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Provisions not to be read in a way that it presumes deficiency and radically changes the meaning of the context of the provision : Supreme Court

Ifrah Murtaza ,
  25 October 2023       Share Bookmark

Court :
Hon’ble Supreme Court of India
Brief :

Citation :
Civil Appeal no. 3991/2023

Case title:

Commissioner, Customs Central Excise and Service Tax, Patna v. M/S Shapoorji Pallonji and Company Pvt. Ltd. & Ors. / Union of India & Ors. V. M/S Shapoorji Pallonji and Company Pvt. Ltd. 

Date of Order:

13 October, 2023


Hon’ble Justice Mr. S. Ravindra Bhat

Hon’ble Justice Mr. Dipankar Datta


Appellant: (i) Commissioner, Customs Central Excise and Service Tax, Patna

(ii) Union of India & Ors.

Respondents: (i) M/S Shapoorji Pallonji and Company Pvt. Ltd. & Ors.



The Hon’ble Supreme Court of India (hereinafter referred to as ‘the Supreme Court or ‘the Court’) upheld the judgment of the High Court of Patna and the High Court of Orissa and that the Indian Institute of Technology Patna (IIT Patna) and National Institute of Technology, Rourkela (NIT Rourkela) fall under section 2(s) of the Mega Service Tax Exemption Notification, issued by the Department of Revenue in 2012.


Exemption Notification : 2(c)

The Finance Act, 1994 (1994 Act) :

  • Section 93
  • Section 65



  • Indian Institute of Technology Patna vide letter of award, awarded a construction contract to M/S Shapoorji Pallonji and Company Pvt. Ltd. (SPCL)
  •  in December of 2012. The letter, however, did not mention the service tax that would be reimbursed to SPCL. SPCL accordingly registered itself with the Central Excise duty, adjusting the tax amount into the monthly running bills paid by IIT Patna, thereby making IIT Patna the ultimate service tax settler.
  • The Indian Audit and Account Department objected to the course of actions, referring to clause 12(c) of the Exemption Notification, according to which IIT Patna was not obligated to remit service tax as it classifies as a ‘governmental authority’. SPCL was directed to make the adjustments for the previously paid taxes.
  • SPCL approached the Patna High Court apprehensive about the tax adjustments and the recovery proceedings initiated by IIT Patna. The High Court of Patna held that IIT Patna would indeed come under the definition of ‘governmental authority’ and ruled that the construction undertaken by SPCL was indeed exempt from Service Tax and that revenue thus far collected shall be refunded.
  •   In the case of NIT Rourkela, SPCL was awarded a contract vide work order in February 2023. The price mentioned in the work order was inclusive of all taxes except the service tax which would be reimbursed as applicable. SPCL then discharged its service tax liability and raised the bills to NIT Rourkela, who promptly refused to pay the service tax.
  • Aggrieved, SPCL approached the High Court of Orissa for reimbursement of service taxes. The Orissa High Court then directed the Deputy Commissioner of Service Tax to dispose of SPCL’s pending application for refund within 2 months, relying on the Patna High Court’s judgment.
  • The appellants have now approached the Court for remedy.



  • Whether the definition of ‘governmental authority’ under clause 2(s) of the Exemption Notification has been correctly interpreted?



  • The Counsel appearing for both the appellants contented that both IIT Patna and NIT Rourkela were ineligible for the benefits outlined in the Exemption Notification.
  •  As per the definition, governmental involvement should be 90% or more in way of either equity or control and applied to both types of governmental bodies, either statutory or non-statutory.
  • The impugned judgment broadens the scope of the exemption to include a vast number of statutory bodies; therefore, unfairly burdening the exchequer.
  • Relying on Mumbai v. Dilip Kumar and Company & Ors., the counsel argued that any notification or a clause granting exemption must be interpreted strictly and literally, with any ambiguity resolved in favour of the revenue.


  • SPCL qualifies for exemption under the Exemption Notification as IIT Patna and NIT Rourkela classify as ‘governmental authorities’, even though the construction services are classified as taxable under section 65 of the 1994 Act.
  • Clause 29(h) of the Exemption Notification exempts services provided by sub-contractors by way of works contract to another contractor providing works contract services which are already exempted under the Exemption Notification.
  • The appeal had no merit and deserved outright dismissal.


  • Upon reading the 2 definitions, it was clear that the scope of the exemption was severely restricted to only a few entities, but the reason for re-defining ‘governmental authority’ was not made available by the appellants.
  • The Amendment by the way of the Clarification Notification had expanded the definition of ‘governmental authority’ and widened the exemption base for service tax. 
  • The Court observed the rulings of the nine-judge Bench of the Supreme Court, in the case of Superintendent & Legal Remembrancer, State of West Bengal v. Corporation of Calcutta, which stated that where the language of a statute is clear, the words are in themselves precise and unambiguous, and a literal reading does not lead to absurd construction, the necessity for employing rules of interpretation disappears and reaches its vanishing point.
  • Referring to Kantaru Rajeevaru v. Indian Young Lawyers Association & Ors., the Court held that although punctuations hold some weightage, they cannot be the controlling element for interpretation.



  • The Supreme Court upheld the judgments of the High Courts of Patna and Orissa, stating that the expanded scope of the operation of the provision is insufficient to attribute to the ambiguity of the provision. The Court rejected the appellants’ contention there exists no ambiguity in the interpretation of clause 2(s) of the Notification. A Court as an interpreter cannot alter or amend the law but only interpret the provision in the happening of ambiguity, to fulfill the legislative intent of the provision. The employment of tools of interpretation cannot be misused simply because the plain interpretation did not yield the desired results. The appeal was thus dismissed without any order for costs.




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