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PETITIONER: NATIONAL CO. LTD. CALCUTTA

       Vs.

RESPONDENT: DEPUTY DIRECTOR OF TAX CREDIT (EXPORTS)CALCUTTA & ORS.

DATE OF JUDGMENT03/03/1977

BENCH: BHAGWATI, P.N. BENCH: BHAGWATI, P.N. FAZALALI, SYED MURTAZA

CITATION:  1977 AIR 1653            1977 SCR  (3) 125  1977 SCC  (2) 735

ACT:             Tax  Credit  Certificate (Exports)  Scheme  1965--Scheme         providing  for  certain categories of goods  or  merchandise         specified  in column 2 which  were exported after  28-2-1965         to  destinations  specified in column 4--Scheme  amended  by         Notification dated 6-6-1966 disentitling an exporter to  tax         credit  certificate in respect of goods or  merchandise  ex-         ported  and the sale proceeds therefore were received  after         5-6-1966---Second  Notification amending the first one  pro-         viding  for  grant of tax credit certificate in  respect  of         goods  exported on or before 5-6-1966 even if the sale  pro-         ceeds  were received thereafter--Whether  the  Notifications         ultra  vires  the powers of the  Central  Government  vested         under s.280 ZE read with 280 ZC of the Income Tax Act.

HEADNOTE:             The jute carpet backing cloth manufactured by the appel-         lant  in its  jute mills and exported was covered by Item  1         in  column 2 which specified "goods made of jute not  other-         wise  specified"  of the Table appended to  the  Tax  Credit         Certificate (Exports) Scheme, 1965.  The notification issued         by the Central Government in exercise of the  powers  vested         under  s.   280ZE read   with S. 280ZC, dated  6-6-1966  and         8-8-1966,  provided that no tax credit certificate shall  be         issued in respect of any goods exported after 5-6-1966.  The         appellant,  who exported diverse quantities of  jute  carpet         backing cloth manufactured by it to various countries during         the  period 13-7-1966 and 30-11-1966, filed a writ  petition         in the Calcutta High Court for a writ of mandamus for quash-         ing and setting aside both the  Notifications and  directing         the  Central Government to consider the application  of  the         applicant  for  tax  credit certificate in  respect  of  the         exports without taking into account the  two  Notifications.         The ground of challenge was that the two Notifications  were         outside  the powers conferred on the Central Government  u/s         280ZE read with S. 280 ZC, since the Central’ Government had         no  power  under those sections to make a  scheme  providing         that  no tax credit certificate shall be granted in case  of         any  goods or merchandise at all.  The single Judge  granted         mandamus, but the Division Bench on appeal took a  different         view and negatived the challenge.         Dismissing the appeal by certificate the Court,

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           HELD: (i) The Division Bench of the High Court was right         in holding that the Central Government was entitled to issue         the two Notifications directing that no tax credit  certifi-         cates shall be granted  in  respect  of  goods  or  merchan-         dise exported on or after 5-6-1966.  [131 A-B]             (ii) No obligation can be spelt out from Ss. 280 ZC  and         280  ZE requiring the Central Government to frame  a  scheme         specifying the goods or merchandise in respect of which  tax         credit certificate shall be granted.  The Central Government         was  entitled to say that having regard to the  factors  set         out  in  subsection (3) of S. 280 ZC, it does not  think  it         desirable  that tax credit certificate should be granted  in         respect of any goods or merchandise for the time being. [130         F-H]

