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Deputy Director of Tax Credit Vs. National Company Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberAppeal from Original Order No. 130 of 1970
Judge
Reported in76CWN1,[1972]86ITR219(Cal)
ActsIncome Tax Act, 1961 - Section 280ZC, 280ZC(1), 280ZC(2), 280ZE and 280ZE(3); ;General Clauses Act - Section 21
AppellantDeputy Director of Tax Credit
RespondentNational Company Ltd.
Appellant AdvocateSubimal Chandra Roy, ;A.K. Basu, ;T.K. Basu and ;D.K. Sen, Advs.
Respondent AdvocateA.C. Bhabra and ;R.N. Bajoria, Advs.
Cases ReferredDr. Indramani Pyarelal Gupta v. W.R. Natu
Excerpt:
- p.b. mukharji, c.j.1. this is a case of first impression on tax credit certificate under section 280zc read with section 280ze(3) of the income-tax act, 1961. this is an appeal from the judgment and order of k. l. roy j.2. the petitioner applied to the court for a writ in the nature of mandamus directing the respondents to forthwith give the petitioner tax credit certificates under the tax credit certificate (exports) scheme, 1965, in respect of sale of jute goods including jute carpet backing cloth. the petitioner had also asked for a writ of certiorari to issue quashing the notification no. g. s. r. 865 dated 6th june, 1966, and notification no. g. s. r. 1226 dated 8th august, 1966. the application was moved on or about 5th day of december, 1967.3. b. c. mitra j. issued a rule on the.....
Judgment:

P.B. Mukharji, C.J.

1. This is a case of first impression on Tax Credit Certificate under Section 280ZC read with Section 280ZE(3) of the Income-tax Act, 1961. This is an appeal from the judgment and order of K. L. Roy J.

2. The petitioner applied to the court for a writ in the nature of mandamus directing the respondents to forthwith give the petitioner tax credit certificates under the Tax Credit Certificate (Exports) Scheme, 1965, in respect of sale of jute goods including jute carpet backing cloth. The petitioner had also asked for a writ of certiorari to issue quashing the notification No. G. S. R. 865 dated 6th June, 1966, and notification No. G. S. R. 1226 dated 8th August, 1966. The application was moved on or about 5th day of December, 1967.

3. B. C. Mitra J. issued a rule on the 7th day of December, 1967. K. L. Roy J. on or about 25th March, 1970, made the rule absolute.

4. Two notifications which are the subject-matter of challenge are to be noticed now. The first notification is dated the 6th June, 1966. The devaluation of the Indian currency was made on the 6th June, 1966. This notification reads as follows:

'In exercise of the powers conferred by Section 280ZE of the Income-tax Act, 1961, read with Section 280ZC thereof and of all other powers enabling it in this behalf, the Central Government hereby makes the following further amendment to the Tax Credit Certificate (Exports) Scheme, 1965, namely:--

In the said Scheme, paragraph 3 shall be re-numbered as sub-paragraph (1) of that paragraph and after sub-paragraph (1) as so re-numbered (as sub-paragraph (1) of that paragraph), the following sub-paragraph shall be inserted, namely :--

(2) No certificate shall be granted under sub-paragraph (1) in respect of any sale proceeds referred to in that sub-paragraph or part of such sale proceeds received after the 5th day of June, 1966, in India in accordance with the Foreign Exchange Regulation Act, 1947 (7 of 1947), and the rules made thereunder.'

Thereafter, by another notification dated the 8th August, 1966, it was provided, inter alia, as follows :

G.S.R. No. 1226:

'In exercise of the powers conferred by Section 280ZE of the Income-tax Act, 1961, read with Section 280ZC thereof and of all other powers enabling it in this behalf, the Central Government hereby makes the following further amendments to the Tax Credit Certificate (Exports) Scheme, 1965, namely :--

In the said Scheme, in paragraph 3,--

(a) in sub-paragraph (1), the brackets and figure '(1)' at the commencement shall be omitted and before the Table, the following proviso shall be inserted, namely :-- 'Provided that-

(a) in the case of any such goods or merchandise,--

(i) the date of export of which falls on or before the 5th day of June, 1966, and

(ii) the sale proceeds whereof are received in India in accordance with the Foreign Exchange (Regulation) Act, 1947 (7 of 1947), and the rules made thereunder after the said date,

the certificate shall be granted for an amount calculated at 16/23 of the rate specified in column (3) of the said Table in respect of such goods or merchandise;

(b) in the case of any such goods or merchandise, the 'date of export of which falls after the 5th day of June, 1966, the rate specified in column (3) of the said Table in respect of such goods or merchandise shall be deemed to be nil and accordingly no certificate shall be granted in respect of such goods or merchandise.'......

