# NATIONAL CO. LTD. CALCUTTA v. DEPUTY DIRECTOR OF TAX CREDIT (EXPORTS) CALCUTTA & ORS

- **Citation:** [1977] 3 S.C.R. 125
- **Court:** Supreme Court of India
- **Decided:** 1977-03-03
- **Bench:** P. N. Bhagwati, S. Murtaza Fazal Ali
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/national-co-ltd-calcutta-v-deputy-director-of-tax-credit-exports-calcutta-ors-7157
- **Pages:** 7

## Headnote

125
Tax Credit Ce1·tificate (Exports) Schenie 1965-Scheme providing for cer-
.tain categories of goods or 1nerchandise specified in column 2 whiclz
were
f'X]>orted after 28-2-1965 to destinations specified in colun1n 4--Scherne a111c11ded· by Notification dated 6-6-1966 disentitling an exporter to tdx credit certificate in respect of goods or n1erc/landise exported and the sale proceeds therefor were receii·ed after 5-6-1966-Second Notification amending the first one
providing for grant of tax credit ci?rtificate in respect of goods exported on or
before 5-6-1966 even if the sale proceeds WPre received thereafter-H,.het!1er
the Notifications ultra vires the powers of the Central Government vested under
~. 280 ZE read with 280 ZC of the lnconze Tax Act.
The jute carpet 'backing cloth manufactured by the appellant in its , jute
mills and exported was covered by Item 1 in column 2 which specified "goods
made of jute not otherwise specified" of the Table appended to the Tax Credit
Certificate (Exports) Scheme, 1965. The notification issued by the Central
Government in exercise of the
powers vested under s.
280ZE read
with
S. 280ZC, dated 6-6-1966 and 8-8-1966, provided that no tax credit certificnte
shall be issued in respect of any goods exported after· 5-6-1966. The appellant, who exported diverse quantities of jute carpet backing cloth .manufactured
by it to various countries during the period 13-7-1966 and 30-11-1966, filed
a writ petition in the Calcutta High Court for a writ of niandarnus for
quashing and setting aside both the
Notifications and directing
the Central
{]overnment to consider the application of the applicant for tax credit certificate in respect of the exports without taking into account the t\-vo Notifications.
The ground of challenge was that the twO Notificatioris \Vere outside.
the powers conferred on the Central Government u/ s 280ZE read with S. 280
ZC, since the Central Government had no power under those sections to make
11 scheme providing that no tax credit certificate shall be granted in case of
any goods or merchandise at all. The single Judge granted mandan1us. hot
the Division Bench on appeal took a different view and negatived the challenge.
Dismissing the appeal by certificate the Court,
HELD : (i) The Division Bench of the High Court was right in holdlng
that the Central Government was entitled to issue the two Notifications directing that no tax credit certificates sha11 be granted
in
respect of goods
or
merchandise exported on or after 5-6-1966. [131 A·B]
(ii) No obligation can be spelt out from Ss. 280 ZC and 280 ZE re.:iuiring
the Central Government to frame a scheme specifying the goods or merchandise
in respect of which tax credit certificate shall be granted. The Central Govern~
ment was entitled to say that having regard to the factors set out in subsection (3) of S. 280 ZC, it does not think it desirable that ,tax credit c.:rti·
ficate should be granted in respect of any goods or merchandISe for the tune
being.
[130 F·HJ
C!v1L APPELLATE JURISDICTION: Civil Appeal No. 950 r:i 1972.
(From the Judgment and Order dated the 5-7-1971 of the Calcutta
High Court in Appeal No. 130/71) _
N. R. Khaitan, A. T. Patra and Pravee11 Kumar, for the appellant.
A
B
c
D
E
F
G
H
12 6
SUPREME COURT REPORTS
(1977] 3 S.C.R.
A
Lal Narain Sinha, Sol. General, S. N. Prasad and Girish Clwndra
B
c
D
E
F
G
H
not present for respondents.

## Text

NATIONAL CO. LTD. CALCUTTA
v.
DEPUTY DIRECTOR OF TAX CREDIT (EXPORTS)
CALCUTTA & ORS.
