In Tax Matters, Strict Letter Of Law Must Be Followed; No Tax Can Be Imposed By Inference Or Analogy : Supreme Court

The Supreme Court in M/s. Shiv Steels v. The State of Assam & Ors. declared that in matters of taxation, the “strict letter of the law” must govern the assessment and imposition of taxes, emphasizing that taxing statutes do not permit authorities to impose taxes by analogy or by inference. The Court held that where the statute is explicit, there is no room for inferential extensions in favour of revenue; only where the provisions are satisfied strictly can liability be imposed. Further, the Court observed that limitation periods prescribed by law cannot be circumvented through administrative directions or similar extra-statutory means. In effect, both taxpayers and revenue authorities must adhere closely to what statute mandates — no extended interpretations merely to increase revenue. The ruling underscores judicial insistence on legislative clarity, legal certainty, and protection against arbitrary extensions of taxing powers. It reaffirms that fiscal statutes should be construed narrowly, only allowing what is expressly authorized, not what might be implied. The Supreme Court’s decision will influence assessments, appeals and limit litigation where tax authorities have sought to broaden liability via inference. It also strengthens taxpayer protections, ensuring that only clear legal obligations impose tax.