2. This notification shall be deemed to have come into force on the 6th day of June, 1966.'

A battle royal was started on these two notifications. It will be appropriate at this stage to mention the argument that found favour with the learned judge. According to him, Section 280ZC(1) of the Income-tax Act, 1961, requires the Central Government to frame a scheme for giving tax credit on exports after the 28th February, 1965, and the only limitation is that the rate of such credit is not to exceed 15 per cent. of the value of the export received in India. Sub-sections (2) and (3) of that section empower the Central Government to specify the goods, merchandise and thecountries to which the exports made would qualify for the credit. The power to amend, vary and rescind any scheme provided under Section 280ZC(t) given by Section 280ZE(3) of the Income-tax Act, 1961, is the general power which would be deemed to be included in the statutory delegation of a rule-making power under Section 21 of the General Clauses Act, Then the learned judge took the line that under the cloak of the exercise of such power the scheme for tax credit envisaged under Section 280ZC(1) could not be nullified.

5. The learned judge did not stop there. He further noticed that none of the impugned notifications purports to rescind the scheme. They merely purport to amend the Tax Credit Certificate (Exports) Scheme of 1965. While by such an amendment the rate of credit could be undoubtedly altered within the limits specified in the Act or the countries of destination and other particulars might have been modified, the withdrawal of the entire scheme of tax credit by purporting to amend the rate of tax credit to nil is neither warranted nor justified.

6. The first notification was, therefore, declared void and inoperative by the learned judge. Though in the second impugned notification there is a purported amendment in the rate of credit, the provision that tax credit even at such amended rate would not be allowed on exports made after a certain date must be struck down as being in excess of the delegated authority according to the learned judge.

7. The result was that he made the rule absolute.

8. The appeal is directed against that interpretation. For the respondent the argument is broadly this: A scheme which provides the goods nil, rates nil, destination nil is not a scheme but a fraud on the scheme. The certificate in such a case is not a credit certificate. Nil certificate is not a credit certificate.

9. On the other hand, on behalf of the appellants, it is argued that devaluation was the occasion for withdrawal of the facilities. The statement of objects and reasons in the Finance Bill introducing Chapter 22B of the Income-tax Act, 1961, said that the tax credit certificate was with a 'view to stimulate industrial output'. Devaluation itself acts as stimulus to exports. As a result of the devaluation of the rupee in June, 1966, the whole scheme of tax credit in favour of exports has been more or less dead ; but the section has not been deleted nor the framework of the scheme from the statute. The cancellation has been achieved by amending the scheme to the effect that, from that date, the amount of credit will be nil. The idea of retaining the section and the frame-work of the scheme is apparently to enable the grant of these credits if changed circumstances in the future warrant such a course. This is the strongest argument in favour of the appellants. They say that devaluation makes the Indiangoods cheaper in the foreign markets. So no more incentive is required by tax credit certificate. Devaluation certainly may not be whole incentive but it can be incentive for the measure of relief intended to be granted by the tax credit scheme.

10. It is necessary now to have a look at the section. Now the section itself, 280ZC of the Income-tax Act, 1961, has not been challenged. Therefore, it does not seem to me that the delegation thereunder can be challenged. Section 280ZC(1) uses the words 'subject to the provisions of this section'. Therefore, the whole of this section is subject to the provisions contained therein. Of the important provisions that Sub-section (2) specifies are, (1) goods or merchandise, (2) destination and (3) rates.

11. Now, under Section 280ZC(1) any person who exported goods or merchandise after February 28, 1965, and received the sale proceeds in accordance with the Foreign Exchange Regulation Act, shall be granted a tax credit certificate for an amount calculated at a rate not exceeding fifteen per cent. on the amount of such sale proceeds. The contention is that by such an amendment this benefit given under a substantive section is taken away. But 28th day of February, 1965, is a qualifying date, namely, the goods exported after that date make them qualified to claim tax credit certificate. But, that is subject to the provisions of the section with regard to goods, destination and rates. As I read the section, it does not mean that goods whenever they are exported after the 28th February, 1965, are bound to get tax credit certificate. What it stipulates is that goods after the 28th February, 1965, are entitled, if other conditions of the section are satisfied, to the tax credit certificate. Under Section 280ZE(3) of the Act, 'the Central Government may, by notification in the Official Gazette, add to, amend, vary or rescind, any scheme made under this section'. Therefore, it means that the Central Government has, by notification, right to add to, amend, vary or rescind, any scheme made under this section.

12. Now, taking the power to amend the scheme, it seems to me that the Central Government has power to rescind 'any scheme'. No limitation can be put by reason of such words as 'a person who exports any goods or merchandise out of India after the 28th February, 1965, and receives the sale proceeds in India in accordance with the Foreign Exchange Regulation' appearing in Section 280ZC(1). That provision itself is subject to the provision of Section 280ZC(1). Therefore, it is subject to Section 280ZC(2). Sub-section (2) of Section 280ZC gives authority to affect the rates and the destination. Under Sub-section (3) of Section 280ZC, the Central Government must have regard to 'any other relevant factor'. Section 280ZE authorises the Central Government by notification to frame one or more scheme or schemes to be called tax credit certificate scheme or schemes in relation to tax credit certificates to be granted under thischapter, but provides in Sub-section (2) 'a scheme provided under Subsection (1) may provide for various matters'. Finally, the 'Central Government may, by notification in the Official Gazette, add to, amend, vary or rescind any scheme made under this section'.

