1971 (7) TMI 30 - HC - Income Tax

Petitioner applied to the court for a writ in the nature of mandamus directing the respondents to forthwith give the petitioner tax credit certificates under the Tax Credit Certificate (Exports) Scheme, 1965 - prayer for quashing the notification No. G. S. R. 865 dated 6th June, 1966, and notification No. G. S. R. 1226 dated 8th August.1966

Summary

Issues Involved:

1. Validity of the two notifications dated June 6, 1966, and August 8, 1966.
2. Interpretation of Section 280ZC(1) and Section 280ZE(3) of the Income-tax Act, 1961.
3. Power of the Central Government to amend, vary, or rescind the Tax Credit Certificate (Exports) Scheme, 1965.
4. Retrospective effect of the notification dated August 8, 1966.
5. Right of exporters to tax credit certificates under the scheme.

Issue-wise Analysis:

1. Validity of the Two Notifications:

The petitioner challenged the validity of two notifications, G.S.R. 865 dated June 6, 1966, and G.S.R. 1226 dated August 8, 1966, which amended the Tax Credit Certificate (Exports) Scheme, 1965. The first notification stated, "No certificate shall be granted... in respect of any sale proceeds... received after the 5th day of June, 1966." The second notification provided, "In the case of any such goods or merchandise, the date of export of which falls after the 5th day of June, 1966, the rate specified... shall be deemed to be nil." The trial court declared the first notification void and inoperative, and struck down the second notification as being in excess of the delegated authority.

2. Interpretation of Section 280ZC(1) and Section 280ZE(3):

The primary argument was that Section 280ZC(1) required the Central Government to frame a scheme for giving tax credit on exports after February 28, 1965, with a limitation that the rate of such credit should not exceed 15% of the export value. Sub-sections (2) and (3) empowered the Central Government to specify the goods, merchandise, and countries for which the exports would qualify for credit. The contention was that the power to amend, vary, and rescind the scheme under Section 280ZE(3) did not authorize the Central Government to nullify the scheme by amending the rate of tax credit to nil.

3. Power of the Central Government to Amend, Vary, or Rescind the Scheme:

The court held that the Central Government had the power to amend, vary, or rescind any scheme under Section 280ZE(3). The argument made by the appellants was that devaluation of the Indian currency necessitated the withdrawal of the tax credit scheme as the devaluation itself acted as a stimulus to exports. The court observed that the scheme was flexible and could be modified to suit the needs of the time and occasion. The Central Government could switch on and switch off the scheme based on circumstances.

4. Retrospective Effect of the Notification Dated August 8, 1966:

The notification dated August 8, 1966, stated, "This notification shall be deemed to have come into force on the 6th day of June, 1966." The respondent argued that the Central Government had no power under the statute to frame a scheme with retrospective effect. The court referred to the Supreme Court judgments in Income-tax Officer, Alleppey v. M. C. Ponnoose and Dr. Indramani Pyarelal Gupta v. W. R. Natu, which held that retrospective operation could not be ascribed to new laws affecting rights unless expressly stated or necessarily implied. The court concluded that the second notification was intended to benefit exporters by granting tax credit at a fraction of the specified rate, thereby making a concession in their favor.

5. Right of Exporters to Tax Credit Certificates:

The respondent claimed a statutory right to a tax credit certificate under Section 280ZC(1) if goods were exported after February 28, 1965, and sale proceeds were received in India. The court noted that the right to a tax credit certificate was subject to the provisions of the scheme framed under the Act. The Central Government had the authority to specify the goods, destination, and rate in the scheme. The court held that the Central Government could fix a target date of export and deny tax credit to exports made after that date. The court also observed that the Central Government had the power to rescind the scheme altogether, and therefore, it could prescribe the rate as nil for exports made after a specified date.

Conclusion:

The court allowed the appeal, holding that the Central Government had the power to amend, vary, or rescind the scheme, including fixing a target date for exports and prescribing the rate of tax credit as nil. The court found that the notifications were valid and dismissed the respondent's application.