- (1.) Amendment to Section 80HHC(3) of the Income Tax Act, 1961 (in short 'the Act') was made by the Taxation Laws (Second Amendment) Act, 2005 with retrospective effect i.e. with effect from Ist April, 1992. By this amendment certain benefits were in fact extended to the exporters who are entitled to claim according to Section 80HHC of the Act. However at the same time, the amendment also carved out two categories of exporters, namely, those whose export is less than Rs. 10 crores per year and those exporters whose exports turn over is more than Rs. 10 crores per annum. Insofar as entitlement of these benefits to the exporter having turn over of more than Rs. 10 crores p.a. is concerned, two conditions contained in third and fourth proviso to the said amendment were to be satisfied for claiming the benefits. Those were: (a) he had an option to choose either the duty drawback or the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme; and (b) the rate of drawback credit attributable to the customs duty was higher than the rate of credit allowable under the Duty Entitlement Pass Book Scheme, being Duty Remission Scheme.
(2.) All the Respondents in these SLPs, who are the exporters, belong to the second category. They filed the writ petitions challenging conditions mentioned in third and fourth proviso to Section 80HHC(3). In fact it was their precise contention that these conditions are severable and therefore these two conditions should be declared ultra vires and severed. The rationale behind seeking such a prayer was obvious inasmuch as the writ Petitioners did not want entire Notification to be declared ultra vires which was to their advantage. What they wanted was that the benefit of amended provision be accorded, without insisting on the aforesaid conditions.
(3.) The High Court vide impugned judgment has decided the issue in favour of the writ Petitioners by concluding as under: 26. On consideration of the entire materials on record, we, therefore, find substance in the contention of the learned Counsel for the Petitioners that the impugned amendment is violative for its retrospective operation in order to overcome the decision of the Tribunal, and at the same time, for depriving the benefit earlier granted to a class of the Assessees whose assessments were still pending although such benefit will be available to the Assessees whose assessments have already been concluded. In other words, in this type of substantive amendment, retrospective operation can be given only if it is for the benefit of the Assessee but not in a case where it affects even a fewer section of the Assessees. 27. We, accordingly, quash the impugned amendment only to this extent that the operation of the said section could be given effect from the date of amendment and not in respect of earlier assessment years of the Assessees whose export turnover is above Rs. 10 crore. In other words, the retrospective amendment should not be detrimental to any of the Assessees.;