JUDGMENT:         CIVIL APPELLATE JURISDICTION: Civil Appeal No. 950 of 1972.             (From  the Judgment and Order dated the 5-7-1971 of  the         Calcutta High Court in Appeal No. 130/71).         N.R.  Khaitan, A.T. Patra and Praveen Kumar, for the  appel-         lant.         126             Lal  Narain Sinha, Sol. General, S.N. Prasad and  Girish         Chandra not present for respondents.         The Judgment of the Court was delivered by             BHAGWATI, J. The appellant ,owns a jute mill situate  at         Rajgunj, Railway Station Andul, District Howrah in the State         of  West Bengal and among other jute products,  it  manufac-         tures  jute   carpet  backing cloth at its  jute  nUll.  The         appellant exported diverse quantities of jutecarpet  backing         cloth  manufactured  by it to various countries  during  the         period  13th July 1966 to 30th November 1966.  There  was  a         Tax  Credit certificate Scheme framed by  the Central   Gov-         ernment  under Section 280 ZE read with Section 200  ZC   of         the   Income  ’tax Act 1962.  The Scheme was called the  Tax         Credit  Certificate (Exports) Scheme 1965.  The Scheme  pro-         vided  for  grant of Tax Credit Certificate  in  respect  of         certain  categories  of goods or  merchandise  specified  in         column  2 which were exported to destinations  specified  in         column  4 and the dates of export of which fell  after  28th         February 1965, for an amount calculated at the rates  speci-         fied in column 3 of the Table attached to the Scheme.   Jute         carpet  backing cloth was covered by Item 1 in column  2  of         the Table which specified "goods made of jute not  otherwise         specified".   If  the  Scheme had  remained  unamended,  the         appellant  would have been entitled to tax  credit  certifi-         cates  in respect of the exports made by it of  jute  carpet         backing  material,  but  a notification was  issued  by  the         Central  Government  on 6th June, 1966 in  exercise  of  the         powers conferred by Section 280 ZE read with Section 200 ZC,         whereby paragraph 3 of the Scheme which .provided for  grant         of tax credit certificates was amended by re-numbering  that         paragraph  as sub-paragraph (1) and adding  a  sub-paragraph         (2) to the following g effect:                              "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  according                       with the Foreign Exchange Regulation Act, 1947                       (VII of 1947)  and the rules made thereunder".             This  amendment had the effect of disentitling  an   ex-         porter  to  taxcredit  certificate in respect  of  goods  or

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       merchandise exported by him in all cases where sale proceeds         or part thereof were received in India after 5th June, 1966.         The necessity for making this amendment in the Scheme  arose         on  account  of devaluation of the Indian  rupee  which  was         made by the Central Government, as it was felt that in  view         of the devaluation it was not necessary to give any  further         incentive  for export.  But it was’soon realised  that  this         amendment of  the Scheme might work hardship in those  cases         where  goods or’ merchandise were exported before  5th  June         1966  on the faith of the Scheme but for some reason or  the         other, the sale proceeds were not received until after  that         date  and, therefore, a second notification dated   8th  Au-         gust,  1966  was issued by the Central  Government  further.         amending  the  scheme in exercise of  the  powers  conferred         under  Section 280 ZE read with Section 280 ZC  by  deleting         sub-paragraph  (2) and instead, adding a proviso which  pro-         vided for grant of tax credit certify-         127         cate  in  respect  of goods or merchandise  exported  on  or         before   5th  June 1966 even if the said proceeds  were  re-         ceived  after that date and declared that in ease  of  goods         exported after 5th June 1966 the’ rate specified in column 3         of  the Table shall be deemed to be nil and  no  certificate         shall  be granted in respect of such goods or   merchandise.         The exports of jute carpet backing cloth made by the  appel-         lant were admittedly after 5th June,  1966 and  hence   both         the   notifications  adversely  affected  the  appellant  by         disentitling  it to tax  credit certificates in  respect  of         these  exports.   The  appellant, therefore,  filed  a  Writ         Petition in the High Court of Calcutta for a writ of  manda-         mus  for quashing and setting aside both  the  Notifications         and directing the Central Government to consider the  appli-         cation  of  the  appellant for tax  credit  certificates  in         respect of the exports without taking  into account the  two         Notifications.   Though there were several grounds on  which         the  validity of these two Notifications was  challenged  in         the  Writ  Petition before the High Court, only  one  ground         was   pressed  before us on behalf of the appellant  and  we         shall,  therefore, refer only to that ground.   That  ground         was  that  both  the Notifications were  outside  the  power         conferred  on the Central Government  under  Seetion 260  ZE         read  with Section 280 ZC, since the Central Government  had         no  power under these  Sections to make a  scheme  providing         that  no tax credit certificate shaft be granted in case  of         any  goods or merchandise at all.  This ground found  favour         with the single Judge of the High Court but on appeal  under         clause  15  of the Letters Patent, a Division Bench  of  the         High  Court  took a different view and negatived  the  chal-         lenge.   Since  the  writ petition was   dismissed   by  the         Division  Bench, the appellant preferred the present  appeal         after  obtaining  a  certificate of fitness  from  the  High         Court.             The  Indian Income Tax Act 1922 as  originally  enacted,         did  not  contain the fasciculus of Sections  under  Chapter         XXII  providing for grant of tax credit certificates.   This         Chapter  comprising Sections 280 ZC and 280 ZE was  inserted         by  the Finance  Act 1965  with effect from lst  April  1965         with  a view to providing incentive  for  export purpose  of         which  Section  280  ZC and 280 ZE are  material,  reads  as         follows :--                             "280  ZC. (1) Subject to the  provisions                       of  this  Section, a person  who  exports  any                       goods or  merchandise  out  of India after the                       28th  day of February. 1965 and  receives  the                       sale proceeds thereon in  India  in  according

