Holding

The prior‑permission clause is a procedural requirement; the Deputy Commissioner must grant permission when conditions are satisfied, and such permission may be issued even after the assessment year, rendering the demand notices unlawful.

Summary

Mangalore Chemicals & Fertilisers Ltd sought to adjust cash refunds of sales tax on raw materials against its tax liability under the Karnataka Sales Tax Act, 1957, based on a 1969 government notification granting such refunds to new industries. A later 1975 notification required the dealer to obtain prior permission from the Deputy Commissioner before making the adjustment. The company obtained permission for the 1976-77 year but its applications for the next three years remained pending; nevertheless it adjusted the refunds and filed returns. The Revenue issued demand notices and penalties, and the High Court dismissed the company's writ petition. The Supreme Court held that the prior‑permission requirement was a procedural step, not a substantive condition, and that the Deputy Commissioner must grant permission when the conditions are met, even after the assessment year has expired. Consequently, the demand notices were quashed and the appeal was allowed.

Issues considered

The requirement of prior permission under the 1975 notification is a substantive condition precedent or a procedural requirement.
Whether permission to adjust refunds can be granted retrospectively after the relevant assessment year has expired.
Whether a subsequent notification can override the entitlement conferred by the earlier 1969 notification.
The proper approach to statutory interpretation of exemption versus procedural provisions.

Legislation cited

Karnataka Sales Tax Act, 1957s. 13, s. SA

Subjects

sales taxrefund adjustmentexemptionprior permissionstatutory interpretationKarnataka Sales Tax Acttax demandpenaltygovernment notificationindustrial incentives

Judgment

A MANGALORE CHEMICALS & FERTILISERS LIMITED
v.
DEPUTY COMMISSIONER OF COMMERCIAL
TAXES AND ORS.

AUGUST 2, 1991
·B
[M.N. VENKATACHALIAH AND S.C. AGRAWAL, JJ.)

Karnataka Sales Tax Act, 1957-Section BA-Notifications dated
30.6.1969 and 11.8.1975 issued under granting reliefs and incentives-
Filing of monthly returns adjusting refund of sales tax in anticipation of
permission of Revenue-Initiation of proceedings u/s. 13 and demand
c notices for sales-tax payment, when assessee's application for permis-
sion to adjust sales tax not disposed of by the Revenue-lllegal.

interpretation of Statutes--Taxing Statute-Provisions whether
substantive or procedural character-Ascertainment-Need of-When
D interpretative process arises, indicated.

On 30th June, 1969, State Government issued a notification under
Section SA of the Karnataka Sal•~s Tax Act, 1957, providing a package
of reliefs and incentives including one concerning relief from payment
of sales tax.
E
A further notification dated 11th August, 1975 was issued,
envisaging certain modified procedures for effectuating the reliefs con-
templated by the exemption notification of 30th June, 1969.

For the assessment year 1976-77, the appellant made an applica-
)-
F ti on to the Respondent No. I on 10th November, 1976 for adjustment of
the refunds against sales-tax due and permission was granted with
retrospective effect from Isl May, 1976 validating the adjustments,
which the appellant had made during the interregnum.

For the three subsequent years, viz., 1977-78, 1978-79 and 1979·
G 80, similar applications, which were made on 29th March 1977, 20th
March 1978 and 8th March 1979 respectively, remained undisposed of.

In anticipation of the permission, appellant adjusted the refund
against tax payable for these years and filed its monthly returns setting
out adjustments so effected.
H

336
CHEMICALS & FERTILISERS v. DY. COMMR. 337

There was no dispute that the appellant was entitled to the benefit
of the notification dated 30th June, 1969 and that the refunds were A
eligible to be adjusted against sales-tax payable for respective years.
i
The respondent no. 1 in his letter dated 27.3.1979 informed the
appellant that the orders on appellant's application for permission
would be passed only on receipt of the clarification from the Govern- B
ment on the matters.

On 9th January, 1980, the appellant was issued three demand
notices by the Commercial Tax Officer.demanding payment of the sales-
> tax, stating that as prior permission to adjust sales-tax had not been
considered by the respondent no. 1, he was obliged to proceed to
recover the taxes. Steps for recovery of the penalties were also c
initiated.

