Anil K. Sen, J.
1. These are the three appeals under Clause 15 of the Letters Patent preferred by the Union of India and the Central Authority constituted under the Tax Credit Certificate (Excise Duty on Excess Clearance) Scheme, 1965. Points raised in these appeals and in the cross-objections in two of them are common and they turn on the interpretation of Section 280ZD of the Income-tax Act, 1961 (hereinafter referred to as 'the said Act'). These appeals and cross objections have in such circumstances been heard together and are being disposed of by this judgment.
2. The sole respondent in these appeals is a company manufacturing paper and paper board in three of its paper mills--two in West Bengal and one in Orissa. The company manufactures different varieties of papers as specified in paragraph 3 of the respective writ petitions. Under the Central Excises and Salt Act, 1944, these different varieties of papers are not subjected to any uniform rate of excise duty. In entry 17 of the First Schedule, though enumerated under a broad heading of 'Paper' the different varieties are not only differently enumerated but are subjected to different rates of excise duty.
3. The Finance Act of 1965, in providing some tax relief, introduced a new scheme of tax credit certificate in Chapter XXIIB including therein a provision for such a credit certificate in relation to increased production of certain goods in Section 280ZD. That provision is set out hereunder s
'280ZD. Tax credit certificates in relation to increased production of certain goods.--(1) Subject to the provisions of this Section, a person, who during any financial year commencing on the 1st day of April, 1965, or any subsequent financial year (not being a year commencing on the 1st day of April 1970, or any financial year thereafter) manufactures or produces any goods, shall be granted a tax credit certificate for an amount calculated at a rate not exceeding twenty-five per cent. of the amount of the duty of excise payable by him on that quantum of the goods cleared by him during the relevant financial year which exceeds the quantum of the goods cleared by him during the base year, whether the clearance in either case is for home consumption or export.
(2) The goods in respect of which a tax credit certificate shall be granted under Sub-section (1) and the rate at which the amount of such certificate shall be calculated shall be such as may be specified in the scheme :
Provided that different rates may be specified in respect of different goods.
(3) In specifying the goods and the rates under Sub-section (1), the Central Government shall have regard to the following factors, namely :
(a) the need for stimulating industrial output;
(b) the need for financial assistance to industrial undertakings engaged in the manufacture or production of such goods;
(c) any other relevant factor.
(4) Where any undertaking begins, after the 1st day of April in the base year, to manufacture or produce any goods in respect of which a tax credit certificate may be granted under Sub-section (1), the quantum of goods cleared in that year shall, for the purposes of that Sub-section, be determined in such manner as may be provided in the scheme.
(5) The amount shown on a tax credit certificate granted to any person under this section shall, on the certificate being produced before the Income-tax Officer, be adjusted against any liability of that person under the Indian Income-tax Act, 1922 (11 of 1922), or this Act, existing on the date on which the certificate was produced before the Income-tax Officer and where the amount of such certificate exceeds such liability, or where there is no such liability, the excess or the whole of such amount, as the case may be, shall, notwithstanding anything contained in Chapter XIX, be deemed, on the said date, to be refund due to such person under that Chapter and the provisions of this Act, shall apply accordingly :
Provided that the adjustment or refund, as the case may be, under this Sub-section shall be only for such amount, not exceeding the amount of the certificate, as is used within such period as may be specified in the scheme-
(i) for repayment of loans taken by the person from any of the financial institutions notified in this behalf by the Central Government, or
(ii) for the acquisition of any capital asset in India, including the construction of any building, for the purposes of his business, or
(iii) where the person is a company, also for redemption of its debentures.
(6) In this section--
(a) 'base year', in relation to an existing undertaking which manufactures or produces the goods referred to in Sub-section (1), means the financial year commencing on the 1st day of April, 1964, and in relation to any other undertaking, the financial year in which such undertaking begins to manufacture or produce such goods;
(b) 'duty of excise' means the duty of excise leviable under the Central Excises and Salt Act, 1944 (1 of 1944).'
