Custom, Excise & Service Tax Tribunal
C C L Products India Limited vs Guntur - G S T on 27 April, 2026
1 Appeal No. ST/30538/2019
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
HYDERABAD
REGIONAL BENCH - COURT NO. - I
Service Tax Appeal No. 30538 of 2019
(Arising out of Order-in-Appeal No.GUN-EXCUS-000-APP-140-18-19 dated 21.02.2019
passed by Commissioner of Customs & Central Tax (Appeals), Guntur)
M/s CCL Products (India) Ltd., .. APPELLANT
7-1-24/d, Greendale,
Ameerpet, Hyderabad,
Telangana - 500 016.
VERSUS
Commissioner of Central Tax .. RESPONDENT
Guntur - GST C.R. Buildings, Kannavari Thota, Guntur, Andhra Pradesh - 522 004.
APPEARANCE:
Ms Chamanthi Bhimireddy, Advocate for the Appellant.
Shri B. Sangameshwar Rao, Authorized Representative for the Respondent.
CORAM: HON'BLE Mr. A.K. JYOTISHI, MEMBER (TECHNICAL) HON'BLE Mr. ANGAD PRASAD, MEMBER (JUDICIAL) FINAL ORDER No. A/30262/2026 Date of Hearing: 27.04.2026 Date of Decision: 27.04.2026 [ORDER PER: ANGAD PRASAD] M/s CCL Products (India) Ltd., (hereinafter referred to as appellant) are in appeal against the demand of Rs. 7,89,568/- with equal penalty, as upheld by the Commissioner (Appeals) vide order dated 21.02.2019 (impugned order). The issue involved is whether they are eligible for claiming the exemption Notification No. 31/2012-ST dated 20.06.2012 or otherwise.
2. The brief, fact of the case is that they are 100% EOU engaged in the business of manufacturing instant/soluble coffee and also inter alia, exporting the same outside India. The Department issued demand for non-
2 Appeal No. ST/30538/2019payment of service tax on the Goods Transport Agent (GTA) service during the period April 2015 to December 2015 on the grounds that the exemption notification claimed by them in their ST-3 returns was not relevant as also the fact that they had not fully complied with the procedure prescribed in terms of Notification No. 31/2012-ST dated 20.06.2012.
3. Learned Advocate for the appellant is mainly contesting that during the material time they are relying on Notification No. 25/2012 dated 20.06.2012 and however the said exemption was withdrawn by Notification No. 06/2015 dated 01.03.2015 with effect from 01.04.2015. Therefore, though the said exemption was not applicable in terms of the product being exported by them, they were still eligible for benefit under Notification No. 31/2012-ST dated 20.06.2012 in respect of GTA service for export of coffee. The Department, however, felt that they have not complied with the conditions of notification in as much as they failed to file form EXP-1 and EXP-2 for the period April 2015 to December 2015. Learned Advocate is relying on the judgment of the Co-ordinate bench in the case of M/s Prachi Leathers Pvt Ltd., Vs Commissioner of Central Excise, Kanpur [2024 (4) TMI 1313 (CESTAT-ALL)] in respect of that the conditions alleged by the Department of having been not fulfilled where merely procedural in nature and they can be waived as there is no dispute that they have not complied with substantive provisions of the said notification.
4. On the other hand, Learned AR apart from reiterating the findings of the order of the Commissioner also submits it is a notification which must be construed strictly and it is an admitted fact that they have not complied with the conditions of the notification in as much as the condition prescribed at proviso (a) sub-clause (i) and sub-clause (c) of the provisions. In as much as 3 Appeal No. ST/30538/2019 they had not informed the jurisdictional Assistant Commissioner before availing the said exemption as also they have not filed EXP-2 return for the period within completion of 15 days as required.
