Supreme Court: While holding that the term “school children” will include college and university as well while interpreting government memo exempting passengers tax in respect of Stage Carriage (buses) owned by educational institution and used for the transportation of children to and from such institutions, the Division Bench of Dinesh Maheshwari and Vikram Nath, JJ., remarked,

“It gets perforce reiterated that the broad expression “children”, obviously, refers to the students taking instructions in educational institutions, irrespective of their class or standard or level.”

The petition was filed by the State of Haryana through its Assistant Excise and Taxation Officer seek leave to appeal against the judgment of the High Court of Punjab and Haryana by which the High Court had quashed the6 Show Cause Notice proposing to deny the benefit of exemption to the respondents from payment of passengers tax in terms of Memo dated 22-09-1970 issued under Section 10 of the Punjab Passengers and Goods Taxation Act, 1952.

The State contended that the approach of the High Court was not in conformity with the requirement of law as regards taxing statutes and further as regards the exemption notification or clauses. Reliance, in this regard was placed on the case of Novopan India Ltd. v. Collector of Central Excise and Customs, (1994) Supp. (3) SCC 606, wherein it had been held that,

“16…..The principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee – assuming that the said principle is good and sound – does not apply to the construction of an exception or an exempting provision; they have to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State.”

Exempting Provision

The provision empowering the State to grant exemption, occurring in Section 10 of Punjab Passengers and Goods Taxation Act, 1952 reads as under:

“10.Exemptions: The State Government may, by general or special order and subject to specific conditions, if any, exempt any person or class of persons from the operation of all or any of the  provisions of this Act, if in its opinion, such exemption would promote national or public interest.”

The Memo dated 22-09-1970, which provided the exemption in question reads as under:

Subject: Exemption of Stage Carriages (Buses) owned and operated by Educational Institutions in carrying School children from the levy of Passengers Tax under Section 10 of the Punjab Passengers and Goods Taxation Act, 1952.

In exercise of the powers conferred by Section 10 of the Punjab Passengers and Goods Taxation Act, 1952, the Governor of Haryana hereby exempts the educational institutions from the payment of Passengers Tax under the Act, ibid, in respect of Stage Carriage(buses) owned by them and used for the transportation of children to and from such institutions.”

High Court’s Interpretation of the Exempting Provision

The submission of the State had essentially been that in the said notification, exemption was granted to the educational institutions in carrying “school children” from the levy of passengers tax; and, therefore, extending this exemption to any other institution, not transporting children of the schools, was impermissible. This submission had been found unworthy of credence and the High Court had rejected the same while observing, inter alia,

“….Once the Government itself has taken a decision as such, the Authorities below are not justified in trying to deny the benefit of exemption which was granted in public interest to the educational institutions under Section 10 of the Act and thus would frustrate the purpose of the exemption granted. Merely because in the heading, the word schoolchildren had been written, would not mean that the exemption was only granted to the children of schools and not to other educational institutions. If the State wanted to make a distinction as such, it would have specified that the institutions imparting education up to certain level i.e. primary or secondary were entitled for the benefit. The distinction, thus, sought to be made out is not justified and a liberal interpretation is to be given once exemption has been granted to the educational institutions.”

Observation and Analysis

The Supreme Court observed that even when nothing is to be intended and only plain language of the notification is to be examined, with reference to the powers under which, and the purpose for which, it has been issued, it is more than evident that the use of expression “school children” in the subject-caption of the said Memo can never be taken as decisive of the matter.

Noticeably, in the body of the said Memo, the exemption was extended to the educational institutions from payment of passengers tax in respect of the stage carriage (buses) owned by them and “used for the transportation of children to and from such institutions”. Opining that the expression “children” used in the body of the said Memo directly referred to the students taking instructions in educational institutions; the Bench stated,

“…there is no reason or logic to restrict the operation of this exemption notification only for the purpose of the vehicles used for transportation of the children going to schools and not to apply the same in respect of the vehicles used for transportation of the students going to other educational institutions, like colleges and universities.”

Further, noticing that the exemption had been granted only in respect of stage carriage (buses), which were being used for transportation of students to and from such institutions and not indiscriminately to all the vehicles used for the purpose of any such institution, the Bench explained that it had not been the case of the State that exemption was being claimed in relation to any vehicle used for any other purpose except transporting students to and from the educational institution, therefore, the exemption claimed by the university was held to be just and proper.


Consequently, holding that the construction of the exemption notification by the High Court had been only on its plain language and while taking note of the purpose for which it was issued, the Bench denied interfering with the impugned judgment. Hence, the special leave was dismissed.

[State of Haryana v. Daronacharya College of Engineering, Special Leave to Appeal (C) No(s). 31730 of 2016, decided on 27-09-2021]

Appearance by:

For the State: Nidhi Gupta, AAG Haryana, Sanjay Kumar Visen, AOR and Bhanwar Jadon, Advocate

For the Respondent: Manoj Kumar Sharma, Advocate and T. Mahipal, AOR

Kamini Sharma, Editorial Assistant has put this report together

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