13. Therefore, this scheme itself is not inviolate. It may be nascent. it may be modified. It is a viable scheme. Its soul is the flexibility to suit the scheme and the needs of the time and the occasion. If the time and occasion justify, a scheme may be permitted, but if time and occasion does not justify the scheme may not operate for the time being. The Central Government may switch on and switch off a scheme according as the circumstances dictate. The scheme may go in hibernation and revive in proper time. The object of Section 280ZC is stimulation of export. The major fact that happened was devaluation, which was itself a stimulation of the export. Therefore, it was felt that the tax credit certificate was no longer required. In the second notification it is enjoined that the certificates shall be granted for an amount calculated at 16/25 of the rate specified in column (3) of the Table in respect of such goods or merchandise. This 16/25 rate was put to place the exporters in the same position as before devaluation.

14. The question of delegated legislation is not quite appropriate in this context. It is true that the Central Government is given the power under delegation to amend, vary or rescind any scheme made under this provision. A delegate necessarily has to perform his duties according to the delegation. But, if the terms of delegation are wide enough it covers it. The statement of the 28th February, 1965, in Section 280ZC(1) being itself subject to the provision of this section, is vulnerable from the point of view that even export made after the 28th February, 1965, would not be entitled to credit certificate, if the scheme itself is liable to' be kept in abeyance due to devaluation.

15. In other words, my reading of the Section 280ZC(1) is, it is subject to the provisions of the section; therefore, it is subject to Sub-section (2); therefore, it is subject to Sub-section (3) including ' any other relevant factor' ; and, therefore, it is subject to a scheme; and therefore, goods may or may not be specified. Hence, if no goods are specified, no tax certificate can be claimed.

16. Another point has been made challenging the second notification of the8th August, 1966, by saying that it retrospectively is given the operationby saying 'this notification shall be deemed to have come into force onthe 6th day of June, 1966'. For that purpose. Income-tax Officer, Alleppeyv. M.C. Ponnoose, : [1970]75ITR174(SC) and Dr. Indramani Pyarelal Gupta v. W.R. Natu, : [1963]1SCR721 havebeen invoked. There the Supreme Court laid down that the courts will not ascribe retrospectivity to new laws affecting rights unless by express words or necessary implication it appears that such was the intention of the legislature. Parliament can delegate its legislative powers within the recognised limits. Where any rule or regulation is made by any person or authority to whom such powers have been delegated by the legislature, it may or may not be possible to make the same so as to give retrospective operation. It will depend on the language employed in the statutory provision which may in express terms or by necessary implication empower the authority concerned to make a rule or regulation with retrospective effect. To vary or rescind any scheme made under this section is wide enough in Section 280ZE, Sub-section (3).

17. For these reasons, I am unable to agree with the learned judge and I allow the appeal with costs.

18. The application of the respondent is dismissed with costs,

B.C. Mitra, J.

19. I agree with the judgment delivered by my Lord and would like to give my reasons for doing so.

20. The respondent is a manufacturer and exporter of jute goods, and as such it claimed to be entitled to tax credit certificate under a scheme framed by the Central Government in accordance with the provisions in Chapter XXIIB of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), After devaluation of the Indian currency, the Central Government issued two notifications withdrawing the scheme of tax credit certificates to exporters, who exported goods after a certain specified date. The respondent claimed to be aggrieved by the withdrawal of the scheme, as it contended that, although the export of jute goods was made after the specified date, the contract for such export was made before the specified date, and, therefore, it was entitled to the tax credit under the scheme. Being thus aggrieved the respondent obtained a rule nisi for appropriate writs' to quash the notifications by which the benefit of tax credit scheme was withdrawn and also for a writ directing the appellant to deal with the respondent's application for tax credit according to law.

21. In order to appreciate the contention of the parties in this appeal it is necessary to refer to the relevant provisions of the Act and also the scheme framed by the Central Government thereunder. The Finance Act, 1965, introduced Chapter XXIIB comprising Sections 280Y to 280ZE of the Income-tax Act, 1961. The purpose of amendment of the Income-tax Act by introducing this Chapter was to give credit to certain classes of assessees including exporters. Under Section 280ZC(1) a person who exports any goods or merchandise out of India after February 28, 1965, and receives sale proceeds in India in accordance with the Foreign Exchange Regulation Act, shall be granted a tax credit certificate for an amount notexceeding 15% of the sale proceeds received in India. Sub-section (2) provides that the goods in respect of which tax credit certificate shall be granted, the destination of export and the rate at which tax credit is to be calculated shall be such as may be specified in a scheme. Sub-section (3) provides that in specifying the goods, the destination of export and the rate, the Central Government shall have regard to various matters. Subsection (4) provides that a person to whom a tax credit certificate has been granted will be entitled to adjust the amount of credit against any liability under the Income-tax Act existing on the date on which such certificate is produced.

22. Section 280Y(c) defines a scheme. Section 280ZE(1) requires the Central Government to frame one or more schemes, by notification in the Official Gazette, to be called tax credit certificate scheme. Sub-section (3) of this section confers power on the Central Government to add to, amend, vary or rescind a scheme framed under that section. Sub-section (4) provides that the scheme is to be laid before Parliament who may modify or delete any provisions of the scheme and the scheme so modified shall have effect.