5. Heard both the sides and perused the records.
6. We find that the short question for determination is whether the appellants are eligible for benefit of notification No. 31/2012-ST dated 20.06.2012 or otherwise. We find that this notification is in supersession of the Notification No. 18/2009-ST dated 07.07.2009, whereby, certain exemptions have been given in respect of transport of goods, export of goods carried for export of goods. In this case, there is no dispute that the service involved is GTA service and it is also not in dispute the exported coffee out of India. It is also noticed that this notification is in supersession of Notification No. 18/2009-ST dated 07.07.2009. We find that in the case of M/s Prachi Leathers Pvt Ltd., Vs Commissioner of Central Excise, Kanpur, supra, the Co-ordinate Bench examined similar situation, where certain conditions were prescribed which were required to be fulfilled by the exporter for claiming exemption from payment of applicable service tax in the case of Notification No. 18/2009-ST dated 07.07.2009. The service was "service provided by a commission agent located outside India and engaged under a contract or agreement or another document by the exporter in India, to act on behalf of the exporter, to cause sale of goods exported by him". This was subjected to four conditions covered in Column (3) as also certain other conditions were provided in the table. The Co-ordinate Bench examined this notification and held that condition is specified in Column 4 (inadvertently mentioned as 4 though referring to Column (3)) of the table are mandatory in nature, whereas those specified are procedural in nature 4 Appeal No. ST/30538/2019 and therefore the appellants having complied with the conditions as specified in Column 4 (actually Column 3) they will be eligible for benefit of this notification. Para 4.4 is relevant and cited below for ready reference:
4.4 We find that the conditions of notification could be classified under the category of mandatory and procedural conditions. As per the mandatory conditions of this notification the exemption should have been claimed by the appellant by way of indication of details of the commission paid or being paid on the shipping bills filed by the appellant. Conditions specified in column 4 of the table in notification are mandatory whereas those specified are procedural in nature. Appellant has complied with the conditions as specified in column 4 and hence is eligible to benefit of this notification. It is settled law that an exemption notification should at the stage of entry to be interpreted in a very strict manner but once it is held that the appellant falls within the parameters of the notification, the notification should be interpreted regularly so as not to disallow the substantial benefits of notification for certain procedural irregularities. Reference is made through the decision of Hon'ble Supreme Service Tax Appeal No.70026-70027 of 2019 20 Court in the case of M/s Dilip Kumar & Company 2018 (361) ELT 577 (SC) wherein following has been held:-
"27. Now coming to the other aspect, as we presently discuss, even with regard to exemption clauses or exemption notifications issued under a taxing statute, this Court in some cases has taken the view that the ambiguity in an exemption notification should be construed in favour of the subject. In subsequent cases, this Court diluted the principle saying that mandatory requirements of exemption clause should be interpreted strictly and the directory conditions of such exemption notification can be condoned if there is sufficient compliance with the main requirements. This, however, did not in any manner tinker with the view that an ambiguous exemption clause should be interpreted favouring the revenue. Here again this Court applied different tests when considering the ambiguity of the exemption notification which requires strict construction and after doing so at the stage of applying the notification, it came to the conclusion that one has to consider liberally.
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29. .....
30. ....
31. The aforesaid placitum is suggestive of the fact that the Courts utilized the rule of strict interpretation in order to decipher the intention of the Legislature and thereafter provide appropriate interpretation for the exemption provided under the provisions of the Act which was neither too narrow nor too broad. It may be noted that the majority did not take a narrow view as to what strict interpretation would literally mean; rather they combined legislative intent to ascertain the meaning of the statute in accordance with the objective intent of the Legislature.