4. The scheme referred to in the above provision known as the Tax Credit Certificate (Excise Duty on Excess Clearance) Scheme, 1965 (hereinafter referred to as the 'said Scheme'), was framed by the Central Government in exercise of the powers under Section 280ZE by a notification dated November 5, 1965. Paragraph 3 of the said Scheme provides that, subject to the provisions of the Scheme, a certificate shall be granted in respect of any class of goods specified in column 2 of Schedule I to this Scheme and falling under the item specified in the corresponding entry in column 3 thereof for the amount calculated at the rate specified in the corresponding entry in column 4 of the said Schedule. Under clause 5 of the said Scheme a person eligible for grant of a credit certificate in respect of any class of goods is required to make an application to the Central Authority in Form A as prescribed by the Scheme in respect of each financial year for which he is so eligible. Such application is to be accompanied by a declaration in Form B of the goods cleared in the base year and the goods cleared in the relevant financial year. The application is to be verified by the factory officer and countersigned by the circle officer. The proviso to Clause 5(1) of the said Scheme provides that the person who owns more than one factory manufacturing or producing the same class of goods is to file a declaration in Form B in respect of each such factory for the base year as also the relevant financial year. Such declaration is to be sent along with the application in Form A. Clause 6 provides how the Central Authority after such enquiry as it deems fit is to determine the eligibility for the certificate and the amount thereof and to grant the same. The other provisions of the Scheme are not relevant for our present purposes except an extract from Schedule I which is set out here under:
'SCHEDULE I(See paragraph 3)
Sl. No.Class of goodsItem No. in the First Schedule to the Act.Rate, being the percentage of duty of excise payable on the quantum of goods cleared in the relevantfinancial year in excess of the quantum cleared or deemed to have been cleared in the base year.
(3)Paper, all sorts, other than (i) newsprint, and (ii) boards including paste-board, mill board,straw board, pulp board, card and coated board
1715% Explanation.-- Newsprint referred to above shall be deemed to be paper containing mechanical wood pulpamounting to not less than fifty per cent. of its fibre content. (4)Newsprint referred to in S. No. (3)1725%'
5. The sole respondent who manufactures paper and paper board as stated hereinbefore claimed the benefit under the aforesaid Scheme for 4 years on the basis of excess clearance of different varieties of papers manufactured and cleared by the company for these years. For the year 1966-67, the company made an application in the statutory form before the appellant, Central Authority, for grant of a tax credit certificate under the said Scheme and the amount of credit claimed was Rs. 9,88,893.18. It is not in dispute that such a claim was made on the basis of quantities of each variety of paper manufactured and cleared by the company from individual mills of its own. Thus, the company not only based the claim for the benefit mill-wise but also on the basis of each variety of paper manufactured by it. The Central Authority, however, by its order dated February 2, 1968, allowed the claim for the benefit to the extent of Rs. 4,19,375. In assessing the amount, the Central Authority admittedly proceeded on the overall net excess clearance in respect of all the mills or the manufacturing units of the respondent-company after setting off a shortfall in one such unit against any excess production in the other. The Central Authority further made the assessment on the paper as a whole and not on individual varieties thereof, that is, in determining the excess clearance, the shortfall in production in one variety was set off by the Central Authority against the excess production in the other variety.
6. For the year 1967-68, the respondent-company made a similar application for grant of tax credit certificate and the credit claimed for that year was Rs. 9,98,532.92. The Central Authority, by its order dated May 27, 1969, allowed the credit for that year at the reduced figure of Rs. 4,68,788 making the assessment in the similar manner as in the previous year.
7. For the years 1968-69 and 1969-70, the respondent-company made similar applications for grant of tax credit certificate and the credit claimed for the respective two years was Rs. 11,63,748.89 and Rs, 10,19,499.41. The appropriate authority again made the assessment in the same manner as in previous years and allowed the credit at the reduced figures of Rs. 6,07,064 and Rs. 4,71,566.09 by its orders dated May 6, 1971, and June 16, 1971, respectively.
8. The respondent-company challenged the assessment for the year 1966-67, in a writ petition, which was registered as C.R. No. 1371(W) of 1969 [Titaghur Paper Mills Co. Ltd. v. Union of India : 93ITR96(Cal) ] out of which F.M.A. No. 60 of 1974 arises. The said company challenged the assessment for the year 1967-68 in a writ petition which was registered as C.R. No. 1584(W) of 1970 out of which F.M.A. No. 64 of 1974 arises. The assessments for the years 1968-69 and 1969-70 were challenged in a writ petition by the respondent-company, which was registered as C. R. No. 4098(W) of 1971 out of which F.M.A. No. 672 of 1974 arises.