23. By a notification dated August 17, 1965, No. G.S.R. 1183, the Central Government notified a Tax Credit Certificate (Exports) Scheme, 1965, which was to come into force from October I, 1965. Under Clause (3) of the Scheme a certificate shall be granted in respect of goods, specified in column (2) of the Table set out thereunder, which are exported to destinations specified in column (4). The date of export of such goods must be after February 28, 1965, and the amount of the certificate is to be calculated at the rates specified in column (3) of the Table, One of the items of goods mentioned in column (2) of the Table is jute goods and the rates specified in column (3) is 2 per cent. By a notification No. G.S.R. 1391, dated September 30, 1965, the scheme was modified and for the word 'jute' the words 'jute not otherwise specified' were substituted. A further modification was the introduction of an item, namely, 16/25, jute carpet backing cloth which was to be inserted with the rate in column (2) at 5 per cent., exported to all countries outside India other than Nepal, Bhutan and Sikkim. A note was added to the scheme by this modification that the rate specified in column (3) should take effect from October 1, 1965.

24. The Indian currency was devalued from June 6, 1966, and on that date a further notification was issued being No. G.S.R. 865 whereby the scheme was further modified by introducing a clause which runs as follows :

'No certificate shall be granted under sub-paragraph (1) in respect of any sale proceeds referred to in that sub-paragraph or part of such sale proceeds received after the 5th day of June, 1966, in India in accordance with the Foreign Exchange (Regulation) Act, 1947, and the rules made thereunder.'

The effect of this modification was that tax credit was withdrawn in respect of all exports, the sale proceeds of which were received after June 5, 1966. Upon this notification representations were made by exporters who had already exported goods before the 5th of June, 1966, and on such representation another notification was issued by the Central Government No. G.S.R. 1226, dated August 8, 1966. By this notification it was provided as follows:

'(a) In the case of any such goods or merchandise,--

(i) the date of export of which falls on or before the 5th day of June, 1966,

and

(ii) the sale proceeds whereof are received in India in accordance with the Foreign Exchange (Regulation) Act, 1947, and the Rules made thereunder after the said date,

the certificate shall be granted for an amount calculated at 16/25 of the rate specified in column (3) of the said Table in respect of such goods or merchandise;

(b) In the case of any such goods or merchandise, the date of export of which falls after the 5th day of June, 1966, the rates specified in column (3) of the said Table in respect of such goods or merchandise shall be deemed to be nil and accordingly no certificate shall be granted in respect of such goods or merchandise. This notification shall be deemed to have come into force on the 6th day of June, 1966.'

The consequence of this modification was that any export made before June 6, 1966, would be entitled to tax credit at a fraction, namely, 16/25, of the rate specified in the scheme even if the sale proceeds were received after June 6, 1966. But in respect of export made after that date no certificate would be granted. The respondent prayed in its writ petition that appropriate writs should be issued directing the appellants to forbear from giving effect to the two notifications Nos. G.S.R. 863, dated 6th June, 1966, and G.S.R. 1226, dated August 8, 1966, and quashing the same, and also for a writ in the nature of mandamus directing the appellants to issue tax credit certificate in respect of certain exports mentioned in annexure 'G' to the petition.

25. Mr. Subimal Roy, counsel for the appellants, contended that the relevant date for the purpose of tax credit certificate is the date of exportof the goods and merchandise. It was argued that the policy of the Government was that exporters should not suffer in the matter of obtaining tax credit certificate by reason of the devaluation of the currency and it was to that end that the notifications were issued providing for grant of a certificate to exporters who had exported the goods before the date of devaluation, but had received the sale proceeds after the date of devaluation. The next contention of counsel for the appellants was that the power to amend, vary and rescind the scheme was expressly given to the Central Government by Section 280ZE(3) and the Central Government was not bound under the statute to give advance intimation of its intention to amend or rescind any scheme.

26. Counsel for the respondent on the other hand contended that an exporter had a statutory right to a tax credit certificate calculated at a rate not exceeding 15 per cent. of the sale proceeds, if he had exported goods out of India after February 28, 1965, and received the sale proceeds in India in accordance with the Foreign Exchange Regulation Act. This right was conferred upon the exporter by the mandatory provisions of Section 280ZC(1) of the Act. This statutory right, it was argued, could not be interfered with, abridged or nullified by the purported exercise of the powers conferred upon the Central Government by Section 280ZE(3), which conferred upon the Central Government the power to amend, vary or rescind the scheme. In other words, it was contended that since the statute had given to the exporter a right to receive the tax credit certificate in certain circumstances, such a right could not be interfered with in exercise of the power to amend, vary or rescind the scheme. It was, therefore, argued by counsel for the respondent that the first notification taking away the benefit of the tax credit in all cases where the sale proceeds were received in India after a particular date, was in violation of Section 280ZC(1) and as such it was ultra vires. With regard to the second notification it was argued, that in so far as it purported to fix a date on or before which the export was to be made and the sale proceeds in respect thereof received, it was ultra vires. The second notification was also attacked on another ground, namely, the total prohibition of tax credit in case of exports made after June 5, 1966. The third ground of attack by counsel for the respondent was that the second notification dated August 8, 1966, purported to affect retrospectively exports made on or after June 5, 1966. It was argued that the Central Government had no power under the statute to frame a scheme with retrospective effect or a power to withdraw the benefit of tax credit already due with retrospective effect.

