Category Archives: Indirect Tax

“Plain Meaning Rule” and “Strict Interpretation”

“The plain meaning rule” suggests that when the language in the statute is plain and unambiguous, the court has to read and understand the plain language as such, and there is no scope for any interpretation. This salutary maxim flows from the phrase “cum inverbis nulla ambiguitas est, non debet admitti voluntatis quaestio”. Following such maxim, the courts sometimes have made strict interpretation subordinate to the plain meaning rule [Mangalore Chemicals and Fertilisers Ltd. v. CCT, 1992 Supp (1) SCC 21] , though strict interpretation is used in the precise sense. To say that strict interpretation involves plain reading of the statute and to say that one has to utilise strict interpretation in the event of ambiguity is self-contradictory.

In Black’s Law Dictionary (10th Edn.) “strict interpretation” is described as under:

Strict interpretation. (16c) 1. An interpretation according to the narrowest, most literal meaning of the words without regard for context and other permissible meanings. 2. An interpretation according to what the interpreter narrowly believes to have been the specific intentions or understandings of the text’s authors or ratifiers, and no more.

(2). “Strict construction of a statute is that which refuses to expand the law by implications or equitable considerations, but confines its operation to cases which are clearly within the letter of the statute, as well as within its spirit or reason, not so as to defeat the manifest purpose of the legislature, but so as to resolve all reasonable doubts against the applicability of the statute to the particular case.” Willam M. Lile et al., Brief Making and the Use of Law Books 343 (Roger W. Cooley & Charles Lesly Ames eds., 3d Edn. 1914).

“Strict interpretation is an equivocal expression, for it means either literal or narrow. When a provision is ambiguous, one of its meaning may be wider than the other, and the strict (i.e. narrow) sense is not necessarily the strict (i.e. literal) sense.” John Salmond, Jurisprudence 171 n. (t) [Glanville L. Williams (Ed.), 10th Edn. 1947]. Commr. of Customs v. Dilip Kumar & Co., (2018) 9 SCC 1

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Interpretation of – Taxing Statute

It is trite that the letter of law has to be accorded utmost respect and strictly adhered to especially while interpreting a taxing statute. There ought not exist any scope for impregnating the interpretation by reading equity into taxing statutes. The classic statement of Rowlatt, J., in Cape Brandy Syndicate v. IRC, (1921) 1 KB 64 still holds the field. It reads as under:

“in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can look fairly at the language used.”

Further, the three Judge Bench in CIT v. MR. P. Firm Muar, AIR 1965 SC 1216 has authoritatively observed that:

“Equity is out of place in tax law; a particular income is either eligible to tax under the taxing statute or it is not.” Pradip Nanjee Gala v. Sales Tax Officer and Others, (2015) 13 SCC 149.


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Valuation of Goods – Point of Sale

The principle of law, thus is crystal clear. It is to be seen as to whether as to what point of time sale is effected, namely, whether it is on factory gate or at a later point of time, i.e., when the delivery of the goods is effected to the buyer at his premises. This aspect is to be seen in the light of the provisions of the Sale of Goods Act by applying the same to the facts of each case to determine as to when the ownership in the goods is transferred from the seller to the buyer. The charges which are to be added have put up to the stage of transfer of that ownership inasmuch as once the ownership in goods stands trabsferred to the buyer, any expenditure incurred thereafter has to be on buyer’s account and cannot be a component which would be included while ascertaining the valuation of the goods manufactured by the buyer. Commissioner, Customs and Central Excise v. Roofit Industries Ltd., (2015) 8 SCC 229.

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