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                     with   the  Foreign Exchange  Regulation  Act,                       1947  (VII of  1947) and the rules made there-                       under  shall be granted a tax credit  certifi-                       cate  for an amount calculated at a  rate  not                       exceeding  fifteen per cent, on the amount  of                       such sale proceeds.                             (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:                              Provided  that different rates  may  be                       specified  in  respect of different  goods  or                       merchandise.                       128                              (3) In specifying the goods or merchan-                       dise    (including  the destination  of  their                       export) and the rates, the Central  Government                       shall have regard  to the  following  factors,                       namely:                          (a)  the cost of manufacture or  production                       of  such  goods or merchandise and  prices  of                       similar  goods in the foreign markets;.                          (b) the need to develop foreign markets for                       such goods or merchandise;                        (c) the need to earn foreign exchange;                        (d) any other relevant factor".             Section 280 ZE conferred power on the Central Government         to  frame  one or more scheme or schemes to  be  called  tax         credit Certificate scheme or schemes in the following words:                             "(1)  The  Central Government  shaH,  by                       notification  in  the Official Gazette,  frame                       one or more scheme or schemes to be called tax                       credit certificate scheme or schemes in  rela-                       tion to tax credit certificates  to  be grant-                       ed  under this Chapter.                              (2)  A scheme framed under  sub-section                       (1) may provide for :--                          (a)  the form and manner in which, and  the                       authority to which, applications for the grant                       of tax credit certificates shall be made;                          (b) the form in which, and the intervals at                       which  and the authority by which, such   cer-                       tificates shall  be issued;                          (c) the verification of any information  or                       particulars  furnished,  or contained  in  any                       application  made,  by or on behalf    of  any                       person entitled to  tax credit certificates;                          (d)  the  determination of the  rights  and                       obligations of a person to whom such  certifi-                       cate has  been  granted and the  circumstances                       in  which  any right in or title to  the  said                       certificate   may  be   transferred   to.   or                       devolve  on any other person by succession  or                       otherwise;                          (e)  the determination of the  rights   and                       obligation   of persons who jointly  subscribe                       to an eligible issue of capital;                          (f)  the determination of the  rights   and                       obligation   of  persons who subscribe  to  an                       eligible  Issue of capital, on behalf, or  for                       the benefit, of any other person;                       129

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                         (g)  the  appointment of any  officer.  of                       Government or of the Reserve Bank of India  to                       exercise  any rights or perform any duties  in                       connection with the grant of the said certifi-                       cates;                           (h) the goods or merchandise and the  rate                       or  rates for the purposes of section  280  ZC                       and section 280 ZD and the destination of  the                       export  of such goods or merchandise  for  the                       purposes of section 280 ZC;                           (i)  any other matter which may be  neces-                       sary  or proper for the effective  implementa-                       tion of the provisions of this Chapter or  the                       scheme.                             (3)The Central Government may, by  noti-                       fication  in  the Official  Gazette,  and  to,                       amend,  vary or rescind any scheme made  under                       this section".             It was in exercise of the power conferred on the Central         Government  under Section, 280 ZE read with section  280  ZC         that the Central Government made the Tax Credit  Certificate         (Exports)  Scheme, 1965.  The first Notification  dated  6th         June  1966  amended  paragraph 3 of the Scheme by  providing         that  no tax credit certificate shall be granted in  respect         of  exports where  the  sale  proceeds  were received  after         5th June, 1966.  This provision was. relaxed by’ the  second         Notification dated 8th August 1966 by providing that in case         of  exports made on or before 5th June 1966 tax credit  cer-         tificate shall be granted according to the provisions of the         Scheme  even if the Sale proceeds were received  after  that         date, but  in respect of exports made after 5th June,  1966,         the  rate specified in column 3 of Table A shall be nil  and         no  tax  credit certificate shall be granted in  respect  of         such exports.             The  argument urged on behalf of the appellant was  that         it was not competent to the Central Government to provide in         the Scheme framed under Section 280 ZE read with Section 280         ZC that no tax credit certificate shah be granted in respect         of  exports  of any goods or merchandise.  The  only  power,         which,  according to the appellant, the  Central  Government         had under these two. Sections, was to frame a scheme  speci-         fying  some goods or merchandise the export of  which  would         entitle  an exporter to tax credit certificate.  The  appel-         lant conceded that the Central Government was. not  bound to         specify  any particular category of goods or merchandise  in         the Scheme framed by it but the limited contention was  that         some  goods or merchandise must be specified in  the  Scheme         and since in the present case  the Scheme as amended provid-         ed  that  tax credit certificates shall not  be  granted  in         respect  of  exports of any goods or  merchandise,  the  two         Notifications making this amendment in-the Scheme were ultra         vires the power of the Central Government under Sections 280         ZE and 280 ZC.  This contention, though it found favour with         the  single Judge of the Calcutta High Court who  heard  the         Writ Petition in the first         130         instance, is in our opinion wholly without force and  cannot         be  sustained.  A mere look at the scheme of the  provisions         of  Section 280  ZC and 280 ZE is sufficient to  expose  the         invalidity of this contention.         Sub-section (1) of Section 280 ZC undoubtedly provides  that         a  person who exports any goods or merchandise out of  India         after  28th  February 1965 and receives  the  sale  proceeds         thereof  in India  in accordance with the  Foreign  Exchange         Regulation Act, 1947 and the rules made thereunder, shall be

