By TIOL News Service

NEW DELHI, FEB 28, 2014: THE Administration of the Union Territory of Daman and Diu issued two notifications on 31 December 1999 under the Goa, Daman and Diu Sales Tax Act, 1964.

The first Notification No.DMN/ST/4-1/99/1, dated 31.12.1999 omitted Entry No. 68 and Entry No. 85 of the Second Schedule to the Act from the date of publication of the Notification.

The second notification No.DMN/ST/4-1/99/2, dated 31.12.1999, the State Government exempted from payment of sales tax on the sale of goods manufactured, processed or assembled in the Union Territory of Daman and Diu by small scale industry, medium scale industry and large scale industry, registered as such, by a competent authority, except those industries of highly polluted industries as declared by the Central Government. The period of exemption was for 15 years/10 years/ 5 years depending upon the type of the industry, namely, small scale industry, medium and a large scale from the date of either the first sale or from the date of the first consignment or branch transfer as the case may be.

Subsequently, the State Government in exercise of its powers under Section 10A of the Local Act and Clause (xi) of the Notification, dated 31.12.1999 had issued notification dated 17.10.2001 in the form of guidelines to understand the effect of the Notification, dated 31.12.1999. Clause (i) of the said Notification speaks of change in Constitution/ownership of industry, Clause (ii) speaks of change in class of goods or product line.

The only question that arises in this appeal is whether the Notification, dated 17th October, 2001 issued by the State Government and Clause (xi) of Notification No.DMN/ST/4-1/99/2 dated 31.12.1999 should be treated as independent Notification or Notification explaining the Notification earlier issued, dated 31.12.1999 and thus operative from the date of the original Notification.

The Supreme Court observed,

By Notification dated 31.12.1999, the State Government has omitted Entry 68 of the Second Schedule from the date of publication of the Notification in the official gazette. On the same date, i.e. on 31.12.1999, the State Government had published yet another Notification granting exemption to certain classes of dealers manufacturing certain goods which earlier enjoyed exemption prior to the issuance of the notification. The subsequent notification was only to further clarify that the exemption was available only in relation to the products which were manufactured by the industries and for which exemption was availed prior to 31.12.1999. By virtue of the first notification, Entry 68 stood deleted from the second schedule. However, the second notification issued by the Government on the same day restored the exemption already availed under Entry 68 of the second schedule of the Act. The said notification under Clause XI also empowered the Government to issue directives from time to time to clarify the scope of the second notification of December, 1999.

It is in the exercise of its powers, that the Government issued a third notification, which brought out the terms more explicitly to fall within the terms 'clarificatory' or 'explanatory' notification. This Court while considering the scope of an 'explanation' observed that, generally speaking, an explanation is intended to explain the meaning of certain phrases and expressions contained in a statutory provision. Depending on its language, an explanation might supply or take away something from the contents of a provision. The express prospective operation and effectuation of an explanation might, perhaps, be factor necessarily detracting from any evincement of the intent on the part of the Legislature that the explanation was intended more as a legislative- exposition or clarification of the existing law than as a change in the law as it then obtained. An explanation should only explain or clarify. If it excepts, excludes or restricts, it is not an explanation, but a proviso, and should be considered as operative only from the date of its coming into effect. Therefore, had the notification issued by the Government, instead of removing the ambiguity in the earlier notification, introduced fresh conditions bringing substantial changes in the Notification then the notification would not have been explanatory or clarificatory.

The next question to be considered is then whether the notification is to be given retrospective effect or prospective .: a clarificatory notification would take effect retrospectively. Such a notification merely clarifies the position and makes explicit what was implicit.

The meaning to be given to an 'explanation' must depend upon its terms, and no "theory of its purpose can be entertained unless it is to be inferred from the language used." An explanation may be added to include something within or to exclude something from the ambit of the main notification or the connotation of some word occurring in it. An explanation, normally, should be so read as to harmonize with and clear up any ambuiguity in the main notification and should not be so construed as to widen the ambit of the notification. The explanation is therefore added to retrospectively clarify a doubtful point in law and to serve as a proviso to the main section or ex-abundant cautela to allay groundless apprehensions.

Therefore, after observing the original notification and the clarificatory notification, dated 17th October, 2001, it is manifest that the intention of the Government was not only to extend the benefit of exemption under Entry 68, Clause XI of the second notification to those dealers who had obtained the certificate of registration and had been enoying exemption on a class of goods prior to 31.12.1999 but also those who have not effected any change in the product manufactured by them after 30.04.2000.

(See 2014-TIOL-16-SC-CT)