The appellant moved the High Court for issue of writ of
mandamus to quash the demand notices and the proceedings initiated
for recovery of penalty under section 13 of the Act. D

The High Court dismissed the writ petition, against which the
present appeal was filed.

The appellant urged that indisputably the permission for the three
years had been sought well before the commencement of the respective E
years but had been withheld for reasons, which were demonstrably
extraneous; that the basic eligibility was conditioned by the notification
of 30th June, 1969, which required a certificate from the Department of
Industries and Commerce; that the requirement of the annual permis-
sion for adjustment envisaged by the notification of llth August; 1975
was merely procedural, as clause 3 of the notification stipulated; and F
that if the conditions were satisfied, it was deemed that permission was
given.

The respondents cont.ended that it was not as if the right to the
refund was denied or defeated by the inaction of the Deputy Commis-
sioner but only one mode of the refund by adjustment-became unav- G
ailable; that the benefit envisaged by the notification of llth August,
1975 was in the nature of a concession and that the appellant in order to
avail itself of its benefit had to sltow strict compliance with conditions
subject to which it was available; that where exemptions were con-
cerned, the conditions thereof ought to be strictly construed and strict
compliance with them exacted before a person could lay claim to the H
338 SUPREME COURT REPORTS [1991] 3 S.C.R.

benefit of the ex~mptions; and tha1t if, in the meanwhile, the period itself
A
expired, no relief was possible as quite obviously, the requirements of
'prior permission' became impossible of compliance.

Allowing the appeal, this Court,

B HELD: 1. The main exemption is under the 1969 notification. The
subsequent notification which contains condition of prior-permission
clearly envisages a procedure to give effect to the exemption. [347E-F]

2. Clause 3 of the notification leaves no discretion to the Deputy
Comuv~il'.ll\lr to refuse the permission, if the conditions are satisfied.
The words are that he "will grant". There is no dispute that appellant
c had satisfied the conditions. Yet the permission was withheld-not for
any valid and substantial reason, but owingto certain extraneous things
concerning some interdepartmental issues. Appellant had nothing to do
with those issues. [347F-H]

D 3. There was no other disentitling circumstance which would
justify the refusal of the permission. Appellant did not have prior
permission, because it was withheld by the Revenue without any justifi-
cation. The High Court took the view that after the period to which the
adjustment.related had expired no permission could at all be granted. A
permission of this nature was a technical requirement and could be
E issued making it operative from tine time it was applied for. [349C-D]

4. A distinction between the provisions of statute which are
of substantive character and were built-in with certain specific objec-
tives of policy on the one hand and those which are merely procedu-
ral and technical in their nature on the other must be kept clearly
F distinguished. [347E-G]

5. The choice between a strict and a liberal construction ari-
ses only in case of doubt in re1:ard to the intention of the Legisla-
ture manifest on the statutory language. Indeed, the need to resort
to any interpretative process arises only where the meaning is not
G manifest on the plain words of the statute. If the words are plain
and clear and directly convey the meaning, there is no need for any
interpretation. [348F-G]

Assistant Commissioner of Commercial Taxes (Asstt.), Dharwar
& Ors. v. Dharmendra Trading Co. & Ors., 1198813 SCC 570; Wells v.
H Minister of Housing and LrJCal Government, [1967] I WLR 1000 at 1007
CHEMICALS & FERTILISERS '· DY. COMMR. 339

and Union of India & Ors. v. M/s. Wood Papers Ltd. & Ors., [1991] JT
A
(1) 151at155, referred to.

·j
Kedarnath Jute Manufacturing Co. v. Commercial Tax Officer,
Calcutta & Ors., [1965] 3 SCR 626 at 630 and Collector of Central
Excise, Bombay and Anr. v. Messrs Parle Exports (P) Ltd., [1989] 1
SCC 345, distinguished. B

Frauds Beuniou: "Statutory Interpretation", 1984 edition at page
683, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3235
of 1991.
c
From the Judgment and Order dated 14.8.1990 of the Karnataka
High Court in Writ Petition No. 3436 of 1980.

Harish Salve, K.P. Kumar, Ravinder Narain, P.K. Ram and Ms.
Amrita Mitra for the Appellant. D

R.N. Narasimhamurthy, K.H. Nobin Singh and M. Veerappa for
the Respondents.