27. The next contention of counsel for the appellant was that since the statute had given the Central Government the power to rescind, vary ormodify a scheme, and since there was a delegation of legislative power by Section 280ZC(2) of the Act with regard to fixing the date, the goods and merchandise to be exported, the countries of export, etc., the Central Government had the authority to issue the impugned notification withholding the benefit of tax credit certificate. It was argued that the statute itself had retrospective operation because Chapter XXIIB was introduced by the Finance Act, 1965, in May, 1965, allowing tax credit and export made on and from February 22, 1965. Therefore, it was argued the statute clearly had retrospective operation as it dealt with the export before the date on which it came into operation. It was next argued that Section 280ZC(2) gave power to the Central Government to fix the rate, the goods and merchandise to be exported, the countries of export, etc. But, this sub-section is subject to Sub-sections (2) and (3) of the same section; and that being so, it was argued that tax credit in respect of export of jute carpet backing might be left out or excluded altogether from the scheme. It was, therefore, submitted that an exporter of jute carpet backing had no right under the statute to a tax credit certificate merely because he was an exporter of that commodity. His right to the certificate would accrue or arise only after an executive order has been made by including export of jute carpet backing in the scheme. It could not, therefore, be said, it was argued, that every exporter of any kind of commodity has a statutory right to the tax credit certificate. It was next argued that in exercise of powers conferred under the statute the scheme had been modified by the first notification, but as it was found that some relief should be given to certain class of export with regard to export made before June 5, 1966, the second notification was issued. Then again it was argued that there was a clear delegation of legislative power to the Central Government by Section 280ZC(2) which empowers the Central Government to fix the rate, the goods and merchandise to be exported, the countries of export, etc. By reason of this clear delegation of legislative power, it was argued by counsel for the appellants, it could not be said that the executive order in issuing notification was in any way arbitrary or unfair. The object of the notification was that by reason of devaluation of the Indian currency, the incentive to the exporter by giving tax credit certificate became altogether unnecessary and the notifications were intended to withdraw the benefit given to exporters as they already had the benefit arising from devaluation of the currency. The two notifications were issued in exercise of legislative power delegated by the statute, and not in exercise of rule-making power, and because of this delegation by Section 280ZE of the Act, the notifications could not be attacked on the ground that they were issued in excess of the powers conferred by the statute.

28. The trial court came to the conclusion that the power to vary, amend or rescind a scheme under Section 280ZE(3) did not enable the Central Government to nullify the scheme, by amending it so as to make the rate of tax credit nil in cases where goods were exported after the specified date. The learned judge was of the view that the power to amend, vary or rescind a scheme was nothing but the power which would be deemed to be included in the statutory delegation of a rule-making power under Section 21 of the General Clauses Act. We are unable to accept this conclusion of the trial court. The statute has expressly conferred upon the Central Government the power to amend, vary or rescind a scheme and this power to amend a statutory scheme, in our view, has nothing to do with the power to add to, amend, vary or rescind orders, rules or bye-laws contemplated by Section 21 of the General Clauses Act, 1897. The general power given to an authority having the right to make rules, orders, bye-laws, etc., to amend, vary or rescind the same can by no means be equated to the power given by Parliament to the Central Government to amend, vary or rescind a scheme framed under Chapter XXIIB of the Act. Orders, rules or bye-laws contemplated by Section 21 of the General Clauses Act is not a scheme for tax credit certificate under Chapter XXIIB of the Act. It is to be noticed that, while Section 21 of the General Clauses Act dealt with notifications, orders, rules and bye-laws, a scheme framed under the Act has been expressly and deliberately left out from the operation of that section. Section 20 of the said Act refers to a scheme under a Central Act or Regulation and provides that expression used in the Central Act or Regulation under which a notification, order, scheme, rule, form or bye-laws is made shall have the same meaning as in the Act or Regulation conferring the power. While, therefore, Parliament considered a scheme under a Central Act in Section 20 of the General Clauses Act, it has deliberately refrained from giving the right to amend or alter a scheme under Section 21 of the said Act. Then again it is to be observed that the Income-tax Act, 1961, has made specific provisions for making rules by Section 295 of the Act, which provides that the Board may, subject to the control of the Central Act by notification in the Gazette of India, make rules for the whole or any part of India for carrying out the purposes of the Act. It is clear, therefore, that the statute makes a clear distinction between rules framed under Section 295 of the Act and a scheme for tax credit certificate framed under Chapter XXIIB of the Act.

