A constitution Bench of the Supreme Court noted that there is an “unsatisfactory state of law” regarding the interpretation of exemption notifications in tax matters. One set of judgments ruled that when there is ambiguity in the language of the notifications, the benefit should go to the assessee. Another stream of judgments took the other view that the benefit should be given to the revenue authorities. The new judgment, Commissioner of Customs vs Dilip Kumar, settled the issue in favour of the authorities.
The judgment clarified that when the words in the statute are ambiguous, the benefit should go to the assessee. This is because “the state cannot at their whims and fancies burden the citizens without authority of law”. On the other hand, exemption notifications should be interpreted strictly. When there is ambiguity, the benefit cannot be claimed by the assessee; it must be interpreted by courts in favour of the revenue authorities. The constitution Bench answered the reference to it in the present can when the customs department denied a concessional rate to certain imports maintaining that they contained chemical ingredients for animal feed and not animal feed.