of India & Ors Vs. Indian Tobacco Association  Insc 427 (23 August 2005)
Sinha & Dr. Ar. Lakshmanan
out of SLP (Civil) No.15844 of 2004] S.B. SINHA, J:
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.
of all unnecessary details, the fact of the matter is as under:
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.
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 :
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.
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;" 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 :
for the words "Tuticorin and Vishakhapatnam", the words "Tuticorin, Vishakapatnam and Kakinada" shall be substituted; and
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.
Central Government, however, rejected the said representation made by the
Respondent in terms of its letter dated 23.8.2001, stating :
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.
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 :
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." 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.
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 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.
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.
exemption notification, it is trite, must be construed having regard to the
object and purport which the same seeks to achieve.
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.
Dairies (supra), a Division Bench of this Court observed :
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 :
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
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
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.
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.
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.
proviso appended to sub-clause (iv) of clause (2) of the 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
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'.
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.
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.
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.
Colliery of BCCL vs. Workmen by Secy., Rashtriya Colliery Mazdoor Sangh and
Another [(2001) 4 SCC 236], a Division Bench of this Court observed :
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 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.
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 :
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"?
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.
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.
is another aspect of the matter which may not be lost sight of.
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 (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
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.
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.
learned Additional Solicitor General relied upon Collector of [(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
Parle Exports (supra), it was observed:
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." The ratio of the said decision,
therefore, runs counter to the submission of the learned counsel.
was also placed by the learned Additional Solicitor General 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.
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.
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.