29. We are also unable to accept the conclusion of the trial court that the proper course would have been for Parliament to amend the provisions of Chapter XXIIB of the Act and not for the Central Government to attempt amendment of the statutory provisions by notifications. Section 280ZC(1) of the Act enables the Central Government to frame a scheme for givingtax credit in certain circumstances, and Section 280ZE(3) gives the Central Government the power to amend, vary or rescind a scheme These two sections have to be read together and not in isolation and exclusion of each other. The power to amend, vary or rescind a scheme under Section 280ZE(3) is not delegation of either legislative or rule-making power. That section creates and confers upon the Central Government a power to amend, vary or rescind a scheme. The statute has clearly conferred upon the Central Government the power to amend the scheme and, in exercise of that specific power, the Central Government issued the impugned notification, the consequence of which is that in certain cases the tax credit would be nil. We do not see why the Central Government cannot, in exercise of the powers conferred upon it, reduce the tax credit on certain goods to nil while retaining others, nor do we see why in order to achieve this object, namely, to withhold tax credit in certain cases, the legislative power of Parliament has to be invoked for amendment of the Act, although the Act itself has given the power to amend or vary the scheme to the Central Government. In our view the trial court was in error in holding that the Central Government had no power to withhold tax credit certificate from certain exporters by amending the scheme and that such an object could be achieved only by amendment of the Act by Parliament. It is to be remembered that the respondent did not challenge the vires of Section 280ZE(3) by which the power to amend, vary or rescind the scheme was conferred upon the Central Government, and that being so, it is not open to the respondent to contend that the exercise of the power under that section is bad and the notifications issued in exercise of the powers tinder that section are ultra vires. In the absence of a challenge to the vires of Section 280ZE(3) it cannot be urged by the respondent that the notifications are bad or that the Central Government has no power to deny tax credit certificate to exporters of goods of a certain variety in certain circumstances.

30. I now turn to the two notifications which were the subject-matter of the writ petition. The first of these is dated June 6, 1966, and is to be found at page 23 of the paper book. The substance of this notification is that no tax credit certificate is to be granted to an exporter with regard to any sale proceeds received after June 5, 1966. The effect of this notification is that even if the goods were exported before June 5, 1966. the exporter will not be entitled to a tax credit certificate, if the sale proceeds were received in India after that date. There was thus a total prohibition on tax credit certificate with regard to exports made before the specified date, namely, June 5, 1966, if the proceeds were received after that date. Further modifications were introduced by the second notification dated August 8, 1966, which is to be found at page 21 of the paper book. Theeffect of this notification was, firstly, that if goods were exported before June 5, 1966, tax credit certificate is to be granted for an amount calculated at 16/25 of the rate specified in column (3) of the Table in respect of such goods or merchandise. Secondly, in the case of goods exported after June 5, 1966, the rate specified in column (3) of the Table shall be deemed to be nil and no tax credit certificate is to be granted in respect of such exports. Thirdly, the notification is to be deemed to have come into effect from June 6, 1966. The net effect of the amendment to the scheme is that if goods were exported before the specified date but the proceeds were received after that date tax credit certificate at 16/25 of the rates specified in the Table is to be granted and with regard to goods exported after the specified date no tax credit certificate is to be granted and the notification is to be given effect to from June 6, 1966.

31. The first question that arises is whether the Central Government is entitled to withhold the benefit of tax credit altogether having regard to the provisions in Section 280ZC(1) of the Act. That sub-section provides that a person who exports goods after February 28, 1965, and receives the sale proceeds in India shall be granted a tax credit certificate for an amount calculated at a rate not exceeding 15 per cent. on the amount of such sale proceeds. It seems that the provisions relating to grant of tax credit certificate in respect of export made after February 28, 1965, are mandatory in character with the result that every exporter of goods of the description specified in the scheme would be entitled to tax credit certificate if the goods were exported after February 28, 1965. The question that, therefore, arises is that where the statute has guaranteed a certificate to an exporter can the Central Government deny the benefit of tax credit certificate by a notification It should be noted, however, that the opening words in Section 280ZC(1) are:

'Subject to the provisions of this section'. That being so, the provision regarding grant of tax credit certificate in Sub-section (1) has to be read along with the provisions made in the other sub-sections of Section 280ZC. Sub-section (2) provides : '(2) The goods or merchandise in respect of which a tax credit certificate shall be granted under Sub-section (1) (including the destination of their export) and the rate at which the amount of such certificate shall be calculated shall be such as may be specified in the scheme.'

It is therefore clear that the statute contemplates a scheme which would indicate the goods with regard to which tax credit certificate is to be granted including questions of destination of such goods and the rate of certificate. The right of an exporter to a tax credit certificate under Sub-section (1) is therefore subject to the provisions in the scheme to be framed under the Act. Section 280ZE lays down particulars of the scheme. Subsection (1) authorises the Central Government to frame one or more schemes. Sub-section (2) lays down the particulars of the scheme and Sub-section (3) confers upon the Central Government the power to amend, vary or rescind a scheme by notification in the Official Gazette. It is in exercise of this power that the two notifications mentioned earlier were issued by the Central Government. The question is whether the two notifications are valid and have the effect of taking away the right to the tax credit certificate with regard to the export made by the respondent.