The following Order of the Court was delivered:
E
By this petition, Messrs Mangalore Chemicals & Fertilisers
Limited, a registered dealer under the Karnataka Sales Tax Act,. 1957,
i ("Act") seeks special leave to appeal to this court from the judgment
and order dated 14th August, 1990 of the High Court of Karnataka in
W .P. No. 3436 of 1980.
F
We have heard Shri Harish Salve, learned counsel for the
petitioner and Shri R.N. Narasimhamurthy, learned Senior Counsel
for the respondent-Revenue. Special leave granted.

2. On 30th June, 1969, State Government issued a notification
in exercise of powers referable to sec. SA of the Act providing certain G
incentives to enterpreneurs starting new industries in the State, pur-
suant to State's policy for "rapid industrialisation". The notification
contains a package of reliefs and incentives including one concerning
relief from payment of sales tax with which this appeal is concerned.

• The clause in the said notification of 1969 relevant for the pre- H
sent purpose reads:
340 SUPREME COURT REPORTS [1991) 3 S.C.R.

"(1). Sales tax: A cash refund will-be allowed on all sales-
A
tax paid by a new indrnstry on raw materials purchased by it
for the first five (5) years from the date of the industry goes
into production, eligibility to the concessions being deter-
mined on the basis of a certificate to be issued by the
.·Department of Industries and Commerce."
B
This·was followed by a further notification dated 11th August,
1975 envisaging certain modified procedures for effectuating the
reliefs contemplated by the earlier exemption notification of 30th
June, 1969. The relevant portions of the Preamble and the body of the
notification say:
c Preamble: " The Commissioner of Commercial
Taxes has suggested that New Industries covered by the
above scheme might be permitted to adjust the refunds to
which they would be eligible against the sales tax payable
by them.. h

D
Order

In partial modification of the Government order cited
(2) above, Government are pleased to prescribe the follow-
ing procedure for claiming refund of sales tax by new
E industries.

2. The new industries intending to take advantage of
the system of adjustment shall apply to the Deputy Com-
missioner of Commercial Taxes (Administration) of the
Division concerned through the assessing authority. The
F application must contain the following particulars.

i) Name and address of the new industry;

ii) Date of commencement of the industry;

G iii) Reference number of the certificate issued by the
Director of Industries & Commerce, Bangalore;

. iv) Year for which the pd-mission to withhold tax
amount is related;

H v) The description of finished products in which the"
materials are used.
CHEMICALS & FERTILISERS v. DY. COMMR. 341

3. The Deputy Commissioner of Commercial Taxes
A
(Administration) of the concerned Division, after scrutinis-
ing the application filed by the new industry and after
satisfying himself that the industry is covered by the
scheme sanctioned in G.O. No. OI 58 FM! 69 dated
30.6.1969 will permit the industry to withhold the amount
of tax payable on raw materials purchased and used in the B
manufacture of goods.

4. Omitted as unnecessary

5. The new industry may apply for permission at any
time during the year subject to its renewal every subse-
quent year. Until permission of renewal is granted by the c
Deputy Commissioner of Commercial Taxes, the new
industry should. ·not' be allowed to adjust the refunds. At
the end of the assessment year, particulars should be
formulated iri the annual return of the total amount
adjusted during the entire year. Along with the return, D
details prescribed in Government Order No. FD 428 CSL
J
70 dated 1.2.1971 should be furnished.

6) *
*
7) * Omitted as unnecessary." E
*
8) •
·j
•
3. Appellant, it is not in dispute, had the necessary eligibility
under the original exemption notification of 1969. The controversy is F
confined only to the question of the manner of effectuating the refund
of sales tax that appellant, admittedly, was entitled to.

Some particulars as to the application made by the appellant for
grant of permission might, perhaps, be necessary here. For the assess-
ment year 1976-77, the appellant made such an application to Deputy G
r Commissioner of Sales-tax (Administration) on 10th November, 1976
for adjusttnent of the refunds against sales-tax due. This permission
was granted with retrospective effect from 1st May, 1976, validating
the adjustments which the appellant had made during the interregnum.

