In a situation where Tax Exemption has to be interpreted, the benefit of doubt should go in favour of the revenue: Delhi HC [Read Judgment]

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The Delhi High Court held that petitioner does not fulfil the eligibility criteria for availing the benefit of exemption or waiver of Cost Recovery charges (CRC) in terms of the Circulars issued by the Revenue.

The Petitioner, Apeejay Infra-Logistics is a private Container Freight Station (CFS) at Haldia, West Bengal, prayed in the petition that merits consideration is the one that has been made in the alternative, impugning the demand raised by the respondents for recovery of CRC of customs employees posted at the Petitioner’s station.

The Petitioner was granted approval to operate as a CFS at Haldia, West Bengal for two years. The petitioner paid a sum of INR1,83,82,420 as CRC to the Revenue. Subsequently, the approval granted to the petitioner was renewed for five years.

The petitioner issued a letter to the Chief Commissioner of Customs, claiming eligibility for waiver from payment of CRC. A communication was issued by the Directorate General of Human Resource Development (DGHRD) whereby, as a one-time measure, waiver of CRC was granted to eligible facilities under certain circumstances as specified therein, and the DGHRD was authorized to deal with the request for waiver of CRC.

The controversy in the present case surrounds the interpretation of the Exemption Circular. This is to be read alongwith letter of the DGHRD dated November 3, 2015 whereby waiver is offered upon satisfaction of the benchmark performance criteria laid out in the Exemption Circular. There is also a Circular dated March 23, 2009 where again the issue of exemption from recovery of CRC has been dealt with. These three documents form the core of the issue in the present case.

It also provided that the conditions for grant of waiver shall be the same as provided in the Exemption Circular.

The principal issue is whether Petitioner fulfils the eligibility criteria for availing the benefit of exemption or waiver of CRC in terms of the Circulars issued by the Revenue.

A bare reading of the Exemption Circular makes it amply clear that in order to avail the benefit of exemption or waiver from payment of CRC, the CFS has to fulfil certain conditions laid down therein, which are based on achievement of prescribed performance benchmark.

The court took into consideration the view taken by the Supreme Court in the case of Sun Exports Corporation vs. The Collector of Customs Bombay wherein it was emphatically reiterated that if in the event of ambiguity in a taxation liability statute, the benefit should go to the subject/ assessee. But, in a situation where the tax exemption has to be interpreted, the benefit of doubt should go in favour of the revenue.

The division bench consisting of Justice Manmohan and Justice Sanjeev Narula noted that on a query by this Court, it has been confirmed that these parameters such as the total number of import or export containers handled, the customs declarations filed for import or export, etc have been consistently applied by the respondent across the board for granting waiver from CRC.

“The petitioner does not contradict this statement and nothing has been placed on record to show that there has been any pick-and-choose policy adopted by the respondents for granting exemption form CRC,” the court while rejecting the petitioner’s prayer said.

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