1. Incentive Scheme: On 16th June, 1976, the Central government, in exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, issued a notification announcing a scheme of excise duty relief in respect of certain commodities. Rule 8 authorises the Central Government t exempt by notification any excisable goods from the whole or any part of the duty livable on such goods. The Rule was framed under 5.37 of the Central Excises and Salt Act, 1944. The notification is thereforee, a piece of subordinate legislation.
2. The scheme gave a rebate of 25 per cent of excise on the excess of the base clearance of a manufacturer. Broadly stated the scheme was this. This scheme granted 25 per cent exemption from duty of certain specify goods enumerated in the scheme on the quantity cleared in excess of a certain limit. this limit was to be fixed in a specified number.
3. A base period had to be determined and a base clearance had to be ascertained under the scheme. The grant of 25 percent rebate or exemption or concession in the payment of excise duty in the subsequent years was to be made on the quantum of clearance in excess of the base clearance. Duty at the rate was payable on the quantity cleared till the base clearance was reached. The quantity in excess thereof was to be cleared by a manufacturer on payment of 75 per cent of the applicable rate of excise duty.
4. The scheme provided that the base period and clearances, in elation a factory, shall be determined as under:-
'After comparing the clearness of specified goods under sub- paragraph (1) the base period and clearances, in relation to a factory, shall be determined as under :-
(a) Where the specified goods were or are cleared from a factory first time on or after the 1st day of April 1976, the base period be the year 1975-76 and the base clearances shall be nil;
(b) Where the specified goods were cleared from a factory for the time on or after the 1st day of April, 1973 but not later that 31st day of March , 1976, the base period shall be three financial year namely 1973-74, 1974-75 and 1975-76 and the base clearance shall be one third of the aggregate of the clearances of such goods during such base period'
(c) Where the specified goods were cleared from the factory for the first time earlier than 1st day of April, 1973, the base period shall be the year in which the aggregate of the clearances of such goods during any of the financial years 1973-74, 1974-75 and 1975-76 was the highest and the clearances during such base period shall be the base clearances.'
Thus three periods of time were determined in order to fix the base period and base clearances. These are as follows:-
(a) 'In case of goods cleared from a factory for the first time on or after 1st April, 1976 the entire quantity of subsequent clearances of specified goods of that factory attracts advantage of concessional rate of duty. The base clearance is nil.
(b) IN case of goods cleared from a factory for the first time on or after 1st April, 1973 but on or before 31st March, 1976 the average of the clearances of the 'Specified goods of that factory for the aforesaid three financial years has to be taken as the base clearance. Clearance in excess of the base clearance determined as aforesaid would attract advantage of the concessional rate of duty. The base clearances is the average of the clearances of three financial years 1973-74, 1974-75, 1975- 76.
(c) In case of a factory which cleared goods for the first time on or before 1st April, 1973, that yea out of the three financial years 1973-74, 1974-75 and 1975-76 in which the factory cleared the highest quantity is to be determined as the base period and the highest clearance so made as to be taken as the base clearance. The base clearance is the highest of clearance out of the three financial years 1973-74, 1974-75 and 1975-76.'
5. Originally the scheme did not include polyester fibre industry. On a representation made by the association of industry the scheme was extended to polyester fibre on 9th September, 1976. Item 48 of polyester fibre was introduced in the scheme. Every manufacturer desiring to avail of the benefit of the `incentive Scheme' as it has been called, had to make a declaration in the prescribed from. After the declaration was approved by the proper officer the clearances in excess of base clearances were entitled for exemption.