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35. In the judgment of two Learned Judges in Union of India v. Wood Papers Limited, (1990) 4 SCC 256 = 1990 (47) E.L.T. 500 (S.C.) [hereinafter referred as Wood Papers Ltd. case‟ for brevity], a distinction between stage of finding out the eligibility to seek exemption and stage of applying the nature of exemption was made. Relying on the decision in Collector of Central Excise v. Parle Exports (P) Ltd., 5 Appeal No. ST/30538/2019 (1989) 1 SCC 345, it was held "Do not extend or widen the ambit at the stage of applicability. But once that hurdle is crossed, construe it liberally". The reasoning for arriving at such conclusion is found in para 4 of Wood Papers Ltd. case (supra), which reads -
"... Literally exemption is freedom from liability, tax or duty. Fiscally, it may assume varying shapes, specially, in a growing economy. For instance tax holiday to new units, concessional rate of tax to goods or persons for limited period or with the specific objective, etc. That is why its construction, unlike charging provision, has to be tested on different touchstone. In fact, an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden or progressive approach of fiscal provisions intended to augment State revenue. But once exception or exemption becomes applicable no rule or principles requires it to be construed strictly. Truly speaking liberal and strict construction of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject, but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction...‟‟ (emphasis supplied)
36. In Mangalore Chemicals & Fertilizers Ltd. v. Dy. Commissioner of Commercial Taxes, (1992) Supp. 1 SCC 21 [hereinafter referred as „Mangalore Chemicals case‟ for brevity], the facts of the case were that the State Government issued a notification in exercise of power under Section 8A of the Karnataka Sales Tax Act, 1957, providing certain incentives to entrepreneurs starting new industries in the State pursuant to State‟s policy for "rapid industrialization". The notification contains a package of reliefs and incentives including one concerning relief from payment of sales tax with which the case was concerned. There was no dispute that the appellant was entitled to the benefit of the Notification dated June 30, 1969. There was also no dispute that the refunds were eligible to be adjusted against sales tax payable for respective years. The only controversy was whether the appellant, not having actually secured the "prior permission" would be entitled to adjustment having regard to the words of the Notification of August 11, 1975, that "until permission of renewal is granted by the Deputy Commissioner of Commercial Taxes, the new industry should not be allowed to adjust the refunds". The contention of the appellants therein was that the permission for the three years had been sought well before the commencement of the respective years but had been withheld for reasons which were demonstrably extraneous. Therefore, contention was that if, in these circumstances, the Deputy Commissioner could withold the permission.
37. This Court while accepting the interpretation provided by the appellant, observed on the aspect of strict construction of a provision concerning exemptions as follows :
"... There is support of judicial opinion to the view that exemptions from taxation have a tendency to increase the burden on the other unexempted class of taxpayers and should be construed against the subject in case of ambiguity. It is an equally well-known principle that a person who claims an exemption has to establish his case. ...
The choice between a strict and a liberal construction arises only in case of doubt in regard to the intention of the legislature manifest on the statutory language. Indeed, the need to resort to any interpretative process arises only where the meaning is not manifest on the plain words of the statute. If the words are plain and clear and directly convey the meaning, there is no need for 6 Appeal No. ST/30538/2019 any interpretation. It appears to us the true rule of construction of a provision as to exemption is the one stated by this Court in Union of India v. Wood Papers Ltd. [(1990) 4 SCC 256 = 1990 SCC (Tax) 422 = JT (1991) SC 151]."
Three important aspects which comes out of the discussion are the recognition of horizontal equity by this Court as a consideration for application of strict interpretation, subjugation of strict interpretation to the plain meaning rule and interpretation in favour of exclusion in light of ambiguity.
38. We will now consider another Constitution Bench decision in Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal, (2011) 1 SCC 236 = 2010 (260) E.L.T. 3 (S.C.) [hereinafter referred as „Hari Chand case‟ for brevity]. We need not refer to the facts of the case which gave rise to the questions for consideration before the Constitutional Bench. K.S. Radhakrishnan, J., who wrote the unanimous opinion for the Constitution Bench, framed the question, viz., whether manufacturer of a specified final product falling under Schedule to the Central Excise Tariff Act, 1985 is eligible to get the benefit of exemption of remission of Excise duty on specified intermediate goods as per the Central Government Notification dated 11-8- 1994, if captively consumed for the manufacture of final product on the ground that the records kept by it at the recipient end would indicate its "intended use" and "substantial compliance" with procedure set out in Chapter 10 of the Central Excise Rules, 1944, for consideration? The Constitution Bench answering the said question concluded that a manufacturer qualified to seek exemption was required to comply with the preconditions for claiming exemption and therefore is not exempt or absolved from following the statutory requirements as contained in the Rules. The Constitution Bench then considered and reiterated the settled principles qua the test of construction of exemption clause, the mandatory requirements to be complied with and the distinction between the eligibility criteria with reference to the conditions which need to be strictly complied with and the conditions which need to be substantially complied with. The Constitution Bench followed the ratio in Hansraj Gordhandas case (supra), to reiterate the law on the aspect of interpretation of exemption clause in para 29 as follows -
"The law is well-settled that a person who claims exemption or concession has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, thought at times, some latitude can be shown, if there is failure to comply with some requirements which are directory in nature, the noncompliance of which would not affect the essence or substance of the notification granting exemption."
