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TMI Blog1971 (7) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the 5th day of June, 1966, in India in accordance with the Foreign Exchange Regulation Act, 1947 (7 of 1947), and the rules made thereunder." Thereafter, by another notification dated the 8th August, 1966, it was provided, inter alia, as follows : G. S. R. No. 1226 : "In exercise of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 such amended rate would not be allowed on exports made after a certain date must be struck down as being in excess of the delegated authority according to the learned judge. The result was that he made the rule absolute. The appeal is directed against that interpretation. For the respondent the argumen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 scheme made under this section. Now, taking the power to amend the scheme, it seems to me that the Central Government has power to rescind "any scheme". No limitation can be put by reason of such words as "a person who exports any goods or merchandise out of India after the 28th February, 1965, and receives the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 purpose, Income-tax Officer, Alleppey V. M. C. Ponnoose and Dr. Indramani Pyarelal Gupta v. W. R. Natu have been invoked. There the Supreme Court laid down that the courts will not ascribe retrospectivity to new laws affecting rights unless by express words or necessary implication it appears that such was the intentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 under the Income-tax Act existing on the date on which such certificate is produced. Section 280Y(c) defines a scheme. Section 280ZE(1) requires the Central Government to frame one or more schemes, by notification in the Official Gazette, to be called tax credit certificate scheme. Sub-section (3) of this section confe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 226, 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 merchandise. This notification shall be deemed to have come into force on the 6th day of June, 1966." The consequence of this modification was that any export made before June 6, 1966, would be entitled to tax credit at a fraction, namely, 16/25, of the rate specified in the scheme even if the sale proceeds were received after June 6, 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Central Government had no power under the statute to frame a scheme with retrospective effect or a power to withdraw the benefit of tax credit already due with retrospective effect. The next contention of counsel for the appellant was that since the statute had given the Central Government the power to rescind, vary or modify a schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rency, 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. The learned judge was of the view that the power to amend, vary or rescind a scheme was nothing but the 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. We are unable to accept this conclusion of the trial court. The statute has expressly confe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 while retaining others, nor do we see why in order to achieve this object, namely, to withhold tax credit in certain cases, the legislative power of Parliament has to be invoked for amendment of the Act, although the Act itself has given the power to amend or vary the scheme to the Central Government. In our view the trial court was in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 certificate in respect of export made after February 28, 1965, are mandatory in character with the result that every exporter of goods of the description specified in the scheme would be entitled to tax credit certificate if the goods were exported after February 28, 1965. The question that, therefore, arises is that where the statute has guaran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral 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 branch of Mr. Bhabra's argument was based on section 280ZE of the Act, under which schemes are to be framed for tax credit certificate. He referred to the various clauses under sub-section (2) of that section and submitted that none of these clauses gave a power to the Central Government to interfere with the date February 28, 1965, specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 notification was issued on August 8, 1966, and clause (2) of the same provides that it shall be deemed to have come into force on June 6, 1966. The question, therefore, is whether the Central Government has the power to give effect to the amendment of the scheme retrospectively. Mr. Roy contended that since the amendment was for the benefit of the expo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Constitution, effect can be given retrospectively to any provision made in an enactment. But the same rule cannot apply to the Central Government exercising delegated legislative and subordinate power. We are unable to accept the contention of counsel for the respondent that the second notification dated August 8, 1966, is bad and should be struck down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 us to be without any merit because without a doubt the Central Government has the right to exclude any variety of goods from the scheme. Lastly, it is to be borne in mind that under sub-section (3) of section 280ZE of the Act, the Central Government has the power to amend, vary or rescind a scheme by notification. Although by the notification dated Augus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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