9. In the different writ petitions on which the respective rules were issued the respondent-company raised two contentions in assailing the validity of the impugned assessments. Firstly, it was contended that the' benefit of tax credit under Section 280ZD should be allowed in respect of each variety of paper which itself constitutes goods within the meaning of the term used in the provision. Secondly, it was contended that such benefit should be allowed mill-wise or unit of production-wise and not on the basis of overall clearance of such goods from all the units of production. The learned judge in the trial court upheld the first of the aforesaid contentions raised by the respondent-company but overruled the second one. The rules were accordingly made absolute in part and the assessments being set aside, the Central Authority was directed to make a fresh assessment in accordance with law and in the light of his decision. The Union of India and the Central Authority, who were contesting the said rules, being aggrieved by the decision of the learned judge in the trial courts, have come up with these appeals. In these appeals the appellants claim that the assessments as made by the Central Authority should be upheld because assessment should be made on paper as a whole and not on the basis of individual varieties thereof so that the assessing authority had rightly set off the shortfall in production of one variety against the excess production in the other. In two out of three appeals, namely, F.M.A. No. 64 of 1974 and F.M.A. No. 672 of 1974, the sole respondent, who was the petitioner in the trial court, has preferred cross-objections reiterating its claim that it should be granted the benefit mill-wise or unit of production-wise and not on the basis of overall clearance of such goods from all the mills or units.
10. Thus, in the appeals, the solitary common ground which arises for consideration is as to whether the quantum of tax credit as claimed by the respondent-company is to be determined on paper as a whole, manufactured by the claimant with reference to overall excess by setting off the shortfall in the production of one variety as against the excess in the other. Similarly, the solitary question which arises for consideration in the two cross-objections is as to whether the benefit of such credit is to be allowed mill-wise or unit of production-wise or on the basis of overall clearance of such goods, adjusting the shortfall in one unit against the excess in the other. We proceed to consider the two points separately.
11. So far as the first point involved in the appeals is concerned, the learned judge in the trial court has held against the appellants. In his view on the provision of Section 280ZD and the scheme, the credit certificate should be granted not on the basis of overall clearance of all varieties and qualities of paper manufactured or produced by the respondent-company but on the basis of clearance of each particular variety or quality of paper which constitutes a different class of goods manufactured by the company for the purpose of exciss levy. According to the learned judge, the benefit under Section 280ZD is admissible with reference to goods which term has not been defined in the Act but has been defined in the Scheme as any excisable goods in respect of which tax credit certificate can be granted under the scheme. The term 'excisable goods' has been defined by Section 2(d) of the Central Excises and Salt Act, 1944, to mean goods specified in the First Schedule to that Act as being subject to a duty of excise. The learned judge has further held that the term 'goods' not having been defined in the said Act and when the different varieties of papers when manufactured are bought and sold individually as different and distinct items of goods, all the varieties cannot be grouped together as the goods for the purpose of making the assessment of the tax credit admissible under Section 280ZD.
12. Mr. Bose, Mr. Sanyal and Mr. Mukherji appearing on behalf of the appellants in the three appeals have challenged the correctness of the view taken by the learned judge in the trial court. In their fairness they, however, conceded that a great amount of ambiguity is left by the use of the term 'goods' not defined in the Act with reference to which the tax credit benefit is to be given. It has, however, been contended on their behalf that the apparent object behind the relief provided by Section 280ZD being to stimulate industrial output, such an object is likely to be frustrated if the assessment of the excess manufacture and clearance be not made on the overall basis of all the varieties of papers manufactured and cleared by the respondent-company but is so done with reference to individual varieties thereof. It has further been contended on the authority of the decision of the Supreme Court in the case of V. V. Iyer of Bombay v. Jasjit Singh, Collector of Customs, : AIR1973SC194 , that even if the term 'goods' is capable of two meanings, the meaning assigned by the assessing authority not being totally an unreasonabe one, this court could not have set aside the assessment adopting the other view as to the meaning of the term. The contentions so raised on behalf of the appellants have been contested by Mr. Chatterji and Mr. Bhattacharya appearing on behalf of the sole respondent.
