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1978 Supreme(Mad) 94
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE RAMANUJAM & THE HONOURABLE MR. JUSTICE MOHAN
Seshasayee Paper and Boardas Limited - Appellant
Versus
Deputy Director of Inspection, Customs and Central Excise, New Delhi, and Another - Respondent
Case No : Writ Petitions Nos. 2589, 2593 and 2595 to 2597 of 1973
Decided On : 03 February 1978
The interpretation of the provisions of section 280ZD of the Income Tax Act, 1961, and the Tax Credit Certificate (Excise Duty on Excess Clearance) Scheme, 1965, in relation to the grant of tax credit certificates for excess clearance of goods.
Headnote:
TAX CREDIT CERTIFICATE - EXCISE DUTY - INTERPRETATION OF SCHEME - DUTY OF EXCISE - SPECIAL EXCISE DUTY - QUANTUM OF EXCESS GOODS CLEARED - DUPLEX BOARD - INCOME TAX ACT, 1961 - SECTION 280ZD - TAX CREDIT CERTIFICATE (EXCISE DUTY ON EXCESS CLEARANCE) SCHEME, 1965.
Fact of the Case:
The petitioner, a paper manufacturing company, applied for tax credit certificates under section 280ZD of the Income Tax Act, 1961, for excess clearance of goods during the financial years 1965-66 to 1969-70. The Central authority determined the amount of tax credit after disallowing a substantial portion of the claim. The petitioner challenged the validity of the orders, contending that the provisions of the Act and the Scheme were not properly construed.
Finding of the Court:
The court held that: 1. The tax credit certificates should be for the amount of excise duty payable on the goods manufactured by the petitioner and not actually paid. 2. The tax credit certificate should also include the special excise duty payable by the company under section 27(4) of the Finance Act, 1973. 3. The amount of tax credit certificate to which the company is entitled should be determined item-wise and not with reference to the aggregate quantity of goods produced. 4. The duplex board manufactured by the petitioner is excluded from the tax credit scheme and is not entitled to the benefit of the tax credit certificate.
Issues: 1. Whether the tax credit certificates should be for the amount of excise duty payable or actually paid? 2. Whether the tax credit certificate should include the special excise duty payable under section 27(4) of the Finance Act, 1973? 3. Whether the amount of tax credit certificate should be determined item-wise or with reference to the aggregate quantity of goods produced? 4. Whether the duplex board manufactured by the petitioner is entitled to the benefit of the tax credit certificate?
Ratio Decidendi: 1. The expression "duty of excise payable" in the scheme refers to the duty leviable under the Central Excises and Salt Act, 1944, as modified by statutory notifications, including exemptions and concessions. 2. The special excise duty levied under section 27(4) of the Finance Act, 1973, is an addition to the duty of excise payable under the Central Excises and Salt Act and is, therefore, included in the definition of "duty of excise" under section 280ZD(6)(b) of the Income Tax Act, 1961. 3. The tax credit certificate should be determined item-wise based on the excess goods cleared in respect of each category of goods, as specified in the scheme. 4. Duplex board is specifically excluded from the tax credit scheme and is not entitled to the benefit of the tax credit certificate.
Final Decision: The writ petitions were allowed to the extent indicated, and the quantum of tax credit for each of the years was to be calculated accordingly, with no order as to costs.
RAMNUJAN J.
The petitioner is the same in all the above writ petitioners and it is company engaged in the manufacture of different varieties of paper from the year 1962.
With a view to encourgage investment in new equity shares and to stimulate industrial output, the Government of India introduced certain special provisions in Chapter XXII-B of the Income-tax Act, 1961, for the grant of tax credit certificates. Section 280ZD coming under that Chpater provides for the grant of credit certificate by way of incentive for the increased production of goods. With a view to carry out the purposes of this section the Government of India framed a scheme called "Tax Credit Certificate (Excise Duty on Excess Clearance) Scheme, 1965," hereinafter referred to as the scheme. Under the provisions of the said scheme the amount of tax credit to which a manufacture in paper is entitiled is calculated at the rate of 15 per cent of the excise duty payable on the quantity of excess production during the financial year as compared to the production in the base year. Financial year 1964-65 is defined as the base year in relation to an existing undertaking.
With reference to excess clearance of goods during each of the financial year commencing from April 1, 1965, to March 31, 1970, over and above the quantity cleared in the base year, 1964-65, the company made an application for the grant of tax credit certificate under section 280ZD of the Income-tax Act, 1961, to the Deputy Director of Central Excise, New Delhi, the Central authority, under the said scheme. The said Central authority determined the amount of tax credit for which the company is entitled to after disallowing a substantial portion of the claim of the company. The amount claimed as tax credit and the amount sanctioned by the Central authority for each of the said years have been set out below :W.P. No. Year Amount claimed Amount sancitoned date of
Rs. Rs. Order
2593/73 1965-66 95, 680.12 85, 315 17-05-72
2586/73 1966-67 2, 05, 832.23 1, 51, 621 21-03-68
2596/73 1967-68 85, 977.35 71, 735 14-10-68
2595/73 1968-69 3, 35, 098.78 1, 75, 634 30-05-69
2597/73 1969-70 7, 19, 435.49 3, 10, 139 27-06-72
The company therafter filed appeals againest the orders passed by the Central authority to the Director of Inspection, Customs, and Centeal excise, New delhi, the appellate authority under the scheme. The appellate authority agreed with the interpretation placed on section 280ZD by the Central aithority. It, howeverr, accccepted the claim of the company that there has been mistakes in claculating the excss clearance and, therefore, directed the Central aithority to rectify the mistakes and modify the tax credit certificates accordingly. the company has now challenged the validity of the orders passed by the respondents Nos. 1 and 2 on the ground that section 280ZD of the Income-tax Act and the provisions of the Scheme have not been properly construed, and that they have erred in disallowing a substantial portion of the claim of the petitioner-company for the grant of tax credit certificate. The four contentions that were urged by the company before us are :
1. The tax credit certificates should be for the amount of excise duty payable in respect of the goods manufactured by the petitioner and not actually paid,
2. Tha tax credit certificate should also the special excise duty payable by the company under section 27(4) of the Finance Act, 1973.
3. The amount of tax credit certificate to which the company is entitiled should be determined item-war and not with reference to the aggregate quantity of goods produced, and
4. The duplex board which is manifactured by the petitioner, though as excluded item under the excise tariff, should also be taken for the purpose of determianing the amount for which tax credit certificate is to be given.Before dealing with the above four contentions it is necessary to set out the relevant provisions of the Act touching the dispute, Section 280ZD provides for the iss