39. The Constitution Bench then considered the doctrine of substantial compliance and "intended use". The relevant portions of the observations in paras 31 to 34 are in the following terms -
"31. Of course, some of the provisions of an exemption notification may be directory in nature and some are mandatory in nature. A distinction between the provisions of a statute which are of substantive character and were built in with certain specific objectives of policy, on the one hand, and those which are merely procedural and technical in there nature, on the other, must be kept clearly distinguished...
Doctrine of substantial compliance and "intended use"7 Appeal No. ST/30538/2019
32. The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably be expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the "essence" or the "substance" of the requirements. Like the concept of "reasonableness", the acceptance or otherwise of a plea of "substantial compliance" depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the pre-requisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleased if a clear statutory pre-requisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means "actual compliance in respect to the substance essential to every reasonable objective of the statute" and the Court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed.
33. A fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance with an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied with notwithstanding the non-compliance of directory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non-compliance for either unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted.
34. The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases and quite often, the critical question to be examined is whether the requirements relate to the "substance" or "essence" of the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine. On the other hand, if the requirements are procedural or directory in that they are not of the "essence" of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance may not be sufficient, but actual compliance with those factors which are considered as essential."
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44. In Hansraj Gordhandas case (supra), the Constitutional Bench unanimously pointed out that an exemption from taxation is to be allowed based wholly by the language of the notification and exemption cannot be gathered by necessary implication or by construction of words; in other words, one has to 8 Appeal No. ST/30538/2019 look to the language alone and the object and purpose for granting exemption is irrelevant and immaterial.
45. In Parle Exports case (supra), a Bench of two-Judges of this Court considered the question whether nonalcoholic beverage base like Gold spot base, Limca base and Thumps Up base, were exempted from payment of duty under the Central Government notification of March, 1975. While considering the issue, this Court pointed out the strict interpretation to be followed in interpretation of a notification for exemption. These observations are made in para 17 of the judgment, which read as follows :
"How then should the Courts proceed? The expressions in the Schedule and in the notification for exemption should be understood by the language employed therein bearing in mind the context in which the expressions occur. The words used in the provision, imposing taxes or granting exemption should be understood in the same way in which these are understood in ordinary parlance in the area in which the law is in force or by the people who ordinarily deal with them. It is, however, necessary to bear in mind certain principles. The notification in this case was issued under Rule 8 of the Central Excise Rules and should be read along with the Act. The notification must be read as a whole in the context of the other relevant provisions. When a notification is issued in accordance with power conferred by the statute, it has statutory force and validity and, therefore, the exemption under the notification is as if it were contained in the Act itself. See in this connection the observations of this Court in Orient Weaving Mills (P) Ltd. v. Union of India, 1962 Supp 3 SCR 481 = AIR 1963 SC 98. See also Kailash Nath v. State of U.P., AIR 1957 SC 790. The principle is well-settled that when two views of a notification are possible, it should be construed in favour of the subject as notification is part of a fiscal enactment. But in this connection, it is well to remember the observations of the Judicial Committee in Coroline M. Armytage v. Frederick Wilkinson, (1878) 3 AC 355, that it is only, however, in the event of there being a real difficulty in ascertaining the meaning of a particular enactment that the question of strictness or of liberality of construction arises. The Judicial Committee reiterated in the said decision at page 369 of the report that in a taxing Act provisions enacting an exception to the general rule of taxation are to be construed strictly against those who invoke its benefit. While interpreting an exemption clause, liberal interpretation should be imparted to the language thereof, provided no violence is done to the language employed. It must, however, be borne in mind that absurd results of construction should be avoided."
