One basic controversy which has persisted over a period of time is about whether Statutory Rules of Interpretation, section notes and chapter notes are applicable to notifications and Rules issued under the Tariff Schedule. Tribunals and Courts have given different views on the issue. Statutory Rules of Interpretation are different from the General Rules of Interpretation.
The view that they are only relevant for classification under the Tariff Schedule is supported by the following arguments. Statutory Rules of Interpretation are given under the heading “Rules for Interpretation of this Schedule”. The significance is that they are meant for the Schedule only. The first Rule says, “.... classification should be determined according to the terms of the headings and any relative Section and Chapter Notes”. So this view says that Rules of Interpretation, chapter and section notes are meant for the classification under the Schedule. Exemption notifications are not part of the Schedule as they are issued under the Act (Customs or Excise) and Rules have been issued under the system of delegated legislation. The Schedule is a part of the main Act passed by Parliament. Since the exemptions are not part of the Schedule and since they do not constitute a question of classification under the Schedule, the Rules of Interpretation, chapter and section notes are not applicable to them. This view has been subscribed to by many judgments of the Tribunals, one of the latest being in the case of Victory Gramophone v. C.C., New Delhi - 1997(96)ELT689.
The opposite view is that notifications may not be exactly part of the Schedule but they contain changes in the rates of duty as in the Schedule. They are part of the fiscal Act and have to be read exactly as the Schedule.
If two sets of rules are followed there will be no harmony but dichotomy. This view has support also of many Tribunal judgements such as Reflect Optics Ltd. Vs. C.C., Bombay – 1997(91)ELT637(T). But the all the judgements said that there applicable only when the wordings are same in the Schedule and in the notification. The Supreme Court has lent indirect support to the view in the case of Khandelwal Metal Engg. Works vs.
UOI – 1985(20)ELT222(SC) because in this case it interpreted an exemption for brass scrap by using Rule 3 & Rule 4 of the Statutory Rules.
| * Some statutory Rules of interpretation are the same as the general Rules of Interpretation such as Generalia Specialibus, predominant use. * Secondly, a motor car will be a motor car for the Tariff but not a motor car for exemption. This will go against the principle of harmonious interpretation. * Lastly, the argument that some of the definitions in the Chapter and Section notes and some of the Rules are fictional and therefore they cannot be extended to the exemptions is based on wrong logic |
Another Supreme Court judgement in the case of CCE vs. Parle Exports – 1988(38) ELT741(SC) held about a Central Excise Exemption notification No.55/75 that “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 it were, contained in the Act itself.” That is to say notification is to be treated as if enacted in the Act itself.
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Even after these two Supreme Court judgements, some of the Tribunal judgements have held in favour of the first view, apparently because the Supreme Court judgements did not give a direct ruling on the issue.
The most logical view on the issue is that if the theory is accepted that Rules of Interpretation, Chapter and Section Notes are not applicable to the exemption notifications and Rules under the Act, then there will be anomalous results. First, some statutory Rules of interpretation are the same as the general Rules of Interpretation such as Generalia Specialibus, predominant use, etc. Secondly, a motor car will be a motor car for the Tariff but not a motor car for exemption. This will go against the principle of harmonious interpretation. Lastly, the argument that some of the definitions in the Chapter and Section notes and some of the Rules are fictional and therefore they cannot be extended to the exemptions is based on wrong logic. For harmonious interpretation it is necessary to take the same fictional meaning for the Schedule for exemption also.
The conclusion is that considering all the arguments and judgements discussed above it is clear beyond doubt that statutory Rules of interpretation, chapter notes and section notes are all relevant and binding for the interpretation of the main tariff and also the exemption notifications and Rules made under the Act.
Email: smukher2000@yahoo.com
(Sukumar Mukhopadhyay is a Former Member CBEC)