1985 (3) TMI 3 - SC - Income Tax

Tax Credit Certificate (Excise Duty on Excess Clearance) Scheme, 1965 framed u/s 280ZD of I.T. Act 1961 - HC negatived the challenge of appellant on the ground that tax credit would not be available to the appellant company in respect of the special excise duty levied under s. 80 of the Finance Act having regard to the special meaning assigned to the expression duty of excise by clause (b) of s. 280ZD(6) - HC order confirmed - as per the scheme, application of the assessee is time barred

Summary

Issues:
1. Interpretation of the Tax Credit Certificate (Excise Duty on Excess Clearance) Scheme, 1965.
2. Entitlement to tax credit under Section 280ZD of the Income Tax Act, 1961.
3. Applicability of special excise duty under Section 80 of the Finance Act, 1965 for tax credit.
4. Question of limitation for filing supplementary application for tax credit certificate.

Analysis:

1. The judgment addresses the contentions raised by an appellant company regarding the Tax Credit Certificate (Excise Duty on Excess Clearance) Scheme, 1965, framed under Section 280ZD of the Income Tax Act, 1961. The High Court's decision, which negated the appellant's contentions, was upheld by the Supreme Court. The scheme aimed to grant tax credit certificates to encourage investment in new equity shares and boost industrial output. The appellant sought tax credit for excess cement production during the financial year 1965-66, based on a special excise duty levied under Section 80 of the Finance Act, 1965, in addition to the basic excise duty under the Central Excises and Salt Act, 1944.

2. Section 280ZD(1) entitles a manufacturer to a tax credit certificate for a specified percentage of the duty of excise payable on excess goods cleared compared to the base year. The definition of "duty of excise" under Section 280ZD(6)(b) specifically refers to the duty leviable under the Central Excises and Salt Act, 1944. The appellant's argument that the special excise duty under Section 80 of the Finance Act should be considered as part of the duty of excise chargeable under the Excise Act was rejected. The court emphasized that the chargeability of the duty under the Excise Act is crucial for tax credit eligibility.

3. The appellant's reliance on sub-clauses (3) and (4) of Section 80 of the Finance Act to include the special excise duty for tax credit was dismissed. The court clarified that the procedural aspects of quantification and collection of duty under the Finance Act do not alter the chargeability of the duty under the Excise Act. A previous decision of the Madras High Court supporting the appellant's contention was not approved due to the specific definition of "duty of excise" in Section 280ZD(6)(b).

4. The second contention regarding the limitation for filing a supplementary application for tax credit was also addressed. The appellant's supplementary application, made after the initial application, was deemed time-barred as per the Scheme's provisions. The court noted that even the authority's power to condone delays for up to 60 days did not apply in this case. The appellant's argument that a trade notice clarified the need for the supplementary application was rejected, as the notice did not amend the law but only provided a clarification.

In conclusion, the Supreme Court upheld the High Court's decision, dismissing the appeals and special leave petitions without costs, based on the rejection of the appellant's contentions regarding tax credit eligibility and the limitation for filing supplementary applications.