However, for the three subsequent years viz., 1977-78, 1978-79 H
342 SUPREME COURT REPORTS [1991] 3 S.C.R.

and 1979-80, similar applications which were made on 29th March,
A
1977, 20th March, 1978 and 8th March. 1979, respectively, remained
undisposed of. In the meanwhile, in anticipation of the permission
appellant adjusted the refund against tax payable for these years and
filed its montly returns setting out adjustments so effected.

B 4. There is, as set-out earlier, no dispute that the appellant was
entitled to the benefit of the notification dated 30th June, 1969. There
is also no dispute that the refunds were eligible to be adjusted against
sales-tax payable for respective years. The only controversy is whether
the appellant, not having actually secured the "prior permission"
would be entitled to adjustment having regard to the words of the
notification of 11th August, 1975, that "until permission of renewal is
c granted by the Deputy Commissioner of Commercial Taxes, the new
industry should not be allowed to adjust the refunds". The contention
virtuallly means this: "No doubt you were eligible and entitled to
make the adjustments. There was also no impediment in law to grant
you such permission. But see language of clause 5. Since we did not
D give you the permission you cannot be permitted to adjust." Is this the
effect of the law?
l
The sales tax already paid by the appellant on the raw materials
procured by it is the subject matter of the refunds. The sales-tax against
which the refund is sought to be adjusted is the sales-tax payable by
E appellant on the sales of goods manufactured by it. If the contention of
the Revenue is correct, the position is that while the appellant is
entitled to the refund it cannot, however, adjust the same against
cu5rent dues of the particular year but should pay the tax working out
its· refunds separately. The situation may well have been such but the
snag comes here. If the adjustments made by the appellant in its
F monthly statements are disallowed, the sales-tax payable would be
deemed to be in default and would attract a penalty ranging from
l'li % to 2 1/i % per month from the dat.e it fell due. That penalty, in the
facts of this case, would be very much more than the amounts of
refund.

G 5. What emerges from the undisputed facts is that appellant was
entitled to the benefit of these adjustments in the respective years. It
had clone and carried out all that was necessary for it to do and carry
out in that behall. The grant of permission remained pending on account of
certain outstanding inter-departmental issues as to which of the
departments-the Department of Sales-tax or the Department of
H Industries-should absorb the financial impact of these concessions.
CHEMICALS & FERTILISERS v. DY. COMMR. 343

Correspondence indicates that on account of these questions, internal
A
to administration, the request for permission to adjust was not proces-
sed. On 27th March 1979, the Deputy Commissioner of Commercial
i Taxes wrote to the appellant to say that the orders on appellant's
application for permission would be passed only on receipt of the
clarification from the Government on these matters.
B
6. While the matter stood thus, on 9th January, 1980, the Com-
mercial Tax Officer of the concerned jurisdiction issued three demand
notices demanding payment of the sales-tax. He said prior permission
to adjust "had not been considered by the Deputy Commissioner of
Managlore Division, Mangalore, and, therefore, the Commercial Tax
Officer was obliged to proceed to recover the taxes." Steps for reco-
very of the penalities were also initiated. Thereafter, in February, c
1980, the appellant moved the High Court for issue of writ of
mandamus to quash the demand notices and the proceedings initiated
for recovery of penalty under sec. 13 of the Act.

7. The contention in the High Court were somewhat different D
from those urged before us. Before the High Court the Revenue
asserted that the very conditions of eligibility for entitlement to these
concessions stood modified under a subsequent notification of 12th
January, 1977 and that appellant did not satisfy the altered conditions
of eligibility. The question, therefore, was whether enterpreneurs who
had commenced their ventures prior to 12th January, 1977, could be E
held to be governed by the terms of the later notification of 12th
January 1977. This question, in principle, had been settled by a deci-
sion of this Court in Assistant Commissioner of Commercial Taxes
IAsst.), Dharwar & Ors. v. Dharmendra Trading Co. & Ors., [ 1988] 3
SCC 570. The question that arose there pertained to another condition
stipulated in the same notification of 12th January, 1977. This Court F
held that industries established prior to that date were not governed by
those altered conditions. Though in the present case the altered condi-
tion set-up against appellant was a different one, on the principle
decided in Dharmendra Trading Company's case the altered condition
would not be attracted. But the High Court took a different view of the
matter. It held, in our opinion quite erroneously, that the principle of G
t the earlier decision of this Court was not applicable because it was
rendered i~ the context of another condition in the 1977 notification.
What fell for decision was not whether a particular condition was or
was not applicable; but the very basic question whether a subsequent
notification could undo the eligibilfry for the concession stipulated and
conferred under the 1969 notification. H
I
344 SUPREME COURT REPORTS [ 1991] 3 S.C.R.

