TMI Blog1971 (7) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... ication No. G. S. R. 1226 dated 8th August.1966. The application was moved on or about 5th day of December, 1967. B. C. Mitra J. issued a rule on the 7th day of December, 1967. K. L. Roy J. on or about 25th March, 1970, made the rule absolute. Two notifications which are the subject-matter of challenge are to noticed now. The first notification is dated the 6th June, 1966. The devaluation of the Indian currency was made on the 6th June, 1966. This notification reads as follows : "In exercise of the powers conferred by section 280ZE of the Income-tax Act, 1961, read with section 280ZC thereof and of all other powers enabling it in this behalf, the Central Government hereby makes the following further amendment to the Tax Credit Certificate (Exports) Scheme, 1965, namely :- In the said Scheme, paragraph 3 shall be re-numbered as sub-paragraph (1) of that paragraph and after sub-paragraph (1) as so re-numbered (as sub-paragraph (1) of that paragraph), the following sub-paragraph shall be inserted, namely :- (2) No certificate shall be granted under sub-paragraph (1) in respect of any sale proceeds referred to in that sub-paragraph or part of such sale proceeds received after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind any scheme provided under section 280ZC(1) given by section 280ZE(3) of the Income-tax Act, 1961, is the general power which would be deemed to be included in the statutory delegation of a rule-making power under section 21 of the General Clauses Act. Then the learned judge took the line that under the cloak of the exercise of such power the scheme for tax credit envisaged under section 280ZC(1) could not be nullified. The learned judge did not stop there. He further noticed that none of the impugned notifications purports to rescind the scheme. They merely purport to amend the Tax Credit Certificate (Exports) Scheme of 1965. While by such an amendment the rate of credit could be undoubtedly altered within the limits specified in the Act or the countries of destination and other particulars might have been modified, the withdrawal of the entire scheme of tax credit by purporting to amend the rate of tax credit to nil is neither warranted nor justified. The first notification was, therefore, declared void and inoperative by the learned judge. Though in the second impugned notification there is a purported amendment in the rate of credit, the provision that tax credit even at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1965, and received the sale proceeds in accordance with the Foreign Exchange Regulation Act, shall be granted a tax credit certificate for an amount calculated at a rate not exceeding fifteen per cent. on the amount of such sale proceeds. The contention is that by such an amendment this benefit given under a substantive section is taken away. But 28th day of February, 1965, is a qualifying date, namely, the goods exported after that date make them qualified to claim tax credit certificate. But, that is subject to the provisions of the section with regard to goods, destination and rates. As I read the section, it does not mean that goods whenever they are exported after the 28th February, 1965, are bound to get tax credit certificate. What it stipulates is that goods after the 28th February, 1965, are entitled, if other conditions of the section are satisfied, to the tax credit certificate. Under section 280ZE(3) of the Act, "the Central Government may, by notification in the Official Gazette, add to, amend, vary or rescind, any scheme made under this section ". Therefore, it means that the Central Government has, by notification, right to add to, amend, vary or rescind, any schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elegation to amend, vary or rescind any scheme made under this provision. A delegate necessarily has to perform his duties according to the delegation. But, if the terms of delegation are wide enough it covers it. The statement of the 28th February, 1965, in section 280ZC(1) being itself subject to the provision of this section, is vulnerable from the point of view that even export made after the 28th February, 1965, would not be entitled to credit certificate, if the scheme itself is liable to be kept in abeyance due to devaluation. In other words, my reading of the section 280ZC(1) is, it is subject to the provisions of the section ; therefore, it is subject to sub-section (2) ; therefore, it is subject to sub-section (3) including "any other relevant factor" ; and, therefore, it is subject to a scheme ; and therefore, goods may or may not be specified. Hence, if no goods are specified, no tax certificate can be claimed. Another point has been made challenging the second notification of the 8th August, 1966, by saying that it retrospectively is given the operation by saying "this notification shall be deemed to have come into force on the 6th day of June, 1966". For that purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Act and also the scheme framed by the Central Government thereunder. The Finance Act, 1965, introduced Chapter XXIIB Comprising sections 280Y to 280ZE of the Income-tax Act, 1961. The purpose of amendment of the Income-tax Act by introducing this Chapter was to give credit to certain classes of assessees including exporters. Under section 280ZC(1) a person who exports any goods or merchandise out of India after February 28, 1965, and receives sale proceeds in India in accordance with the Foreign Exchange Regulation Act, shall be granted a tax credit certificate for an amount not exceeding 15% of the sale proceeds received in India. Sub-section (2) provides that the goods in respect of which tax credit certificate shall be granted, the destination of export and the rate at which