1977 (3) TMI 2 - SC - Income Tax

Goods Or Merchandise - Central Government was entitled to issue notification directing that tax credit certificate shall be granted in respect of specified goods with effect from a particular date - Assessee s appeal dismissed

Summary

Issues Involved:
1. Validity of the two notifications issued by the Central Government amending the Tax Credit Certificate (Exports) Scheme, 1965.
2. Whether the Central Government had the power under sections 280ZE and 280ZC of the Income-tax Act, 1961, to amend the scheme to provide that no tax credit certificate shall be granted for certain exports.

Issue-wise Detailed Analysis:

1. Validity of the Two Notifications:
The appellant, a jute mill owner, exported jute carpet backing cloth between 13th July 1966 and 30th November 1966. Initially, under the Tax Credit Certificate (Exports) Scheme, 1965, framed by the Central Government under section 280ZE read with section 280ZC of the Income-tax Act, 1961, the appellant was entitled to tax credit certificates for these exports. However, a notification issued on 6th June 1966 amended the scheme to disallow tax credit certificates for sale proceeds received in India after 5th June 1966. This amendment was due to the devaluation of the Indian rupee, which negated the need for further export incentives. Subsequently, a second notification on 8th August 1966 provided relief for goods exported on or before 5th June 1966, even if the proceeds were received later, but maintained that no certificates would be granted for exports after 5th June 1966. These notifications adversely affected the appellant, leading to a writ petition challenging their validity.

2. Power of the Central Government under Sections 280ZE and 280ZC:
The appellant argued that the Central Government had no power under sections 280ZE and 280ZC to amend the scheme to entirely disallow tax credit certificates for any goods or merchandise. The appellant contended that while the Central Government could specify categories of goods eligible for tax credit certificates, it could not provide that no certificates would be granted at all. This argument was initially accepted by a single judge of the Calcutta High Court but was rejected by a Division Bench on appeal.

The Supreme Court examined the provisions of sections 280ZC and 280ZE. Section 280ZC(1) grants tax credit certificates for exports made after 28th February 1965, subject to other provisions, including subsections (2) and (3). Subsection (2) allows the Central Government to specify the goods eligible for tax credit certificates and the applicable rates in the scheme. Subsection (3) outlines factors the Central Government must consider, such as manufacturing costs, foreign market prices, the need to develop foreign markets, and the need to earn foreign exchange.

Section 280ZE empowers the Central Government to frame and amend schemes regarding tax credit certificates. The Court found no statutory obligation requiring the Central Government to specify any goods or merchandise in the scheme. The Court held that the Central Government could decide, based on the factors in section 280ZC(3), that no tax credit certificates should be granted for any goods or merchandise at a given time. The power to rescind a scheme under section 280ZE(3) further supported this view.

Conclusion:
The Supreme Court upheld the Division Bench's decision, affirming that the Central Government had the authority to issue the notifications amending the scheme to disallow tax credit certificates for exports made after 5th June 1966. The appeal was dismissed with costs.

Appeal Dismissed.