32. Mr. A.C. Bhabra, counsel for the respondent, argued that Section 280ZChad fixed a date, namely, February 28, 1965, as the target date after whichthe export had to be made, in order to earn the benefit of tax credit, andthe Central Government could riot by notification deny the right of anexporter to the same, on the ground that the export was made after June5, 1966, It was argued that the provisions in Section 280ZE(2) that theCentral Government could in the scheme to be framed specify the class ofgoods, the export of which would attract the benefit of tax credit and therate at which tax credit is to be granted, did not empower the CentralGovernment to interfere with the date fixed by the statute, namely,February 28, 1965. He argued that by both the impugned notificationsthe date fixed by the statute had been interfered with inasmuch as in thefirst notification of June 6, 1966, it was provided that no certificate shouldbe granted in case of export if the sale proceeds or part thereof werereceived in India after June 5, 1966, and in the second notification ofAugust 8, 1966, it was provided that in the case of exports after June5, 1966, the rate of credit should be nil. He submitted that the twoimpugned notifications clearly showed that the right of an exporter to taxcredit certificate, if the export was made after February 28, 1965, wasaltogether denied to an exporter if the export was made after June 5, 1966.This Mr. Bhabra contended could not be done.'

33. The next branch of Mr. Bhabra's argument was based on Section 280ZE of the Act, under which schemes are to be framed for tax credit certificate. He referred to the various clauses under Sub-section (2) of that section and submitted that none of these clauses gave a power to the Central Government to interfere with the date February 28, 1965, specified in Section 280ZC(1). Sub-section (2) of Section 280ZE specifies the matters which may be provided in the scheme. Clauses (a) to (g) under Sub-section (2) deal with various matters which have nothing to do with the date of export. . Clauses (h) and (i) are as follows :

'(h) The goods or merchandise and the rate or rates for the purposes of Section 280ZC and Section 280ZD and the destination of the export of such goods or merchandise for the purposes of Section 280ZC; (i) Any other matter which may be necessary or proper for the effective implementation of the provisions of this Chapter or the scheme.'

Mr. Bhabra argued that Clauses (b) and (i) did not confer on the Central Government the power to fix by notification a date of export after which the exporter would not. be entitled to tax credit. He argued that while the Central Government could specify the goods and the merchandise and the rate, it could not require that in order to earn tax credit certificate, the export must be made before June 5, 1966, and if made after that date the exporter would not be entitled to any tax credit at all. With regard to Sub-section (1) it was argued that it must be construed ejusdem generis and, therefore, this clause could not be invoked in support of a right to fix a target date of export.

34. While we agree with the contention of Mr. Bhabra regarding Clause (i) we cannot accept his submission with regard to Clause (h) of the sub-section. That clause clearly empowers the Central Government to specify in the scheme the goods or merchandise which will be entitled to tax credit. In specifying the goods in the scheme the Central Government is entitled to not only specify the class of goods but also the date of export of the goods. There is nothing in the statute to hold that the Central Government has not the power to fix a target date of export, so that if exports are made after that date the exporter would not be entitled to a tax credit certificate. It should be recalled that the opening words of Section 280ZC(1) are 'subject to the provisions of the section' and this clause qualifies also the date specified in the section, namely, February 28, 1965. It is also to be noticed that Sub-section (2) of Section 280ZC and Clause (h) of Sub-section (2) of Section 280ZE are almost in the same terms and are dealing with identical matters.

35. The object of the provisions in Chapter XXIIB is to provide a boost to exporters of goods and merchandise. The devaluation of the Indian currency did certainly bring into existence a situation in which the whole concept of incentive to exporters had necessarily to be reconsidered. In that situation and having regard to the provision in the statute to which I have earlier referred, it cannot be said that the provision regarding the date of expiry, namely, February 28, 1965, in Section 280ZC(1) is so inflexible that the Central Government could not alter the target date of export so as to withhold an incentive to exporters, which after devaluation was uncalled for and unnecessary.

36. The next question to be considered is whether the notification dated August 8, 1966, is invalid on the ground that it sought to give retrospective operation to the amendment proposed therein. The notification was issued on August 8, 1966, and Clause (2) of the same provides that it shall be deemed to have come into force on June 6, 1966. The question, therefore,is whether the Central Government has the power to give effect to the amendment of the scheme retrospectively.

37. Mr. Roy contended that since the amendment was for the benefit of the exporter it should be held to be valid, retrospective operation of the same notwithstanding. He submitted that under the first notification of June 6, 1966, no certificate was to be granted if sale proceeds of exports were received after June 5, 1966. Therefore, according to this notification, even if exports were made before June 5, 1966, the exporter will not be entitled to a tax credit certificate, if the sale proceeds came into India after June 5, 1966. This total prohibition, Mr. Roy argued, was modified in favour of exports by the second notification of August 8, 1966, in which it was provided that in case of exports made before June 5, 1966, even if sale proceeds were received in India after that date, certificate shall be granted for an amount calculated at 16/25 of the rates specified in column (3) of the table. This class of exporters, it was argued by counsel for the appellants, would clearly be benefited by the second notification as they were given tax credit at a rate proportionate to the rate of devaluation, whereas under the first notification they would not have been entitled to any certificate at all.