A Shri Narasimhamurthy with his usual fairness said that he found
it difficult to support the approach of the High Court to the question.
The main point on which the case turned is thus settled in favour of the
appellant.

8. But a subsidiary qut,stion arose whether the grant of permis-
B sion for adjustment could at all be made after the period to which such
adjustment related had itself expired. On this, the High Court said:

" ........ But under Ext. B, the 1975 notification, a clear
procedure was provided in order to claim the benefit of
refund on the sales-tax paid on raw materials purchased by
the industrialists. The industrialists claiming the benefit had
c to secure the prior permission of the assessing authority tu
withhold the tax subject to the Government's permission. In
other words, prior permission was a' condition precedent. In
the instant case, Mr. Kumar was not able to satisfy us,
permission had indeed been granted. On the other hand,
D he fairly conceded that though an application was made, no
permission was actually granted to withhold the payment.
Therefore, in view of the 1975 notification prescribing the L
procedure for claiming the benefit under 1969 notification
as at Ex. A, there has been no compliance and as such, the
petitioner will not be entitled to withhold the tax. With the
E result, the demand at Annexure R.S and T would be justifi-
able and legal."
(Emphasis supplied)

This is the only ground on which the appellant's right to adjustment is
contested by the Revenue.
F
9. Shri Harish Salve urged that indisputably the permission for
the three years had been sought well before the commencement of the
respective years but had been withheld for reasons which were demon-
strably extraneous. Learned counsel emphasised that the basic eligibil-
ity was condit,ioned by the notification of 30th June, 1969, which
G required a certificate from the Department of Industries and Com-
merce. Both the eligibility and the fact that there was such certification
from the Department of Industries were not disputed. Indeed, the
requirement of the annual permission for adjustment envisaged by the
notification of 11th August, 1975 was, says counsel, merely procedural
as clause 3 of the notification stipulated that if the conditions were
H satisfied-there was no dispute they were-the Deputy Commissioner
CHEMICALS & FERTILISERS v. DY. COMMR. 345

"will permit" the adjustment. Counsel says that if, in these circums- A
tances, the Deputy Commissioner withheld the permission law treats
that as done which ought to have been done .
.. 10. Shri Narasimha Murthy; however, sought to contend that
the requirement of the prior permission was held-and rightly-by the
B
High Court to be a"condition precedent' and that. non-satisfaction of
that condition precedent, whatever be the reason for the non-satisfac-
tion, automatically entailed the logical consequences. Learned counsel
further submitted that it was not as if the right to the refund was
denied or defeated by the inaction of the Deputy Commissioner but
·I only one mode of the refund-by adjustment-became unavailable.
Learned counsel i:rged that the benefit envisaged by the notification of c
11th August, 1975 was in the nature of a concession and that the
appellant in order to avail itself of its benefit had to show strict comp-
liance with condition subject to which it was available. Learned
counsel placed reliance on Kedarnath Jute Munufacturing Co. v. Com-
mercial Tax Officer, Calcutta & Ors., (1965) 3 SCR 626 and Collector
D
of Central Excise, Bombay and Anr. v. Messrs Parle Exports ( P) Ltd.,
[ 1989] I SCC 345 to support his contention that where exemptions
were concerned, the conditions thereof ought to be strictly construed
" and strict compliance with them exacted before a person could can lay
claim to the l;>enefit of the exemptions.