March 3, 1977
[P. N. BHAGWATI AND S. MURTAZA FAZAL ALI, JJ.J
125
Tax Credit Ce1·tificate (Exports) Schenie 1965-Scheme providing for cer-
.tain categories of goods or 1nerchandise specified in column 2 whiclz
were
f'X]>orted after 28-2-1965 to destinations specified in colun1n 4--Scherne a111c11ded· by Notification dated 6-6-1966 disentitling an exporter to tdx credit certificate in respect of goods or n1erc/landise exported and the sale proceeds therefor were receii·ed after 5-6-1966-Second Notification amending the first one
providing for grant of tax credit ci?rtificate in respect of goods exported on or
before 5-6-1966 even if the sale proceeds WPre received thereafter-H,.het!1er
the Notifications ultra vires the powers of the Central Government vested under
~. 280 ZE read with 280 ZC of the lnconze Tax Act.
The jute carpet 'backing cloth manufactured by the appellant in its , jute
mills and exported was covered by Item 1 in column 2 which specified "goods
made of jute not otherwise specified" of the Table appended to the Tax Credit
Certificate (Exports) Scheme, 1965. The notification issued by the Central
Government in exercise of the
powers vested under s.
280ZE read
with
S. 280ZC, dated 6-6-1966 and 8-8-1966, provided that no tax credit certificnte
shall be issued in respect of any goods exported after· 5-6-1966. The appellant, who exported diverse quantities of jute carpet backing cloth .manufactured
by it to various countries during the period 13-7-1966 and 30-11-1966, filed
a writ petition in the Calcutta High Court for a writ of niandarnus for
quashing and setting aside both the
Notifications and directing
the Central
{]overnment to consider the application of the applicant for tax credit certificate in respect of the exports without taking into account the t\-vo Notifications.
The ground of challenge was that the twO Notificatioris \Vere outside.
the powers conferred on the Central Government u/ s 280ZE read with S. 280
ZC, since the Central Government had no power under those sections to make
11 scheme providing that no tax credit certificate shall be granted in case of
any goods or merchandise at all. The single Judge granted mandan1us. hot
the Division Bench on appeal took a different view and negatived the challenge.
Dismissing the appeal by certificate the Court,
HELD : (i) The Division Bench of the High Court was right in holdlng
that the Central Government was entitled to issue the two Notifications directing that no tax credit certificates sha11 be granted
in
respect of goods
or
merchandise exported on or after 5-6-1966. [131 A·B]
(ii) No obligation can be spelt out from Ss. 280 ZC and 280 ZE re.:iuiring
the Central Government to frame a scheme specifying the goods or merchandise
in respect of which tax credit certificate shall be granted. The Central Govern~
ment was entitled to say that having regard to the factors set out in subsection (3) of S. 280 ZC, it does not think it desirable that ,tax credit c.:rti·
ficate should be granted in respect of any goods or merchandISe for the tune
being.
[130 F·HJ
C!v1L APPELLATE JURISDICTION: Civil Appeal No. 950 r:i 1972.
(From the Judgment and Order dated the 5-7-1971 of the Calcutta
High Court in Appeal No. 130/71) _
N. R. Khaitan, A. T. Patra and Pravee11 Kumar, for the appellant.
A
B
c
D
E
F
G
H
12 6
SUPREME COURT REPORTS
(1977] 3 S.C.R.
A
Lal Narain Sinha, Sol. General, S. N. Prasad and Girish Clwndra
B
c
D
E
F
G
H
not present for respondents.
The Judgment of the Court was delivered by
BllAGWATI, J. The appellant.owns a jute mill situate at Rajgunj,
Railway Station Andul, District Howrah in the State of West Bengal
and among other jute .products, it manufactures jute . carpet backing
cloth at its jute mill. 'fhc appellant exported diverse quantities m jut~
carpet backing cloth manufactured· by it to various countrie:; during
the period 13th July 1966 to 30th November 1966.
There was a Tax
Credit certificate Scheme framed by the Central Government under
Section 280 ZE read with Section 200 ZC of the Income Tux Act
l 962.
The Scheme was called the Tax cr,dit Certificate (Exports)
Scheme 1965. The Scheme provided for grant of Tax Credit Certificate in respect of certain categories of goods or merchandise specified
in column 2 which wero exported to destinations specified in column 4
and the dates of export of which fell after 28th February 1965, for
an amount calculated at the rates specified in column 3 of the Table
attached to the Scheme.
