Exports - Rebate - Duty Paid on both inputs and final products are entitled for rebate - "OR" means "AND" - Supreme Court
MORE than nine years ago while reporting a High Court judgement, DDT commented,
In a major blow to the exporters, the Bombay High Court has held that exporters are eligible for rebate on the duty paid either on the inputs or the final products but not both. The court was interpreting Rule 18 of the Central Excise Rules, 2002:-
Where any goods are exported, the Central Government may, by notification, grant rebate of duty paid on such excisable goods OR duty paid on materials used in the manufacture or processing of such goods.
Because of the word, "or" in the rule, the High Court held that only one of the benefits could be allowed. This is the result of benevolent simplification to make the assessee's life simpler! As long as the Central Excise Rules, 1944 ruled the roost, there was no problem, and simplification has taken away another benefit. Is it fair on the part of the government to take the matter to the High Court when they knew all along that rebate was and should be allowed on both the items? Should the assessees suffer for the deficiency in English of the officers in the Board? First the government makes a bad law because of a mistake, because somebody's English grammar was poor and then they go to Court to get benefit out of the badly drafted law! Certainly not an act worthy of a government! ( 19 06 2006)
DDT 1354 07.05.2010 asked, "If duty paid on inputs used in manufacture of goods cleared for export could be availed as CENVAT credit and at the same time the duty paid on such goods cleared for export (even utilizing CENVAT A/c) could be claimed as rebate under Rule 18, what is the harm if both the rebates i.e. input stage rebate and rebate of duty paid on finished goods cleared for export are claimed simultaneously"
Now, the Supreme Court has held that an exporter is eligible for rebate of the duty paid on final products exported as well as the duty paid on the materials used in the manufacture of the final products.
And the Supreme Court held that in this case, the OR should be read as AND.
The Supreme Court observed that these two words normally 'or' and 'and' are to be given their literal meaning in unless some other part of same Statute or the clear intention of it requires that to be done. However, wherever use of such a word, viz., 'and'/'or' produces unintelligible or absurd results, the Court has power to read the word 'or' as 'and' and vice-versa to give effect to the intention of the Legislature which is otherwise quite clear.
The Supreme Court concluded that the only inevitable consequence is this : the word 'OR' occurring in Rule 18 cannot be given literal interpretation as that leads to various disastrous results pointed out in the preceding discussion and, therefore, this word has to be read as 'and' as that is what was intended by the rule maker in the scheme of things and to carry out the objectives of the Rule 18 and also to bring it at par with Rule 19.
Just because some babu in North Block did not know the difference between ‘OR' and ‘AND', and the Board's audacity in taking advantage of the mistake, several exporters were denied the benefit of rebate and only the few exporters who could fight this battle till the Supreme Court got their due benefits.
This is what they perhaps understand by "err on the side of revenue". Every Revenue officer is taught by his seniors to "err on the side of revenue". That way nothing happens to them and the government can merrily collect more revenue for every mistake that the revenue officer makes. It is only government that can make a mistake and then claim fiscal benefit out of that mistake. They deserve a huge raise - they should have told the 7th Pay Commission that they earn revenue even by their careless mistakes and poor understanding of English. There should be a special allowance (preferably tax free) for drafting defective laws.
We bring you the Supreme Court today.