Learned counsel submitted that the point was not whether there E
was any justification for delaying the permission; but, more impor-
tantly, whether appellant at the relevant point of time had, such prior

-
permission or not and that if, in the meanwhile, the period itself ex-
i
pired, no relief was possible as, quite obviously, the requirements of
'prior permission' became impossible of compliance.
F
Shri Narasimha Murthy relied on the following observations of
this court in Kedarnath Jute Manufacturing Co. 's case to support this
contention:

" .......... But the said exemption is made subject to a
proviso. Under that proviso, in the case of such sales a G
r declaration form duly filled up and signed by the registered
dealer to whom the goods are sold and containing the pre-
scribed particulars on a prescribed form obtainable from
the prescribed authority has to be furnished in the pres-
cribed manner by the dealer who sells the goods ..... "
H
346 SUPREME COURT REPORTS [1991] 3 S.C.R.

A " ........... The provision prescribing the exemp-
tion shall. therefore, be strictly construed ............. .

To accept the argument of the learned counsel for the
appellant is to ignore the proviso altogether, for if his con-
tention be correct it will lead to the position that if the
B declaration form is furnished, well and good; but if not
furnished, other evidence can be produced. That is to
rewrite the clause and to omit the proviso. That will defeat
the express inten"tion of the Legislature ..... "

11. We have given our careful consideration to these submis-
sions. We are afraid the stand of the Revenue suffers from certain
c basic fallacies, besides being wholly technical. In Kedarnath's case, the
question for consideration was whether the requirement of the decla-
ration under the proviso to Sec. 5(2)(a)(ii) of the Bengal Finance
(Sales-tax) Act, 1941, could be established by evidence aliunde. The
court said that the intention of the Legislature was to grant exemption
D only upon the satisfaction of the substantive condition of the provision
and the condition in the proviso was held to be of substance embody-
ing considerations of policy. Shri Narasimha Murthy would say the
position in the present case was no different. He says that the notifica-
tion of 11th August, 1975 was statutory in character and the condition
as to 'prior-permission' for adjustment stipulated therein must also be
E held to be statutory. Such a condition must, says counsel, be equated
with the requirement of production of 'the declaration form in
Kedarnath's case and thus understood the same consequences should
ensue for the non-compliance. Shri Narasimhamurthy says that there
was no way out of this situation and no adjustment was permissible,
whatever be the other remedies of the appellant. There is a fallacy in
F the emphasis of this argument. The consequence which Shri Nara-
simha Murthy suggests should flow from the non-compliance would,
indeed, be the result if the condition was a substantive one and one
fundamental to the policy underlying the exemption. Its stringency
and mandatory nature must be justified by the purpose intended to be
served. The mere fact that it is statutory does not matter one way or
G the other. There are conditions and conditions. Some may be substan-
tive, mandatory and based on considerations of policy and some others
may merely belong to the area of procedure. It will be erroneous to
attach equal importance to the non-observance of all conditions
irrespective of the purposes they were intended to serve.

H In Kedarnath's case itself this Court pointed out that the string-
CHEMICALS & FERTILISERS v DY. COMMR. 347

ency of the provisions and the mandatory character imparted to them
A
were matters of important policy. The Court observed:

" ..... The object of s. 5(2)(a)(ii) of the Aci and the rules
made thereunder is self-evident. While they are obviously
intended to give exemption to a dealer in respect of sales to
registered dealers of specified classes of goods, it seeks also B
to prevent fraud and collusion in an attempt to evade tax.
In the nature of things, in view of innumerable transactions
that may be entered into between dealers, it will wellnigh
be impossible for the taxing authorities to ascertain in each
case whether a dealer has sold the specified goods to
another for the purposes mentioned in the section. There-
fore, presumably to achieve the two fold object, namely, c
prevention of fraud and facilitating administrative efficiency,
the exemption given is made subject to a condition that the
person claiming the exemption shall furnish a declaration
form in the manner prescribed under the section. The liberal
construction suggested will facilitate the commision of fraud D
and introduce administrative inconveniences, both of which
the provisions of the said clause seek to avoid."
(Emphasis Supplied)