Jute carpet backing cloth was covered by
Item 1 in column 2 of the Table which specified "goods made of jute
not otherwise specified". If the Scheme had remained unamended, the
appellant would have been entitled to tax credit certificates io respect
of the exports made by it of jute carpet backing material, but a notification was issued by the Central Government on 6th June, 1966 in
exercise of the powers ~oonferred by Section 280 ZE read \\itlr Section
200 ZC, whereby paragraph 3 of the Scheme which provided for grant
of tax credit certificates was amended by re-numbering that paragraph
as sub-paragraph (l) and adding a sub-paragraph (2) to the following effect :
"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 according with the Foreign Exchange Regulation Act, 1947 (Vil of 1947)
and the mies
made thereunder''.
This amendment had the effect of disentitling an exporter to taxcrcdit certificate in respect of goods or merchandise exportc;d by him
in nil cases where sale proceeds or part thereof were received in lndi"
after 5th June, 1966.
The necessity for making this ame~dment in
the Scheme arose on account of devaluation of the Indian rupee which
was made by tho Central Government, as it was felt that in
view of tho devaluation it was not nocessary to give any further incentive for export. But it was soon realised that this amendment of the
Scheme might work hardship in those cases whero goods or merchandise were exported before 5th June 1966 on the faith of the Scheme
but for some reason or the other, the sale proceeds were uot received
until after that date and, therefore, a second notification dated 8th
August, 1966 was issued by the Central Government further amending the scheme in exercise of the powers conferred under Section 280
ZE read with Section 280 ZC by deleting sub-paragraph ( 2) a.nd instead, adding a proviso which provided for grant of tax credit certifi7
NATIONAL co. v. DY •. DIRECTOR TAX (Bhagwati, J.)
I 27
'
.
.
cate in respect of goods or merchandise exported on or before 5th
June 1966 even if the said proceeds were received a!ter that date and
declared that in case of goods exported after. 5th June 1966 the rate
specified in column 3 of the Table shall be deemed to he nil and no
certificate shall be granted in respect of such goods or merchandise.
The exports of jute carpet backing cloth made by the appellant were
admittedly after 5th June, 1966 and hence both the r.otifications
adversely affected the appellant by disentitling it to tax
cr~dit ce1tifkstes in respect of these exports.
The appellant, therefore, filed a
Wri! Petition in the High Court of Calcutta for a writ of mandamus
for quashing and setting aside both the Notifications and directing the
Central Government to consider the application of the .appellant for
tax credit certificates in respect of the exports without taking
into
account the two Notifications .. Though there were several grounds on
· which the validity of these two Notifications was challenged in the
Writ Pc:tition before the High Court, only one ground was pressed
before us on behalf of the appellant and we shall, therefore, refer only
to that ground. That ground was that both the Notifications were
outside the power conferred on the Central Government under Section 260 ZE read with Section 280 ZC, since the Central Government
had no power under these Sections to make a scheme providing that
no tax credit certificate shall be. gr-d.llted' in case of any goods or mer-
.. chandise at all. This ground found favour with the single Judge of
the High Court but on appeal 'under clause 15 of the Letters Patent,
a Division Bench of the High Court took a different view and negatived the challenge. Since !he writ petition was
dismissed
by the
Divio;lon Bench, the appellant preferred the present appeal after obtaining a certificate of fitness from the High court.
The Indian Income Tax Act 1922 as originally enacted, did not
contain the fasciculus of Sections under Chapter XXII providing for
gro.nt of tax credit certificates. This Chapter compri:;ing Sections -280
ZC and 280 .ZE was inserted by the Finance Act 1965 with effect
from 1st April 1965 with a view to providing incentive for export .
purpose of which Section 280 ZC and 280 ZE are material, reads as
fellows:-
·
·
·
·
"280 ZC. ( 1) Subject to the provisions of this Section,
a person who exports any goods or merchandise out of
India. after the 28th day of February.1965 and receives the .
sale procttds thereon in India in
according with the
Foreign Exchange Regulation Act, · 1947 · (VII of 1947)
A
B
c
D
E
F
and tho rules made thereunder shall be granted a tn.x credit
'G
~cate for an amount calculated at a rate not exceeding
fifteen pet' cent, on the amount of •uth sale proceeds.
