1983 (3) TMI 30 - HC - Income Tax

Summary

Issues Involved:
1. Competency of the Central Government to prescribe a time-limit for claiming benefits under Chapter XXII-B of the I.T. Act.
2. Whether the prescription of a period of limitation is a substantial right or a procedural matter.
3. Validity of sub-paragraph (3) of para. 5 of the Tax Credit Certificate (Excise Duty on Excess Clearance) Scheme, 1965.

Detailed Analysis:

1. Competency of the Central Government to prescribe a time-limit:

The primary issue addressed is whether the Central Government has the authority to prescribe a time-limit for claiming the benefits under Chapter XXII-B of the Income Tax Act. The court examined Section 280ZE, which empowers the Central Government to frame schemes to implement the chapter. The court noted that while Section 280ZE allows the Central Government to specify the form, manner, and verification process for applications, it does not explicitly grant the power to prescribe a period of limitation for claiming the benefits. The court emphasized that the Central Government's power is limited to procedural aspects and does not extend to curtailing substantive rights conferred by the Act.

2. Substantial right vs. procedural matter:

The court considered whether the prescription of a period of limitation is a matter of substantive right or procedural law. Citing Supreme Court decisions, the court highlighted that there is no clear demarcation between substantive and procedural law. However, it concluded that the right to claim a tax credit certificate, which includes the adjustment of tax liability and potential refunds, is a substantive right. The court reasoned that procedural rules should facilitate the exercise of substantive rights, not curtail them. The court found that the scheme's time-limit provision hindered the implementation of the legislative intent and was, therefore, beyond the Central Government's delegated authority.

3. Validity of sub-paragraph (3) of para. 5 of the Scheme:

The court scrutinized sub-paragraph (3) of para. 5, which allows for a delay in application submission of up to 60 days but prohibits any application beyond that period. The court determined that this provision was ultra vires (beyond the powers) of the Central Government. It reasoned that Parliament did not delegate the power to prescribe a limitation period for claiming benefits under Chapter XXII-B. The court held that this provision extinguished a substantive right granted by the Act, which is impermissible. Consequently, the court declared sub-paragraph (3) of para. 5 void and quashed it.

Conclusion:

The writ petition was allowed, and the court ruled that sub-paragraph (3) of para. 5 of the Tax Credit Certificate (Excise Duty on Excess Clearance) Scheme, 1965, is ultra vires and void. The court quashed the orders denying the tax credit certificates and directed the respondents to process the petitioner's claims within three months.