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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.