(2) The goods or merchandise in respect of which a
tax credit certificate shall be granted under sub-section (1)
(including the destination of their export) and· th~ rate at
which the amount of such certificate shall be calc::rlated shall
be such as may be specified in the Scheme:.
II
Provided thit different rates may be specified .in respect
of different gocids or merchandise.
·
·
_
128
A
B
SUPREME COURT REPORTS
[J 977] 3 S.C.R.
(3) In specifying the goods or merchandise (including
the destination of their export) and the rates, the Central
Government shall have regard
to the following
factors,
namely:
(a) the cost of manufacture or production of such goods
or merchandise and prices of similar goods in the
foreign markets;
(b) the need to develop foreign markets for such goods
or merchandise;
(c) the need to earn foreign exchange;
(d) any other relevant factor".
C
Section 280 ZE conferred power on the Central Government to
frame one or more scheme or schemes to be called tax ,:redit ccrtificaie scheme or schemes in the following words :
"(!) The Central Government shall, by notification in
the Official Gazette, frame one or more scheme or schemes
to be called tax credit certificate scheme or schemes in relaD
'lion to tax credit certificates to be granted under this
Chapter.
E
F
G
H
(2) A scheme framed under sub-section (I) may provide for:-
(a)
(b)
(c)
(d)
(e)
the form and manner in which, and the authoritv to
which, applications for the grant of tax credit certificates shall be made;
the form in which, and the intervals at which. and
the authority by which, such certificates shall be
issued;
the verification of any information or particulars furnished, or contained in any application made, by or
on behalf of any person entitled to tax credit certificates;
the determination of the rights and obligations of a
person to whom such certificate has been granted
and the circumstances in which any right in or title
to the said certificate may be transferred to or
devolve on any other person by succession or otherwise;
the detcnnination of the rights and obligation of
prsons who joinly subscribe to an eligible issue of
capital;
(f) the determination of the rights and. obligation of
persons who subscribe to an eligible Tssuc of capital,
on behalf, or for the benefit, of any other person;
l
NATIONAL co. v. DY. DIRECTOR TAX (Bhugwati, J.)
129
(g)
(h)
the appointment of any officer of Government or of
the Reserve Bank of India to exercise any rights or
perform any duties in connection with the grant of
the said certificates;
the goods or merchandise and the rate or rates for
the purposes of section 280 ZC and section 280 ZD
and the destination of the export of such goods or
merchandise for the purposes of section 280 ZC;
(!) any other matter which may be necessary or proper
for the effective implementation of the provisions of
this Chapter or the scheme.
(3) The Central Government may, by notification in the
Official Gazette, and to, amend, vary or rescind any scheme
made under this section".
It was in exercise of the power conferred on the Central Government under Section 280 ZE read with section 280 ZC that the Central Government made the Tax Credit Certificate (Exports) Scheme,
1965. The first Notification dated 6th June 1966 amended paragraph 3 of the Scheme by providing that no tax credit certificate shall
be granted in respect of exports where the sale proceeds were
received after 5th June, 1966. This provision was relaxed by the
second Notification dated 8th August 1966 by providing that in case
of e:»ports made on or before 5th June 1966 tax credit certificate shall
be granted according to the provisions of the Scheme even if the sale
pi'oceeds were received after that date, but in respect of ·exports inade
after.5th June, 1966, the rate specified in column 3 of Table A shall
be nil and. no tax credit certificate shall be granted in respect of such
·exports.