tax credit is to be calculated shall be such as may be specified in a scheme. Sub-section (3) provides that in specifying the goods, the destination of export and the rate, the Central Government shall have regard to various matters. Sub-section (4) provides that a person to whom a tax credit certificate has been granted will be entitled to adjust the amount of credit against any liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit was withdrawn in respect of all exports, the sale proceeds of which were received after June 5, 1966. Upon this notification representations were made by exporters who had already exported goods before the 5th of June, 1966, and on such representation another notification was issued by the Central Government No. G.S.R. 1226, dated August 8, 1966. By this notification it was provided as follows : "(a) In the case of any such goods or merchandise, - (i) the date of export of which falls on or before the 5th day of June, 1966, and (ii) the sale proceeds whereof are received in India in accordance with the Foreign Exchange (Regulation) Act, 1947, and the Rules made thereunder after the said date, the certificate shall be granted for an amount calculated at 16/25 of the rate specified in column (3) of the said Table in respect of such goods or merchandise ; (b) In the case of any such goods or merchandise, the date of export of which falls after the 5th day of June, 1966, the rates specified in column (3) of the said Table in respect of such goods or merchandise shall be deemed to be nil and accordingly no certificate shall be granted in respect of such goods or merchandis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onferred upon the Central Government the power to amend, vary or rescind the scheme. In other words, it was contended that since the statute had given to the exporter a right to receive the tax credit certificate in certain circumstances, such a right could not be interfered with in exercise of the power to amend, vary or rescind the scheme. It was, therefore, argued by counsel for the respondent that the first notification taking away the benefit of the tax credit in all cases where the sale proceeds were received in India after a particular date, was in violation of section 280ZC(1) and as such it was ultra vires. With regard to the second notification it was argued, that in so far as it purported to fix a date on or before which the export was to be made and the sale proceeds in respect thereof received, it was ultra vires. The second notification was also attacked on another ground, namely, the total prohibition of tax credit in case of exports made after June 5, 1966. The third ground of attack by counsel for the respondent was that the second notification dated August 8, 1966, purported to affect retrospectively exports made on or after June 5, 1966. It was argued that the Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be exported, the countries of export, etc. By reason of this clear delegation of legislative power, it was argued by counsel for the appellants, it could not be said that the executive order in issuing notification was in any way arbitrary or unfair. The object of the notification was that by reason of devaluation of the Indian currency, the incentive to the exporter by giving tax credit certificate became altogether unnecessary and the notifications were intended to withdraw the benefit given to exporters as they already had the benefit arising from devaluation of the currency. The two notifications were issued in exercise of legislative power delegated by the statute, and not in exercise of rule-making power, and because of this delegation by section 280ZE of the Act, the notifications could not be attacked on the ground that they were issued in excess of the powers conferred by the statute. The trial court came to the conclusion that the power to vary, amend or rescind a scheme under section 280ZE(3) did not enable the Central Government to nullify the scheme, by amending it so as to make the rate of tax credit nil in cases where goods were exported after the specified date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion of the trial court that the proper course would have been for Parliament to amend the provisions of Chapter XXIIB of the Act and not for the Central Government to attempt amendment of the statutory provisions by notifications. Section 280ZC(1) of the Act enables the Central Government to frame a scheme for giving tax credit in certain circumstances, and section 280ZE(3) gives the Central Government the power to amend, vary or rescind a scheme. These two sections have to be read together and not in isolation and exclusion of each other. The power to amend, vary or rescind a scheme under section 280ZE(3) is not delegation of either legislative or rule-making power. That section creates and confers upon the Central Government a power to amend, vary or rescind a scheme. The statute has clearly conferred upon the Central Government the power to amend the scheme and, in exercise of that specific power, the Central Government issued the impugned notification, the consequence of which is that in certain cases the tax credit would be nil. We do not see why the Central Government cannot, in exercise of the powers conferred upon it, reduce the tax credit on certain goods to nil wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of goods exported after June 5, 1966, the rate specified in column (3) of the Table shall be deemed to be nil and no tax credit certificate is to be granted in respect of such exports. Thirdly, the notification is to be deemed to have come into effect from June 6, 1966. The net effect of the amendment to the scheme is that if goods were exported before the specified date but the proceeds were received after that date tax