and Tata Iron & Steel Co. Ltd.(supra) were ineligible from
claiming the benefit. The subsequent notification, thus, should receive a
beneficent construction.
The learned Additional Solicitor General relied upon Collector of
Central Excise, Bombay \026 I and Another Vs. M/s. Parle Exports (P) Ltd.
[(1989) 1 SCC 345] for raising the contention that the interpretation of the
Executive should receive due consideration. It is not a case where the
doctrine of ’Contemporanea Expositio’ can be invoked. The order relied
upon by the learned counsel has been impugned by the Respondents by
filing the writ petition. It, therefore, cannot be said that by reason thereof
the notification had been constructed on administrative side.
In M/s Parle Exports (supra), it was observed:
"17\005 The notification must be read as a whole in the
context of the other relevant provisions. When a
notification is issued in accordance with power conferred
by the statute, it has statutory force and validity and,
therefore, the exemption under the notification is as if it
were contained in the Act itself. See in this connection
the observations of this Court in Orient Weaving Mills
(P) Ltd. v. Union of India. See also Kailash Nath v. State
of U.P. The principle is well settled that when two views
of a notification are possible, it should be construed in
favour of the subject as notification is part of a fiscal
enactment. But in this connection, it is well to remember
the observations of the Judicial Committee in Coroline
M. Armytage v. Frederick Wilkinson that it is only,
however, in the event of there being a real difficulty in
ascertaining the meaning of a particular enactment that
the question of strictness or of liberality of construction
arises. The Judicial Committee reiterated in the said
decision at p. 369 of the report that in a taxing Act
provisions establishing (sic enacting) an exception to the
general rule of taxation are to be construed strictly
against those who invoke its benefit. While interpreting
an exemption clause, liberal interpretation should be
imparted to the language thereof, provided no violence is
done to the language employed. It must, however, be
borne in mind that absurd results of construction should
be avoided."
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7
The ratio of the said decision, therefore, runs counter to the
submission of the learned counsel.
Reliance was also placed by the learned Additional Solicitor General
on H.M. Bags Manufacturer Vs. Collector of Central Excise [(1997) 11 SCC
696] wherein having regard to the use of the expression "henceforth" the
order of the Board was held to have a prospective operation. The said
decision, therefore, has no application in the present case.
Furthermore, registration at the inland container depot was to remain
valid for a period of 12 months only and in that view of the matter too, it
cannot be said that the Central Government intended to deprive the
Respondents herein who were agriculturists from the benefit of the
aforementioned notification dated 7.4.1997 only for a limited period, viz.,
between 7.4.1997 and 27.11.1997. We, therefore, are of the opinion that the
High Court cannot be said to have committed any error in arriving at the
aforementioned conclusion.
For the reasons aforementioned, we are of the opinion that the High
Court has not committed any error in passing the impugned judgment. The
Appeal is dismissed. No costs.