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       granted a tax credit certificate for an amount calculated at         a rate not exceeding 15 per cent of the amount of such  sale         proceeds.   But  this fight conferred  on  an   exporter  is         subject  to  the other provisions of Section  ZC  and  these         other  provisions include sub-sections (2) & (3).   Sub-sec-         tion (2) provides in so many terms that the goods or  merch-         andise 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.  It is, thus,  left         to  the  Scheme to be framed by the  Central  Government  to         specify  the  goods or merchandise in respect  of  which  an         exporter,  shall  be entitled to tax credit  certificate  as         also the rate at which the amount of  such certificate shall         be  calculated.  It is. not in respect of every category  of         goods or merchandise that an exporter can claim to be  enti-         tled to tax credit certificate but it is only in’ respect of         such  goods or merchandise as are specified in  the  Scheme.         The  policy and the principle which would guide the  Central         Government  in selecting the goods or merchandise  for  this         purpose are set out in sub-section (3)  which provides  that         in  specifying the goods or merchandise as also  the  rates,         the  Central  Government shall have regard  to  the  various         factors set out in that sub-section.  These are the  factors         which  would influence the choice of the Central  Government         in  selecting  the goods or merchandise for the  purpose  of         grant of tax credit certificate and also in determining  the         rates at which tax credit certificate should be given.  Sec-         tion  280 ZE, sub-section (1) confers power on  the  Central         Government  to frame one or more Schemes in relation to  tax         credit  certificate to be granted under Section 280  ZC  and         under  sub-section (2), such scheme or schemes  may  provide         inter  alia  for the goods or merchandise and  the  rate  or         rates for the purposes of Section 280 ZC. We fail to see how         any  obligation can be spelt out from these  provisions  re-         quiring the Central Government to frame a scheme  specifying         the  goods or merchandise in respecter of which  tax  credit         certificate shall be granted.  It would indeed be absurd  to         suggest  that the Central Government is under an  obligation         to make a scheme and the    requirement of the statute would         be  satisfied so long as the Central  requirement  specifies         some goods or merchandise in the Scheme.  There is no reason         why  the  Central Government should not be entitled  to  say         that having regard to the factors set out in sub-section (3)         of  section 280 ZC it does not think it desirable  that  tax         credit certificate should be granted in respect of any goods         or merchandise for the time being Sub-section (3) of Section         280 ZC  confers  power on the  Central Government in so many         terms to rescind a Scheme made by it ,and that also supports         the view that the Central Government may keeping in view the         factors set out in sub-section (3) of Section 280 ZC,         131         decline to make a scheme or provide in the scheme that there         shall  be  no goods or merchandise in respect of  which  tax         credit  certificate shall be granted.  In the  circumstances         we  think  that the  Division Bench of the  High  Court  was         right in holding that the Central Government was entitled to         issue  the two impugned Notifications directing that no  tax         credit certificates shall be granted in respect of goods  or         merchandise exported on or after 5th June, 1966.               We accordingly dismiss the appeal with costs.         S.R.                                Appeal dismissed.         132

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