Churchill first used the phrase during the 1906 election. After the election in the House of Commons on 22 February 1906, as Under-Secretary of the Colonial Office, he repeated what he had said during the campaign,
It seems this first usage was strictly literal, merely a roundabout way of referring to inexact or inaccurate terminology (Churchill was indeed given to circumlocution). But it was soon interpreted or taken up as a euphemism for an outright lie. To accuse another member in the House of lying is unparliamentary, so a way of implying that without saying it was very useful.