Exemption to 'Hank Yarn' can’t be restricted to Cotton Hank Yarn when the Provision is Clear and Unambiguous: Supreme Court [Read Order]

A two-judge bench of the Supreme Court consisting Justice Dinesh Maheswari and Justice Hrishikesh Roy held that the exemption to “Hank Yarn” cannot be restricted to cotton hank yarn only when the exemption notification is clear and unambiguous.

The Authority for Clarification and Advance Ruling, had held that the commodity “Hank Yarn”, as stipulated in Entry 44 of Part B of the Fourth Schedule to the Tamil Nadu Value Added Tax Act, 2006 (‘the Act’), meant only “Cotton Hank Yarn” and not “Viscose Staple Fiber (‘VSF’) Hank Yarn”.

However, the Single Judge of the Madars High Court disapproved the above clarification which was subsequently upheld by the Division Bench of the High Court holding that no external aid for interpretation was called for when the language of the Entry in question was clear in itself.

“As noticed, the Entry in question, as inserted into the Fourth Schedule to the Act, is clear and specific that is, “Hank Yarn”; it carries neither any ambiguity nor any confusion. Undoubtably, the yarn in the hank form (which is a unit of measure), has come for exemption under the said Entry 44; and obviously, that exemption enures to the benefit of the handloom industry too. However, for that matter, if the benefit of this broad and unambiguous entry,” the Supreme Court said.

“When the Entry in question specifically provides for exemption to the goods described as “Hank Yarn” without any ambiguity or qualification, its import cannot be restricted by describing it as being available only for the hank form of one raw material like cotton nor could it be restricted with reference to its user industry. That being the position, reference to the decision in K.P. Varghese (supra) remains entirely inapposite to the facts of the present case. Therein, this Court was dealing with the interpretation of the language of sub-section (2) of Section 52 of the Income Tax Act, 1961 and it was found that a literal interpretation might not cover several eventualities concerning the value of consideration declared by the assessee in respect of the transfer of a capital asset vis-a-vis its fair market value as on the date of its transfer. Thus, this Court found, with reference to the intent and purpose, that the said provision could only be invoked when the consideration for transfer had not been correctly declared by the assessee, with burden of proving such understatement or concealment being on the Revenue. The observations in the said decision, based on the rules of interpretation to cull out meaning of a sentence (vide paragraph 5 thereof), do not apply to the question at hand because the Entry in question is clear, direct and unambiguous; and simply reads: “Hank Yarn”,” the bench added.

THE AUTHORITY FOR CLARIFICATION AND ADVANCE RULING & ANR vs M/S. AAKAVI SPINNING MILLS (P) LTD

CITATION: 2022 TAXSCAN (SC) 115

To Read the full text of the Order CLICK HERE

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