The Supreme Court has, in its latest judgement in the case of Meridian Industries vs CCE, reported in 2015 (325) ELT 417 (SC), has clarified in unequivocal terms what was earlier under some doubt. It has held, while deciding about the applicability of an exemption, that "if there is a doubt or if two interpretations are possible, then one which favours the department is to be resorted to while construing an exemption notification." Earlier, and all along, the taxpayers have been trying to take advantage of creating a doubt and claiming the benefit of doubt must go in their favour.
More often than not, practicing lawyers argue in cases relating to fiscal laws such as customs, excise, sales tax and income tax that there being a doubt in the interpretation, the benefit of doubt should go to the assesse. This is now clear that in fiscal law the principle of benefit of doubt acts in favour of revenue. It is different in the case of criminal law.
If we go through the earlier judgments of the Supreme Court on this issue carefully we find that no benefit of doubt has been given by the court just because there is a doubt. It is very easy to create a doubt in the interpretation of fiscal law, there being several judgments on every issue where judgements differ on some points or other. So the Supreme Court has given the benefit of doubt after first going deep into the facts and law and coming to the conclusion that the assessee is right on merit. Then only the benefit of doubt has been given which is more or less a superfluity. It is never the first consideration but only the second and the last.
This concept about benefit of doubt in fiscal law has been discussed in a recent latest Supreme Court judgement in the case of CCE vs. Calcutta Springs - 2008(229) ELT 161(SC). The issue was whether Glass Filled Nylon Insulating Liners (GFNIL) was classifiable under Tariff Item 39.26 as articles of plastics or under Item 85.46 as electrical insulator. After discussing the function of the item, the Supreme Court came to the conclusion that it was not an insulator but other articles of plastic (39.26). Then only the Supreme Court invoked the theory of benefit of doubt while the first argument of the Supreme Court was that on merit the classification was in favour of the assesse. The same principle has been upheld earlier in previous judgments. This principle has been also upheld by the Supreme Court in the cases of Novopan India Ltd. Vs. CCE - 1994(73) ELT769(SC) and Liberty Oil Mills vs. CCE - 1995(75)ELT13(SC) as it was a case of exemption.
In the case of undervaluation, the burden of proof is on the department. So the Supreme Court in the cases of Commissioner of Customs, Mumbai vs. J.D. Orgochem Ltd. - 2008 (226) E.L.T. 9 (S.C.) and Commissioner of Customs, Calcutta vs. South India Television (P) Ltd. 2007 (214) E.L.T. 3 (S.C.) held that under-valuation has to be proved with proper evidence. If the charge of under-valuation cannot be supported either by evidence or information about comparable imports, the benefit of doubt must go to the importer. In respect of penalty in fiscal cases the principle followed is more like the principle in criminal cases. That is to say the benefit of doubt is more easily given to the assesse, as has been expounded in the case of V V Iyer vs. CC - 1999(110)ELT414(SC).
So the conclusion is that the concept of benefit doubt in fiscal law is not the same as in criminal law. In the case of fiscal law, if there is a doubt, the benefit goes to revenue, if it is an exemption. In the case of classification, involving rate of duty, the benefit goes to the assesse, but only if the merit also goes in his favour. Merely because there is a doubt, no case is decided in fiscal matters in favour of the assesse. In the case of undervaluation, the department must prove undervaluation and if there is a doubt, the benefit goes to tax payer.
The writer is retired member of the Central Board of Excise & Customs.
E-mail: smukher2000@yahoo.com
E-mail: smukher2000@yahoo.com
