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TMI Blog1978 (2) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... tled is calculated at the rate of 15 per cent. of the excise duty payable on the quantity of excess production during the financial year as compared to the production in the base year. Financial year 1964-65 is defined as the base year in relation to an existing undertaking. With reference to the excess clearance of goods during each of the financial year commencing from April 1, 1965, to March 31, 1970, over and above the quantity cleared in the base year, 1964-65, the company made and application for the grant of tax credit certificate under section 280ZD of the Income-tax Act, 1961, to the Deputy Director of Central Excise, New Delhi, the Central authority, under the said Scheme. The said Central authority determined the amount of tax credit for which the company is entitled to after disallowing a substantial portion of the claim of the company. The Amounts claimed as tax credit and the amount sanctioned by the Central authority for each of the said years have been set out below : W. P. No. Year Amount claimed Amount sanctioned Date of Rs. Rs. order 2593/73 1965-66 95,680.12 85,315 17-5-72 2586/73 1966-67 2,05,832.23 1,51,621 21-3-68 2596/73 1967-68 85,977.35 71,73 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtificate for an amount calculated at a rate not exceeding twenty-five per cent. of the amount of the duty of excise payable by him on that quantum of the goods cleared by him during the relevant financial year which exceeds the quantum of the goods cleared by him during the base year, whether the clearance in either case is for home consumption or export. " Sub-section (2) says that the goods in respect of which tax credit certificate shall be granted under sub-section (1) and the rate at which amount of such certificate shall be calculated shall be as specified in the Scheme. Sub-section (3) enables the Central Government to specify the goods and the rates for purposes of sub-section (1), having regard to the following factors, namely : (a) the need for stimulating industrial output ; (b) the need for financial assistance to industrial undertakings engaged in the manufacture or production of such goods ; and (c) any other relevant factor. The expressions " base year " and " duty of excise " occurring in sub-section (1) extracted above have been defined in sub-section (6). " Base year " has been defined in relation to an existing undertaking as the financial year commencin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty of excise payable on that excess has to be determined or quantified. As already stated, in this case, the company is a manufacturer of paper which is one of the items of goods covered by Schedule I to the Scheme. Paper falls under item 17 of Schedule I to the Central Excises and Salt Act, 1944, which prescribes the different rates of excise duty for different kinds of paper based on its weight. Column (4) of Schedule I of the Scheme says that 15 per cent. of the excise duty payable on the excess of the quantum cleared under the Central Excises and Salt Act, 1944, will be the amount for which the company will be entitled to tax credit certificate. If the rate of excise duty payable on paper under the Central Excises and Salt Act had remained constant or uniform no difficulty would have arisen as regards the interpretation of the provisions of the Scheme. However, as a result of certain statutory notifications issued under the provisions of the Central Excises and Salt Act, Central excise duty payable thereunder had been exempted or a concessional rate of duty has been levied in certain cases instead of the normal rate of levy. Apart from this, the rate of excise duty provided fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of excise duty cannot be divorced from the Act while determining the amount of excise duty payable, by a particular manufacturer. Apart from this section 38 of the Central Excises and Salt Act, 1944, before its amendment in 1973, clearly says that all notifications issued under the Act shall, on its publication in the Official Gazette, have effect as if included in the Act. That means that all the exemption and concession notifications have to be treated as being part of the Act and as automatically altering the basic rate of excise duty referred to in column (4) of the First Schedule to that Act. Similarly, the word " payable " occurring in column (4) of Schedule I to the Scheme has also to be understood with reference to the notifications giving exemption or concession in the duty leviable under the Act. Any other interpretation will not only lead to an anomalous situation but will also defeat the purpose for which the tax credit certificate scheme was brought into force. Take a case where the entire excise duty payable under the Act has been exempted in respect of manufacturers of a particular class of goods. By virtue of that notification the manufacturers of those goods would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that the amount for which the petitioner is entitled to a tax credit certificate should be determined without reference to the various exemption or concession notifications issued under the Central Excises Act. Then coming to the second contention that the said excise duty levied under section 27(4) of Finance Act has to be taken into account for the purpose of determination of the amount for which the tax credit certificate should be given, the learned counsel for the petitioner relies on the decision of the Supreme Court in Commissioner of Income-tax v. K. Srinivasan [1972] 83 ITR 346 and submits that if the principle of that decision is to be applied, the special excise duty levied under section 27(4) of the Finance Act, 1973, has to be treated as part and parcel of the excise duty leviable under the Central Excises and Salt Act, 1944. In that case, it was held that though section 2 of the Finance Act, 1964, used merely the word " income-tax ", that word should be taken to include surcharge, special surcharge and additional surcharge whenever payable under the various Finance Acts, as the surcharge, special surcharge and the additional surcharge form part of the income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount for determining the duty of excise payable by the manufacturer referred to in section 280ZD(6)(b). After referring to the relevant provisions of the Tax Credit Certificate Scheme, the court held that, having regard to the definition of " duty of excise " occurring in sub-section (6)(b) of section 280ZD, it is not possible to include the special excise duty levied by section 80 of the Finance Act of 1965 for the purpose of grant of a tax credit certificate under that Scheme, and that the tax credit was to be given only in respect of the excise duty levied under the Central Excises and Salt Act on the excess goods manufactured and cleared. We are of the view that the principle laid down in the earlier decision of the Supreme Court in Commissioner of Income-tax v. K. Srinivasan [1972] 83 ITR 346 will be applicable to the facts of this case rather than the subsequent decision in Madurai District Central Co-operative Bank Ltd. v. Third Income-tax Officer [1975] 101 ITR 24 (SC). With respect we are also not inclined to agree with the view expressed in Associated Cement Cos. v. Director of Inspection [1972] 84 ITR 811 (Delhi). For one thing though the special excise duty is impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . v. Union of India [1974] 93 ITR 96 (Cal), where an assessee produced different varieties of paper in three separate factories the question arose as to whether tax credit in relation to increased production under section 280ZD was to be computed taking the entire production of each variety of paper, and whether the production in each factory was to be considered separately. It was held that the tax credit is to be computed separately in respect of each variety or quantity of paper which forms a distinct class of goods for the purpose of excise duty and also for the purpose of section 280ZE of the Act, and that the total quantity of the same class of goods manufactured or produced in all the factories owned by the person should be taken into account together. With respect we are inclined to agree with the reasoning in that case that each class of goods is a distinct variety and there is no reason why for the purpose of granting tax credit all varieties of paper with their separate and distinct qualities should be lumped together for the purpose of giving tax credit certificate and that such an interpretation will run counter to the object of section 280ZD and the Scheme so introduc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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