OCTOBER 06, 2021

By Vijay Kumar

A proviso is a clause in a deed or statute, beginning with "provided that" and operating as a condition or qualification, frequently inserted to save or except, from the effect of the preceding words, some rights, instances or cases.

We find in many Acts, the phrases "provided that" "provided further" "provided also". These are called provisos; "provided that" is the proviso if there is only one proviso and the first proviso if there are more than one proviso. "Provided further" is the second proviso and "provided also" is the third and subsequent provisos.

In the CGST Act, I could find 141 instances of 'provided that', 40 'provided further' and 12 of 'provided also'. In fact, the very First Section of CGST Act contains a proviso:

1. Short title, extent and commencement.-

(1) This Act may be called the Central Goods and Services Tax Act, 2017.

2) It extends to the whole of India

(3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint:

Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

See how badly, this is drafted. This Act will come into force only when the government notifies it or its provisions. Notification No. 1/2017 - Central Tax, dated 19th June, 2017, stated:

In exercise of the powers conferred by sub-section (3) of section 1 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government hereby appoints the 22nd day of June, 2017, as the date on which the provisions of sections 1, 2, 3, 4, 5, 10, 22, 23, 24, 25, 26, 27, 28, 29, 30, 139, 146 and 164 of the said Act shall come into force.

The powers conferred by sub-section (3) of section 1 can be used only if the Act has come into force. When Section 1 itself has not come into force, how can its powers be used to notify some sections? But that was the practice and it is going unquestioned. But not all laws are like that. There was a brilliant drafting of the Companies Act 2013 in which Section 1 reads as:

1. Short title, extent, commencement and application.

(1) This Act may be called the Companies Act, 2013.

(2) It extends to the whole of India.

(3) This section shall come into force at once and the remaining provisions of this Act shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of this Act …….

This is how it should be done - the first section should be made effective immediately and then the government will get the power to notify other sections.

Coming back to the provisos, I wonder why there should be so may provisos in our Laws or why a proviso at all. I found my curiosity was nothing new. More than a hundred years ago, a Senator in the US Senate observed on April 26 1910:

I never could understand why provisos should be multiplied, when in the text of the statute itself its meaning might be so much better expressed, …

Instead of having a proviso, can't Section 1(3) of the CGST Act read as

(3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of this Act .

This is how the Companies Act was written.

Anyway, provisos are here to stay and there have been numerous disputes on what the provisos mean.

In the recent famous case of VKC Footsteps India Pvt Ltd - 2021-TIOL-237-SC-GST, there was a section on Construing the proviso. The Supreme Court observed,

Provisos in a statute have multi-faceted personalities. As interpretational principles governing statutes have evolved, certain basic ideas have been recognized, while heeding to the text and context.

The normal function of a proviso is to except something out of the enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. 

As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment, and ordinarily, a proviso is not interpreted as stating a general rule.

The proper function of a proviso is that it qualifies the generality of the main enactment by providing an exception and taking out as it were, from the main enactment, a portion which, but for the proviso would fall within the main enactment.

But then these principles are subject to other principles of statutory interpretation which may supplement or even substitute the above formula.

These other rules are:

(i) A proviso is not construed as excluding or adding something by implication.

(ii) A proviso is construed in relation to the subject matter of the statutory provision to which it is appended.

(iii) Where the substantive provision of a statute lacks clarity, a proviso may shed light on its true meaning.

(iv) An effort should be made while construing a statute to give meaning both to the main enactment and its proviso bearing in mind that sometimes a proviso is inserted as a matter of abundant caution.

(v) While ordinarily, it would be unusual to interpret the proviso as an independent enacting clause, as distinct from its main enactment, this is true only of a real proviso and the draftsperson of the statute may have intended for the proviso to be, in substance, a fresh enactment.

As per the most comprehensive and oft-cited precedent governing the interpretation of a proviso the Supreme Court in  S Sundaram Pillai v. V R Pattabiraman held:

43. …To sum up, a proviso may serve four different purposes:

(1) qualifying or excepting certain provisions from the main enactment.

(2) it may entirely change the very concept of the intendment of the enactment by insisting on certain mandatory conditions to be fulfilled in order to make the enactment workable.

(3) it may be so embedded in the Act itself as to become an integral part of the enactment and thus acquire the tenor and colour of the substantive enactment itself; and

(4) it may be used merely to act as an optional addenda to the enactment with the sole object of explaining the real intendment of the statutory provision.

In  Hiralal Rattanlal v. State of UP where Justice KS Hegde, speaking for a four judge Bench of the Supreme Court observed that while ordinarily, a proviso is in the nature of an exception, the precedents indicate that sometimes a proviso is in the nature of a separate provision, with a life of its own. The Court held:

But cases have arisen in which this Court has held that despite the fact that a provision is called a proviso, it is really a separate provision and the so-called proviso has substantially altered the main section. In CIT v. Bipinchandra Maganlal & Co. Ltd., Bombay - 2002-TIOL-1116-SC-IT-LB, this Court held that by the fiction in Section 10(2)(vii) second proviso read with Section 2(6-C) of the Indian Income Tax Act, 1922 what is really not income is, for the purpose of computation of assessable income, made taxable income.

Mr. PM Bakshi, a former Member of the Law Commission wrote in 1992 in the 'Journal of The Indian Law Institute'

Traditions of legislative drafting in India and other countries have given birth to a number of linguistic devices, not found in ordinary language. Some of them concern sentence structure, while a few others pertain to the use of particular words and phrases. Many of these have been sanctified by usage; and those who spend their lives in the world of law, have become so used to such devices, that they tend to forget that these linguistic devices are not quite familiar to persons belonging to the non-legal world. The proviso is one such device. It is more than a hundred years old in Indian legislative drafting, and perhaps much older in English drafting. But the very fact that it is very frequently used in legal drafting seems to have made us oblivious to some of its deficiencies.

In 1880 Justice Lush said that when we find a proviso, the natural presumption is that, but for it, the enacting part of the section would have included the subject matter of the proviso. In 1909, in the case of Local Government Board v. South Stoneham Union Lord Macnaghten observed, "the proviso is a qualification of the preceding enactment which is expressed in terms too general to be quite accurate."

In Dwarka Prasad vs Dwarka Das Saraf on 11 August, 1975, the legendary Justice VR Krishna Aiyer observed

In 1959 in Commissioner of Income Tax, Mysore, Travancore-Cochin and Coorg, Bangalore vs The Indo Mercantile Bank, the Supreme Court observed,

The territory of a proviso is to carve out an exception to the main enactment and exclude something which otherwise would have been within the section; it has to operate in the same field and if the language of the main enactment is clear it cannot be used for the purpose of interpreting the main enactment or to exclude by implication what the enactment clearly says unless the words of the proviso are such that that is its necessary effect.

The insignificant proviso has thus been a very active litigant. And the proviso prospers and proliferates. You can see in Notification No. 76/2018 - Central Tax, Dated: December 31, 2018, there 11 provisos. Yes, there are 11 provisos and they are not numbered. This Notification was amended by Notification No. 19/2021-Central Tax, Dated: June 01, 2021, which stated: after the eighth proviso, the following provisos shall be inserted, namely: -

Sometimes they would not know which of the provisos have been amended or even omitted. In DDT 2943 04 10 2016, I had written Omitted Proviso Amended?

In the recent Circular No. 160/16/2021-GST, dated 20th September, 2021, the CBIC stated, "The term 'subjected to export duty' used in first proviso to section 54(3) of the CGS Act, 2017 means …."

Only it is not the first proviso, it is the second one!

Until Next Week.