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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;"

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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

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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

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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

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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.

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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."

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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.