A five-judge bench of the Supreme Court today declared that when there is an ambiguity in an exemption notification, the view favouring the Revenue should be adopted.
The bench comprising Justices Ranjan Gogoi, N.V. Ramana, R. Banumathi, Mohan M. Shantanagoudar and S. Abdul Nazeer has overruled the ratio in Sun Export case wherein it was ruled that an ambiguity in a tax exemption provision or notification must be interpreted so as to favour the assessee claiming the benefit of such exemption.
The respondents imported a consignment of Vitamin – E50 powder (feed grade) under Bill of Entry No. 8207, dated 19.08.1999. They claimed the benefit of concessional rate of duty at 5%, instead of standard 30%, as per the Customs Notification No. 20/1999. However, the department rejected the same and took a view that the goods under import contained chemical ingredients for animal feed and not animal feed/prawn feed, as such, the concessional rate of duty under the extant notification was not available.
The respondents relied on the ratio in Sun Export Case and claimed the benefit of the exemption.
Overruling the ruling in Sun Export Case, the bench held that the exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification.
“When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/ assessee and it must be interpreted in favour of the revenue. The ratio in Sun Export case (supra) is not correct and all the decisions which took the similar view as in Sun Export Case (supra) stands overruled,” the bench said.
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