1978 (2) TMI 84 - HC - Income Tax

Summary

Issues Involved:
1. Whether 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. Whether tax credit certificates should cover 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 and not with reference to the aggregate quantity of goods produced.
4. Whether the duplex board, though an excluded item under the excise tariff, should be considered for the purpose of determining the tax credit certificate amount.

Issue-wise Detailed Analysis:

1. Excise Duty Payable vs. Actually Paid:
The petitioner contended that the tax credit certificates should be based on the excise duty payable rather than the excise duty actually paid, arguing that the word "payable" in the scheme should be understood as "leviable" under the Central Excises and Salt Act, 1944, without considering any exemptions or concessions. The court rejected this contention, stating that "duty of excise leviable under the Act" includes statutory notifications that modify the rate of duty. The court emphasized that ignoring these notifications would lead to an anomalous situation where a manufacturer could receive a tax credit for an amount not actually paid, which would contradict the purpose of the tax credit scheme.

2. Inclusion of Special Excise Duty:
The petitioner argued that the special excise duty under section 27(4) of the Finance Act, 1973, should be included in the tax credit calculation. The court referred to the Supreme Court's decision in Commissioner of Income-tax v. K. Srinivasan, which held that terms like "income-tax" should include surcharges and additional charges. Applying this principle, the court determined that the special excise duty, though introduced by the Finance Act, is collected under the Central Excises and Salt Act and should be considered part of the "duty of excise" for tax credit purposes.

3. Item-wise Determination of Tax Credit:
The petitioner contended that the tax credit should be calculated item-wise rather than on an aggregate basis. The court agreed, citing the provisions of the scheme and the decision in Titaghur Paper Mills Co. Ltd. v. Union of India, which held that tax credit should be computed separately for each class of goods. The court found that calculating the tax credit on an aggregate basis and adopting an average rate does not align with the scheme's provisions, which specify different rates for each class of goods.

4. Inclusion of Duplex Board:
The petitioner argued that duplex board should be included for tax credit purposes despite being an excluded item under the excise tariff. The court rejected this contention, pointing out that Schedule I of the scheme explicitly excludes boards, including duplex board, from the tax credit benefit. Therefore, the petitioner cannot claim tax credit for duplex board.

Conclusion:
The writ petitions were partly allowed. The court directed that the quantum of tax credit for each year be recalculated in accordance with its findings:
- The tax credit should be determined considering the excise duty payable, including any exemptions or concessions.
- Special excise duty under section 27(4) of the Finance Act, 1973, should be included in the tax credit calculation.
- The tax credit should be calculated item-wise rather than on an aggregate basis.
- Duplex board, being an excluded item, cannot be considered for tax credit.

There was no order as to costs.