13. We have carefully considered the respective contentions of the parties. In our view, the learned judge in the trial court was correct in his conclusion that the tax credit certificate under Section 280ZD should be granted not on the basis of overall clearance of all varieties and qualities of paper manufactured or produced by the respondent-company but on the basis of the clearance of each particular variety or quality of such paper which constitutes a different class of goods manufactured by the company for the purpose of excise levy under the Central Excises and Salt Act, 1944. Under section 280ZD(1), the person who manufactures or produces any goods is made entitled to a tax credit certificate for an amount calculated at a rate to be specified in the Scheme but not exceeding 25% of the amount of duty of excise payable by him on the goods cleared by him during the relevant' financial year which exceeds the quantum of goods cleared by him during the base year. Therefore, the amount is to be calculated with reference to the duty of excise payable in respect of the goods. As we have pointed out hereinbefore, under the First Schedule to the Central Excises and Salt Act, 1944, rate of the duty of excise payable in respect of different varieties of papers are not the same or uniform. Therefore, unless the term goods be not construed to mean the individual varieties of papers separately enumerated and made liable to separate rates of excise duties under the First Schedule to the Central Excises and Salt Act, 1944, it would not be possible to calculate the amount specified in Section 280ZD in any reasonable manner. Under Section 280ZD the amount of tax credit benefit is to be calculated with reference to excise duty payable on the excess amount of goods cleared during the relevant financial year and not with reference to the excess amount of excise duty paid on the totality of the production in the manufacturing process. That being the prescribed method of assessment it is difficult to follow how any shortfall in production of a particular variety of paper which is subject to lesser rate of excise duty, say, 50 paise per kg., can reasonably beset off against any excess production of another variety of paper, the excise duty payable for which is higher, say, Re. 1 or Rs. 2 per kg. The basis of calculation being the excess clearance of goods with reference to the excise duty payable thereon, the goods must necessarily mean the different varieties individually, where such varieties are individually subjected to different excise duty. This view finds support from the definition of the term 'goods' in the Scheme. Though not defined in the Act, this term has been defined in the Scheme to mean excisable goods and excisable goods on its definition under Section 2(d) of Central Excises and Salt Act, 1944, must mean the individual varieties specified in the First Schedule and subject to different duties of excise. This definition being quite consistent with the provisions of the Act and the Scheme framed thereunder, must be taken to be the true meaning of the term 'goods' in the section.
14. We are also in agreement with the learned judge in the trial court that even if we take the term 'goods' to mean an Article which is ordinarily bought and sold in the market even then the different varieties of papers produced 6r manufactured by the respondent-company cannot be considered to be one and the same goods. The learned judge was perfectly justified in observing that the blottings and bond papers or cigarette tissues and typewriting papers cannot constitute one class of goods ; they are bought and sold as distinct varieties of goods in the market and there is no reason why they should not be taken to be different and distinct goods for the purpose of grant of tax credit certificate prescribed by Section 280ZD.
15. We feel assured as to our conclusion as above when we refer to Section 280ZD(2) and the Scheme. Sub-section (2) provides that the goods in respect of which a tax credit certificate is to be granted and the rate at which the amount of such certificate is to be calculated shall be specified in the Scheme to be framed by the Central Government under Section 280ZE. The Central Government is authorised to make specification goods-wise and not with reference to individual varieties thereof if those varieties themselves do not constitute 'goods' individually. Now, if we accept the contention of the appellants that by the term goods, as it is applicable to the respondent-company is concerned, what is meant is paper as a whole and not the individual varieties thereof, then under the aforesaid sub-section it would be open to the Central Government only to specify in the Scheme as to whether tax credit certificate shall be granted in respect of paper as a whole or not and the rate at which the amount of such certificate is to be calculated. We have set out the relevant entries in the Schedule to the Scheme. There, what we find is that in entry 3 what is included is not the paper as a whole but paper excluding newsprints and boards. Newsprints have been separately specified as item No. 4, the rate specified for which is 25% as against 15% for other papers. Thus, it is quite explicit that in the matter of specification in the Scheme as contemplated by Section 280ZD(2), the different varieties of paper are taken to be distinct and different goods which are capable not only of being specified differently but in respect of which different rates could as well be specified. It is, therefore, quite clear that on the provisions of Section 280ZD and the Scheme framed thereunder, the different varieties of paper manufactured and cleared by the respondent-company and bought and sold as distinct and different goods in the market and which again are subject to different rates of excise duties must be construed to be different and distinct goods for the purpose of grant of the tax credit certificate under the said section and the Central Authority was, therefore, clearly in the wrong in assessing the amount of the credit admissible to the respondent-company with reference to the excess determined by setting off the shortfall in production in one variety against the excess in the other and the learned judge in the trial court was right in his conclusion that the tax credit is to be computed in respect of each variety or quality of paper which forms a distinct class of goods for the purpose of excise duty and so also for the purpose of Section 280ZD of the said Act.