credit certificate at 16/25 of the rates specified in the Table is to be granted and with regard to goods exported after the specified date no tax credit certificate is to be granted and the notification is to be given effect to from June 6, 1966. The first question that arises is whether the Central Government is entitled to withhold the benefit of tax credit altogether having regard to the provisions in section 280ZC(1) of the Act. That sub-section provides that a person who exports goods after February 28, 1965, and receives the sale proceeds in India shall be granted a tax credit certificate for an amount calculated at a rate not exceeding 15 per cent. on the amount of such sale proceeds. It seems that the provisions relating to grant of tax credit certific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same, on the ground that the export was made after June 5, 1966. It was argued that the provisions in section 280ZE(2).that the Central Government could in the scheme to be framed specify the class of goods, the export of which would attract the benefit of tax credit and the rate at which tax credit is to be granted, did not empower the Central Government to interfere with the date fixed by the statute, namely, February 28, 1965. He argued that by both the impugned notifications the date fixed by the statute had been interfered with inasmuch as in the first notification of June 6, 1966, it was provided that no certificate should be granted in case of export if the sale proceeds or part thereof were received in India after June 5, 1966, and in the second notification of August 8, 1966, it was provided that in the case of exports after June 5,1966, the rate of credit should be nil. He submitted that the two impugned notifications clearly showed that the right of an exporter to tax credit certificate, if the export was made after February 28, 1965, was altogether denied to an exporter if the export was made after June 5, 1966. This Mr. Bhabra contended could not be done. The next ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of the section" and this clause qualifies also the date specified in the section, namely, February 28, 1965. It is also to be noticed that sub-section (2) of section 280ZC and clause (h) of sub-section (2) of section 280ZE are almost in the same terms and are dealing with identical matters. The object of the provisions in Chapter XXIIB is to provide a boost to exporters of goods and merchandise. The devaluation of the Indian currency did certainly bring into existence a situation in which the whole concept of incentive to exporters had necessarily to be reconsidered. In that situation and having regard to the provision in the statute to which I have earlier referred, it cannot be said that the provision regarding the date of expiry, namely, February 28, 1965, in section 280ZC(1) is so inflexible that the Central Government could not alter the target date of export so as to withhold an incentive to exporters, which after devaluation was uncalled for and unnecessary. The next question to be considered is whether the notification dated August 8, 1966, is invalid on the ground that it sought to give retrospective operation to the amendment proposed therein. The notif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may or may not be possible to make the same so as to give retrospective operation. It will depend on the language employed in the statutory provision which may in express terms or by necessary implication empower the authority concerned to make a rule or regulation with retrospective effect. But, where no such language is to be found it has been held by the courts that the person or authority exercising subordinate legislative functions cannot make a rule, regulation or bye-law which can operate with retrospective effect." In that case a Tehsildar had attached certain shares at a time when he had no power to act as a Tax Recovery Officer. By a notification issued subsequently Tehsildars were designated Tax Recovery Officers and by this notification it was deemed to have come into effect retrospectively. It was, in these circumstances, that it was held that the notification was bad and the attachment effected by the Tehsildar was invalid. Reliance was also placed on the observations of Subba Rao J. (as he then was) in Dr. Indramani Pyarelal Gupta v. W. R. Natu to the effect that in the case of the legislature which exercised plenary powers of legislation under article 246 of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case as made out in the writ petition is that the actual export was made after June 5, 1966. The first notification is prospective in operation and this notification should come into operation if the second notification is struck down because the former was cancelled by the latter. Turning now to the broader question of the Central Government's power to deny tax credit certificate to the respondent, it is to be seen if the respondent can claim a certificate as a matter of right under the provisions of the statute. It cannot be overlooked that no exporter has a right to the tax credit certificate unless the particular goods which he has exported is included in the scheme. The provisions in the Act do not confer a right to all exporters of goods with regard to all variety of goods exported. Without doubt the Central Government has the right to include any commodity in the scheme and similarly to withdraw a particular commodity from the scheme. The respondent was concerned, with the export of jute carpet backing cloth. Its grievance is that the Central Government had denied the certificate to it because it exported the goods after the specified date. But, this grievance appears to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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