The argument urged on behalf of the appellant was that it was
not competent to the Central Government to provide in the Scheme
framed under Section 280 ZE read with Section 280 ZC that no tax
-credit certificate shall be granted in respect of exports of any goods
or merchandise. The only power, which; according to the appellant,
the Central Government had under these two Section~, was to frame
a Scheme specifying some goods or merchandise the export of which
would entitle an exporter to tu credit certificate. The appellant conceded that the· Central Government was not bound to specify any
particular category of goods or merchandise in the Scheme framed
by it but the limited corttention was that some goods or merchandise
must be specified in the Scheme and since in the present case the
Scheme as amended provided that tax credit certificates shall not be
~'l'llnted in respect of experts of any goods or merchandise, the two
Notifications making this amendment in the Scheme wel'e ultra vites
the p0wel' of the Central Government under Sections 280 ZE and 28(1
'ZC. This contention, thoogh it found favour with the single Jndge of
tlte Calcutta High Court who beard the Writ Petition in the first
A
B
c
D
E
F
H
A
B
c
D
E
F
G
H
130
SUPREME COURT REPORTS
(1977) 3 S.C.R.
instance, is in our opinion wholly without force and cannot he sustained.
A mere look at the scheme of the provisions of Section 280
ZC and 280 ZE is sufficient to expose the invalidity of this contention.
Sub-section ( l) of Section 280 ZC undoubtedly provide~ that a
person who exports any goods or merchandise out of India after 28th
Febn1ary 1965 and receives the sale proceeds thereof in India
in
accordance with the Foreign Exchange Regulation Act, 194 7 and the
rules made thereunder, shall he granted a tax credit certificate for an
amount calculated at a rate not exceeding 15 per cent of the amount
of such sale proceeds.
But this right conferred on an exporter is
subject to the other provisions of Section ZC, and these other provisions include sub-sections (2) & (3).
Suh-section (2) provides in
so many terms that the goods or merchandise in respect of which a
tax credit certificate shall be granted under sub-section (I) and the
rate at which the amount ol such certificate shall be calculaterl, shall
be such as may be specified in the Scheme.
It is, thus, left to the
Scheme to be framed by the ~ntral Government to specify the goods
or merchandise in respect of which an exporte~ shall be entitled to
tax credit certificate as also tho rate at which the amount of such
certificate shall be calculated. It is not in respect of every category
of goods· or merchandise that an exporter can claim to be entitled to
tax credit certificate but it is only in respect of such goods or merchandise as are specified in the Scheme. The policy and the principle
which would guide the Central Government in selecting the goods or
merchandise for this purpose are set out in sub-section ( 3)
which
provides that in specifying the goods or merchandise as also the rates,
the ~ntral Government shall have regard to the various factors set
out in that sub-section.
These are the factors which woukl influence
the choice of the Central Government in selecting the goods or merchandise for the purpose of grant of tax credit ce11ificate and also in
determining the rates at which tax credit certificate should be given.
Section 280 ZE, sub-section (1) confers power on the Central Gm·-
emment to frame one or more Schen1es in relation to tax credit certificate to be granted under Se.ctiou 280 ZC, and under sub-se.:tion (2).
such scheme or schemes may provide inter alia for the goods or merchandise and the rate or rates for the purposes of Section 280 ZC.
We fail to see how any obliization can be spelt out from these pnwisions requiring the Central Government to frame a scheme specifyi11.r
the p:oods or merchandise in respect of which tax credit certificate shall
be granted.
It would indeed be absurd to suggest that the Cel\{ral
Government is under an obligation to make a scheme and the reqcirement of the statute would bo satisfied so long as tho Centm! Government specifies some ~oods or merchandise in the Sch=e. The.-e i•
no reason why the Central Government should not be entitled to say
that having rel!'lrd to the factors set out in sub-section (3) of .ectiu11
280 7£, it does not think it d~irable that tax credit certificate should
be granted in respect of any goods or merchandise for the time hcin~.
Sub-section (3) of Section 280 7£ confers pawer on the Central
Government in so manv terms to rescind a Scheme made by it and
that also supports the view that the Central Government mav keening in view the factors set out in sub-section (3) ~ section 280 ZC,
l
,
NATIONAL co. v. DY. DIRECTOR TAX (Bhagwati, J.)
131
decline to make a scheme or provide in the scheme that there shall
be no goods or merchandise in respect of which tax credit certificate
shall be granted. In the circumstances, we think that the Division
Bench -of the Hi~ Court was right in holding that the Central ~Y
cmment was enlltled to issue the two impugned Notifications directing that no tax credit certificates shall be granted in respect of goods
or merchandise exported on or after 5th June, 1966.
We accordingly dismiss the appeal with costs.
S.R.
Appeal dismisicd.
A
B