16. It is difficult to accept the contention put forward on behalf of the appellants that such a construction may frustrate the object of stimulating industrial output. On the materials now before us it is not possible to conclude that in a manufacturing process as carried on by the respondent-company it is possible to divert the manufacturing process of one variety to the other so that to derive an unfair benefit under a provision like Section 280ZD, the company may divert its process of production to manufacture' one or two varieties only stopping the production of other varieties altogether so that it derives the benefit under the provision though the country loses in the total output of the different varieties. Be that as it may, when on the interpretation of Section 280ZD the term 'goods' must necessarily mean the different varieties of papers differently and distinctly manufactured, the respondent gets the benefit only on proof of higher output of the said goods and the mere fact that it had a shortfall in manufacturing different goods simultaneously manufactured by it is no reason to deny it the benefit which the law confers on it. That being the position, we find no merit in the contention of the appellants that the construction which found favour with the learned judge in the trial court could in any way frustrate the object behind the provision.
17. So far as the other contention on behalf of the appellants is concerned, we are of the opinion that the principles enunciated in the Supreme Court decision in the case of V. V. Iyer v. Jasjit Singh, : AIR1973SC194 can have no bearing on the point under consideration by us. In the said case, the appellant had imported certain goods on the authority of an import licence as goods coming within item No. 74(vi), Part V, Schedule I to the Import Control Order, 1955, but when imported the same was found to be one coming within item No. 74(x) of the said Schedule. The authorities having come to the conclusion that the goods so imported really answers the description of item No. 74(x) and not 74(vi) prosecuted the appellant under Section 167(8) of the Sea Customs Act, 1878, which was the subject-matter of challenge in a writ petition. The writ petition having been dismissed by the High Court there was appeal before the Supreme Court. The Supreme Court upheld the view of the High Court that when the customs authorities had come to a conclusion which can be said to be a reasonable one with reference to the goods so imported and with reference to the description of the goods as set out in item No. 74(x) of the Schedule it was not open to the High Court to set aside the said conclusion even though another view contrary to the one adopted by the customs authorities is possible. Here, in the present case, we have considered the provision as in Section 280ZD and in the relative Scheme. In our view, it is not possible to adopt two views as to the meaning of the term 'goods' for reasons given by us hereinbefore. Moreover, the term has been denned by the Scheme to give it a meaning we have adopted. Therefore, it can hardly be said that the interpretation given by the Central Authority in making the assessment can in any way be said to be a reasonable view which should not be interfered with by this court. Hence, we find no merit in either of the two contentions put forward on behalf of the appellants. The appeals, therefore, must fail.
18. We now proceed to consider the two cross-objections filed by the respondent in two of the appeals. In these cross-objections, the claim put forward by the respondent is that the tax credit is to be calculated on the basis of the quantum of goods of a particular class or variety cleared from one of its factories and the production of all the factories should not be taken into account; it is further contended that the learned judge in the trial court is wrong in overruling such a claim. We, however, find no merit in this claim. Under Section 280ZD, the tax credit is to be granted to the person who manufactures and clears the goods on the basis of excess clearance effected by him. Obviously, if the person concerned had been manufacturing the goods and clearing the same at different units of production, the overall production and clearance of the goods is to be taken into consideration to find out if really there is any excess clearance by him and the exact quantum thereof. The tax credit has not been granted to the individual manufacturing units but to the manufacturer so that the respondent cannot lawfully claim any such credit factory-wise. When it had been manufacturing the same class of goods in these manufacturing units, the total quantity of goods manufactured is to be taken into account for finding out the excess clearance and calculating the tax credit. We agree with the learned judge in the trial court that the Scheme framed under the Act clearly lends support to the above conclusion. The respondent, therefore, cannot claim the tax credit on the basis of the quantity of goods manufactured by it at one of its factories alone. The cross-objections, therefore, have no merit and they are liable to be dismissed.
19. On the conclusions as above, both the appeals and the cross-objections fail and they are dismissed. The judgments and orders of the learned judges in the trial court are affirmed. There will be no order for costs.
M. N. Roy, J.
20. I agree.