Where two reasonable constructions of a taxing provision are possible then the construction which favours the assessee must be adopted


The Hon’ble Customs, Excise & Services Tax Appellate Tribunal, Bangalore (“CESTAT”) in the matter of John’s Cashew Company v.  Commissioner of Customs, Cochin [Final Order 20792 /2021 dated October 18, 2021], allowed the refund of 4% of Special Additional Duty. Further, held that if two reasonable constructions of a taxing provision are possible then that construction which favours the assessee must be adopted.

John’s Cashew Company (“the Appellant”) filed the current appeal being aggrieved of the Order-in-Appeal passed by the Commissioner of Customs (Appeals), Cochin. The Appellant has raised the issue in respect of eligibility of the Appellant for a refund of 4% of Special Additional Duty (“SAD”) in terms of Notification No.102/2007-Customs dated September 14, 2007. The Appellant made the above claim for refund and after due adjudication vide the Order-in-Original, the Assistant Commissioner rejected 4% SAD of Rs.40,81,240/- being time-barred in terms of the above Notification. The Commissioner of Customs (Appeals), Cochin, vide Order-in-Appeal upheld the rejection.

The Appellant had relied on some decisions in support of his claim and contended that neither the statute nor the original notification prescribed any limitation for claiming the refund of SAD and hence, imposition of time restriction by an amending notification is clearly bad in law. Per contra, the Department supported the findings of the lower authorities. Department also relied on an order of Chandigarh Bench to contend that the learned Single Member Bench in the case of Ambey Sales Vs. CC, Ludhiana [2021 (5) TMI 483 – CESTAT, Chandigarh dated May 13, 2021] has referred the matter to Larger Bench of the Tribunal.

The Hon’ble CESTAT, Bangalore said that both the Appellant and Department fairly agree that the above issue in appeal is subject-matter of difference of opinion by Hon’ble non-jurisdictional High Courts and that we do not have the benefit of guidance by Hon’ble jurisdictional High Court. Moreover the CESTAT said that there can be no dispute on the proposition that irrespective of whether or not the judgments of Hon’ble non-jurisdictional High Courts are binding, these judgments deserve utmost respect which implies that at the minimum, these judgments are to be considered reasonable interpretations of the related legal and factual situation.

Further, the CESTAT relied upon the principle laid down by Hon’ble Supreme Court in case of CIT v. Vegetable Products Ltd. [[1973] 88 ITR 192 dated January 29, 1973] wherein it was held that if two reasonable constructions of a taxing provision are possible then that construction which favours the assessee must be adopted. And in the present case Hon’ble non-jurisdictional High Court’s judgment in favour of the assessee, in the light of this legal principle laid down by Supreme Court is to be preferred over the Hon’ble non-jurisdictional High Court not favourable to the assessee. Resultantly In view of the above held that the denial of refund is bad in law and hence not sustainable and the Order-in-Appeal is therefore set aside and the appeal is allowed.

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