In the above passage, no doubt this Court observed that "when two views of a notification are possible, it should be construed in favour of the subject as notification is part of fiscal document". This observation may appear to support the view that ambiguity in a notification for exemption must be interpreted to benefit the subject/assessee. A careful reading of the entire para, as extracted hereinabove would, however, suggest that an exception to the general rule of tax has to be construed strictly against those who invoke for their benefit. This was explained in a subsequent decision in Wood Papers Ltd. case (supra). In para 6, it was observed as follows :
"... In Collector of Central Excise v. Parle Exports (P) Ltd., (1989) 1 SCC 345, this Court while accepting that exemption clause should be construed liberally applied rigorous test for determining if expensive items like Gold Spot base or Limca base of Thums Up base were covered in the expression food products and food preparations used in Item No. 68 of First Schedule of Central Excises and Salt Act and held „that it 9 Appeal No. ST/30538/2019 should not be in consonance with spirit and the reason of law to give exemption for non-alcoholic beverage basis under the notification in question‟. Rationale or ratio is same. Do not extend or widen the ambit at stage of applicability. But once that hurdle is crossed construe it liberally. Since the respondent did not fall in the first clause of the notification there was no question of giving the clause a liberal construction and hold that production of goods by respondent mentioned in the notification were entitled to benefit."
46. The above decision, which is also a decision of twoJudge Bench of this Court, for the first time took a view that liberal and strict construction of exemption provisions are to be invoked at different stages of interpreting it. The question whether a subject falls in the notification or in the exemption clause, has to be strictly construed. When once the ambiguity or doubt is resolved by interpreting the applicability of exemption clause strictly, the Court may construe the notification by giving full play bestowing wider and liberal construction. The ratio of Parle Exports case (supra) deduced as follows :
"Do not extend or widen the ambit at stage of applicability. But once that hurdle is crossed, construe it liberally".
47. We do not find any strong and compelling reasons to differ, taking a contra view, from this. We respectfully record our concurrence to this view which has been subsequently, elaborated by the Constitution Bench in Hari Chand case (supra).
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49. .....
50. In Tata Iron & Steel Co. Ltd. v. State of Jharkhand, (2005) 4 SCC 272, which is another two-Judge Bench decision, this Court laid down that eligibility clause in relation to exemption notification must be given strict meaning and in para 44, it was further held -
"The principle that in the event a provision of fiscal statute is obscure such construction which favours the assessee may be adopted, would have no application to construction of an exemption notification, as in such a case it is for the assessee to show that he comes within the purview of exemption (See Novopan India Ltd. v. CCE and Customs)."
51. In Hari Chand case (supra), as already discussed, the question was whether a person claiming exemption is required to comply with the procedure strictly to avail the benefit. The question posed and decided was indeed different. The said decision, which we have already discussed supra, however, indicates that while construing an exemption notification, the Court has to distinguish the conditions which require strict compliance, the non-compliance of which would render the assessee ineligible to claim exemption and those which require substantial compliance to be entitled for exemption. We are pointing out this aspect to dispel any doubt about the legal position as explored in this decision.
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10 Appeal No. ST/30538/20197. We find that the conditions in the Notification No. 31/2012 are only that the exporter shall have to produce the consignment note by whatever name called issued under his name. Admittedly, there is no dispute that they have complied with this condition. In so far as, further procedural compliance is concerned, we find that the procedure at proviso a(i), is para materia, to procedure as contained at proviso a(i) of Notification No. 18.2009-ST dated 07.07.2009. In other words, this condition/requirement of not having informed in advance or for having not filed the EXP-2 within 15 days of completion of above provisions are procedural in nature and therefore non-compliance thereof, per se, can not devoid the appellant from taking the substantive benefit of the notification. We find that the ratio of the judgment of the Co-ordinate Bench cited supra is squarely applicable in the factual matrix of this appeal. It is also not in dispute that they had later on filed EXP-2 returns, though not within 15 days period as mandated in the notification. We find that these things are therefore procedural in nature and they have also substantively complied with the requirement except for the time limit prescribed for filing EXP-2 and prior intimation under the said procedure.
8. In view of the discussion above, we find there is a merit in the appeal of the appellant and we therefore set aside the impugned order.
9. Appeal allowed.
(Dictated and Pronounced in the open court) (A.K. JYOTISHI) MEMBER (TECHNICAL) (ANGAD PRASAD) MEMBER (JUDICIAL) Jaya