Bhagwati, J. - (1.) The appellant owns a jute mill situate at Rajguni, 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. The appellant exported diverse quantities of jute carpet backing cloth manufactured by it to various countries during the period 13th July 1966 to 30th November. 1966. There was a Tax Credit Certificate Scheme framed by the Central Government under S. 280 ZE read with S. 280 ZC of the Income Tax Act 1961. The Scheme was called the Tax Credit 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 were 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 in 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 conferred by S. 280 ZE read with S. 280 ZC, whereby paragraph 3 of the Scheme which provided for grant of tax credit certificate was amended by re-numbering that paragraph as sub-paragraph (1) 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 accordance with the Foreign Exchange Regulation Act, 1947 (VII of 1947) and the rules made thereunder."
(2.) This amendment had the effect of disentitling an exporter to tax credit certificate in respect of goods or merchandise exported by him in all cases where sale proceeds or part thereof were received in India after 5th June, 1966. The necessity for making this amendment in the Scheme arose on account of devaluation of the Indian rupee which was made by the Central Government, as it was felt that in view of the devaluation it was not necessary to give any further incentive for export. But it was soon realised that this amendment of the Scheme might work hardship in those cases where 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 not 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 S. 280 ZE read with Sec. 280. ZC by deleting sub-paragraph (2) and instead, adding a proviso which provided for grant of tax credit certificate in respect of goods of merchandise exported on or before 5th June 1966 even if the said proceeds were received after 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 be 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 Notifications adversely affected the appellant by disentitling it to tax credit certificates in respect of these exports. The appellant, therefore, filed a Writ 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 Petition 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 S. 280 ZE read with S. 280 ZC, since the Central Government had no power under these sections to make a scheme providing that no tax credit certificate shall be granted in case of any goods or merchandise at all. This ground found favour with the single Judge of the High Court but on appeal under Cl. 15 of the Letters Patent, a Division Bench of the High Court took a different view and negatived the challenge. Since the writ petition was dismissed by the Division Bench, the appellant preferred the present appeal after obtaining a certificate of fitness from the High Court.
(3.) The Indian Income Tax Act, 1922 as originally enacted, did not contain the fasciculus of sections under Chap. XXII providing for grant of tax credit certificates. This Chapter comprising Ss. 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 Ss. 280 ZC and 280 ZE are material, read as follows:- "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 proceeds thereon in India in accordance with the Foreign Exchange Regulation Act, 1947 (VII of 1947) and the rules made thereunder 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. (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 the rate at which the amount of such certificate shall be calculated shall be such as may be specified in the Scheme: Provided that different rates may be specified in respect of different goods or merchandise. (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.";