Retrospective insertion of clarification to exemption notification :
An exemption notification cannot be amended with retrospective effect. However, sometimes it is found that there is some drafting mistake or ambiguity in (a) the general exemption notification or (b) Special exemption order issued. Sometimes, taxable person gets unintended benefit while in some cases even intended benefit cannot be obtained due to drafting error in the exemption notification or exemption order.
To overcome this problem, section 11(3) CGST Act provides that Central Government, for the purpose of clarifying the scope or applicability of exemption notification or exemption order, may insert an explanation to the exemption notification or order within one year of such notification or order. Such Explanation to an exemption Notification will have retrospective effect from date of exemption notification. Such Explanation can be inserted in exemption notification only within one year of date of issue of notification and not thereafter.
There is identical provision in section 6(3) of IGST Act.
Purpose and meaning of explanation – The section itself clarifies that purpose of ‘explanation’ is to clarify the scope or applicability of an exemption notification or exemption order. Thus, the retrospective insertion can be made only to explain or clarify.
As per Concise Oxford dictionary, ‘explain’ means to make clear or intelligible with detailed information etc. ‘Clarify’ means to make clearer, make transparent.
In M K Salpekar v. Sunil Kumar Shamsunder Chaudhari AIR 1988 SC 1841, it was held that an explanation to a clause cannot be so construed as to narrow down the scope of main section. An explanation should be read so as to harmonise with and clear up any ambiguity in the main section – similar views in Bihta Marketing Union v. Bank of Bihar AIR 1967 SC 389 = AIR 1967 SC 389 * Sulochana Amma v. Narayanan Nair – AIR 1994 SC 152 = 1993 AIR SCW 3792 = (1994) 2 SCC 14. In this case it was also observed that an explanation is not a substantive provision by itself. It is entitled to explain the meaning of the words contained in the section or clarify certain ambiguities.
Thus, the clarification to exemption notification/order cannot be added with retrospective effect to restrict the scope of notification/order or to insert a condition which was not there.