38. Mr. Bhabra's answer to this contention was that the statute did not give any power to the Central Government to amend a scheme with retrospective effect. There was nothing, Mr. Bhabra argued, in Section 280ZE(3) to indicate that the legislature intended that the Central Government should have power to amend the scheme by a notification retrospectively, and in the absence of any such power given by the statute either expressly or by necessary implication, the Central Government cannot claim to amend the scheme by a notification with retrospective effect. In support of this contention Mr. Bhabra relied on a decision of the Supreme Court in Income-tax Officer, Alleppey v. M.C. Ponnoose. The passage relied on in the judgment is at page 177 of the report and runs as follows:

'Where any rule or regulation is made by any person or authority to whom such powers have been delegated by the legislature it may or may not be possible to make the same so as to give retrospective operation. It will depend on the language employed in the statutory provision which may in express terms or by necessary implication empower the authority concerned to make a rule or regulation with retrospective effect. But, where no such language is to be found it has been held by the courts that the person or authority exercising subordinate legislative functions cannot make a rule, regulation or bye-law which can operate with retrospective effect.'

In that case a Tehsildar had attached certain shares at a time when he had no power to act as a Tax Recovery Officer. By a notification issued subsequently Tehsildars were designated Tax Recovery Officers and by this notification it was deemed to have come into effect retrospectively. It was, in these circumstances, that it was held that the notification was bad and the attachment effected by the Tehsildar was invalid. Reliance was also placed on the observations of Subba Rao J. (as he then was) in Dr. Indramani Pyarelal Gupta v. W.R. Natu to the effect that in the case of the legislature which exercised plenary powers of legislation under Article 246 of the Constitution, effect can be given retrospectively to any provision made in an enactment. But the same rule cannot apply to the Central Government exercising delegated legislative and subordinate power.

39. We are unable to accept the contention of counsel for the respondent that the second notification dated August 1966, is bad and should be struck down on the ground that it is of retrospective operation. It is true that the notification provides that it shall come into force on June 6, 1966, but the modification introduced by this notification is clearly intended for the benefit of exporters, and it does not operate to their prejudice. The first notification of June 6, 1966, makes no distinction between exports made before or after June 5, 1966, but provides that no certificate is to be granted in respect of any export if sale proceeds are received after June 5, 1966. The second notification is clearly intended to grant relief to those exporters who had exported the goods before the specified date, namely, June 5, 1966, but received the sale proceeds in India after the specified date. Therefore, while the first notification denied the certificate even to those exporters who exported before the specified date and received the sale proceeds after the specified date, the second notification made a concession in their favour though the certificate was to be given at the specified rate of 16/25 of the rate specified in column (3) of the Table. The benefit conferred by the second notification, therefore, is clearly a concession to certain class of exporters who fulfilled the condition prescribed by the second notification.

40. The second and the more important reason for rejecting the contention of counsel for the respondent is that the challenge on the ground of retroactivity is applicable only to the second notification and not to the first; and therefore even if the second notification of August 8, 1966, is struck down on the ground of retroactivity the respondent would not be entitled to any relief because according to the respondent its exports were made after the 5th June, 1966, and, therefore, the sale proceeds received after that date would not be entitled to a certificate by reason of the first notification of June 6, 1966, which will undoubtedly revive and come into operation if the first notification is struck down and held to be void. The respondent's case as made out in the writ petition is that the actual export was made after June 5, 1966. The first notification is prospective in operation and this notification should come into operation if the second notification is struck down because the former was cancelled by the latter.

41. Turning now to the broader question of the Central Government's power to deny tax credit certificate to the respondent, it is to be seen if the respondent can claim a certificate as a matter of right under the provisions of the statute. It cannot be overlooked that no exporter has a right to the tax credit certificate unless the particular goods which he has exported is included in the scheme. The provisions in the Act do not confer a right to all exporters of goods with regard to all variety of goods exported. Without doubt the Central Government has the right to include any commodity in the scheme and similarly to withdraw a particular commodity from the scheme. The respondent was concerned with the export of jute carpet backing cloth. Its grievance is that the Central Government had denied the certificate to it because it exported the goods after the specified date. But, this grievance appears to us to be without any merit because without a doubt the Central Government has the right to exclude any variety of goods from the scheme.

42. Lastly, it is to be borne in mind that under Sub-section (3) of Section 280ZE of the Act, the Central Government has the power to amend, vary or rescind a scheme by notification. Although by the notification dated August 8, 1966, the scheme has not been rescinded, yet what has been done is that in case of export after June 5, 1966, the rate specified in column (3) of the Table is to be taken to be nil. In substance therefore the scheme stands revoked with regard to goods exported after the specified date. We do not see why the Central Government cannot by notification prescribe that the rate should be nil since it has the power to rescind the scheme altogether. The effect of the second notification which prescribes the rate of certificate to be nil is the same as rescission of the scheme itself and since the Central Government has power to rescind the scheme there is no reason why it cannot prescribe the rate as nil with regard to export made after the specified date.

43. For the reasons mentioned above, I concur in the order made by my Lord.


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