(See: (1965)3 SCR 626 at 630)
E
Such is not the scope or intendment of the provisions concerned
here. The main exemption is under the 1969 notification. The subse-
quent notification which contain condition of prior-permission
clearly envisages a procedure to give effect to the exemption. A dis-
tinction between the provisions of statute which are a substantive
character and were built-in with certain specific objectives of policy on F
the one hand and those which are merely procedural and technical in
their nature on the other must be kept clearly distinguished. What we
have here is a pure technicality. Clause 3 of the notification leaves no
discretion to the Deputy Commissioner to refuse the permission if the
conditions are satisfied. The words are that he "will grant". There is
no dispute that appellant had satisfied these conditions. Yet the G
t permission was withheld-not for any valid and substantial reason but
owing to certain extraneous things concerning some inter-depart-
mental issues. Appellant had nothing to do with those issues. Appel.-
Ian! is now told "we are sorry. We should have given you the permis-
sion!"'" But now that the period is over, nothing can be done". The
answer to this is in the words of Lord Denning: "Now I know that a H
348 SUPREME COURT REPORTS [1991] 3 S.C.R.

public authority can not be estopped from doing its public duty, but I
A
do think it can be estopped from relying on a technicality and this is a
technicality" (See Wells v. Minister of Housing and Local Government,
[ 1967] 1 WLR 1000 at 1007).

Francis Bennion in his "Statutory Interpretation", 1984 edition,
B says at page 683:

"Unnecessary 'technicality: Modern courts seek to cut down
technicalities attendant upon a statutory procedure where
these cannot be shown to be necessary to t~ fulfilment of
the purposes of the legislation." •·
c 12. Shri Narasimhamurthy again relied on certain observations
in Collector of Central Excise, Bombay-I & Anr. v. M/s. Parle Exports
( P) Ltd., I1989] l SCC 345 in support of strict construction of a provi-
sion concerning exemptions. There is support of judicial opinion to the
view that exemptions from taxation have a tendency to increase the
D burden on the other. unexempted class of tax-payers and should be
construed against the subject in case of ambiguity. It is an equally
well-known principle that a person who claims an exemption has to
establish his case:· Indeed, in the very case of M/s. Parle Exports (Pj
Ltd. relied upon by Sri Narasimhamurthy, it was observed:

E "While interpreting an exemption clause, liberal interpre-
tation should be imparted to the language thereof, pro-
vided no violence, is done to the language employed. It
must, however, be borne in mind that absurd results of
construction should be avoided." •
F The choice between a strict and a liberal construction arises only in
case of doubt in regard to the intention of the Legislature manifest.on
the statutory language. Indeed,, the need to resort to any interpretative
process arises only where the meaning is not manifest on the plain
words of the statute. If the words are plain and clear and directly
convey the meaning, there is no need for any interpretation. It appears
G to us the true rule of construction of a provision as to exemption is the
one stated by this Court in Union of India & Ors. v. M/s. Wood Papers
Ltd. & Ors., [1991] JT (1) 151at155.

" ...... Truly, speaking liberal and strict construction of
an exemption provision are to be invoked at different
H stages of interpreting it. When the question is whether a
CHEMICALS & FERTILISERS v. DY. COMMR. 349

subject falls in the notification or in the exemption clause A
then it being in nature of exception is to be construed strictly
and against the subject but once ambiguity or doubt about
applicability is lifted and the subject falls .in the notification
then full play should be given to it and it calls for a wider and
liberal construction ..... "
(Emphasis supplied) B

13. It appears to us that the view taken of the matter by the High
Court does not acknowledge the essential distinction between what
was a matter of form and "fat was one of substance. There was no
other disentitling circumstance which would justify the refusal of the
permission. Appellant did not have prior permission because it was
withheld by the Revenue without any justification. The High Court
c
took the view that after the period to which the adjustment related had
expireq no permission could at all be granted. A permission of this
nature was a technical requirement and could be issued making it
operative from the time it was applied for.
D
14. We, therefore, allow the appeal, set aside the judgment of
.J the High Court under appeal and direct the Deputy Commissioner of
Sales Tax (Admn.) to grant the permission for the said 1hree years
operative from the dates of the application. The permission shall enti-
tle the appellant to the adjustment of the refunds against the taxes due
for the respective years. We issue these directions in view of the admit- E

,
led position that, apart from the technical objection that periods to
which the applications related had since expired, there was no other.
impediment for the grant of permission. It also follows that the
demand notices which proceed on the premise that adjustment of
refunds against taxes due was unavailable can not also stand. They arc
quashed. F

There will be no order as to costs.

V.P.R. Appeal allowed.

t