SURYA PRAKASH KESARWANI,J - (1.) IN this bunch of writ petitions, the petitioners have challenged the constitutional validity of amendments in Section 80 HHC(3) of the Income Tax Act, 1961 brought by the Taxation Laws (Amendment) Act, 2005 as well as the validity of the impugned notices/orders. Facts of the Case
(2.) THE facts involved in these writ petitions are similar and as such the facts of the Writ Petition No. 523 of 2006 are noted in detail and this writ petition is being taken up as a leading writ petition. The facts of the rest of the writ petitions are being noted in brief. In Writ Petition No. 523 of 2006 the petitioner is a limited company engaged in manufacturing of Mentha Oil, Menthol Powder, Menthol crystal, Dementholized Oil, Peppermint oil and Di -hydromyrcenol and their bye -products. The petitioner's factory is situate in district Rampur established in the year 1997. It is stated in paragraph nos. 10 and 11 of the writ petition that it has been the basic policy of Government of India to make the export competitive and to neutralize the incurrence of custom, excise duties, and other taxes by the schemes known as Duty Drawback Scheme (for short DDS), Advanced Licencing Scheme (for short ALS), Duty Entitlement Pass Book Certificate ( for short DEPB) and Duty Free Replenishment Scheme (for short DFRC). It is alleged that the above schemes are basically introduced to refund the incurrence of the customs, excise duty and taxes on the inputs used in the resultant export product. In paragraph no. 13, it is stated that remission granted under the aforesaid scheme is not a profit. In paragraph no. 14 it is stated that the DEPB entitlements can be used by the exporters / petitioner while making payment of import duty on their own imports and the DEPB is transferable and can be used by the transferee against their import duty liability. In paragraph 17, 18, 20 and 21, it is stated that the petitioner had adopted for DEPB scheme since the first assessment year, i.e., A.Y. 1998 -99. By a judgment dated 18.11.2004 delivered by the Income Tax Appellate Tribunal in Income Tax Appeal No. 342 of 2004, it was held that DEPB credit sale falls under Section 28(iv) of the Act. To overcome this judgment the Taxation Laws (Second Amendment), Bill 2005 was passed by the Parliament. It is stated in paragraph 23 that pursuant to the amendment under challenge, the respondent no. 1 issued a Circular No. 2/2006 dated 17.1.2006 ( Annexure 4) which was followed by impugned notices dated 24.1.2006 ( Annexures 5 and 6) on the ground that "export turnover is more than Rs.10 crores, therefore please explain as to why the deduction under Section 80HHC may not be disallowed on the amount of DEPB in view of amended provision of Section 80 HHC". Paragraph no. 25 to 50 contains the averments to challenge constitutional validity of the 2nd and 3rd proviso to Section 80 HHC which are summarized as under : - (i) There is no rational to confer statutory deduction on exporters having export turnover up to Rs.10 crores and to withdraw the said benefit from the petitioner exporters who have export turnover of more than Rs. 10 crores. (ii) Profits on transfer of DEPB licence and DFRC are treated as business profit as per Section 28(iiid) and 28 (iiie) which has been made eligible for deduction under Section 80 HHC, subject to the condition that only those assessee shall be eligible for this deduction whose export is less than Rs.10 crores without any further condition to be complied with. While assessees having export turnover of more than Rs.10 crores have to comply with two conditions, namely, that he has an option to choose either the duty draw back or the DEPB scheme and secondly the rate of draw back credit attributable to the custom duty was higher than the rate of credit allowable under DEPB scheme. This is wholly unreasonable restriction on fundamental rights guarantee under Article 19(1)(g) of the Constitution of India. (iii) The retrospective amendment levying tax on items which was not profit or gain in business is oppressive and unreasonable. (iv) The amendment has been made to overrule the judgment of the Tribunal. The legislature is not competent to overrule the binding verdict of the Tribunal. (v) The option given in the 3rd proviso to Section 80 HHC (3) of the Act is sham and total nonexistent inasmuch as the incentive under DEPB and DFRC was more attractive than duty draw back and as such business would certainly opt a more attractive scheme. Thus the levy is not optional but compulsive . (vi) The amendment is discriminatory between exporter under duty draw back and under DEPB and DFRC . The classification meant under the amended proviso is not based on any intelligible differentia or nexus with the object sought to be achieved. Thus amendment is discriminatory. (vii) The retrospective amendment is confiscatory. (viii) The classification between exporters with less than Rs.10 crore and more than Rs. 10 crore export turnover to be eligible for deduction is wholly irrational or arbitrary. (ix) The incentive/ benefit under DEPB and DFRC scheme is not an income and therefore subjecting it to levy income tax with retrospective effect is arbitrary and violative of Articles 14 and 19 (i)(g) of the Constitution. The impugned amendment retrospectively withdraw the benefit w.e.f. 1.4.1998 which is barred by principles of estoppel. The benefit of Section 80HHC was available to the petitioner from last seven years which has been retrospectively withdrawn.
(3.) THE facts in other writ petitions and the challenge therein is briefly noted as under : - Sl. No. Writ Petition Number Brief Facts 1 922 of 2006 The validity of 3rd and 4th Proviso of Section 80 HHC (3) as well as the notices under Section 148 dated 2.2.2006 and 23.2.2006 ( Annexure No.2) have been challenged . In this case also the export turnover of the petitioner is more than Rs.10 crores. The petitioner has challenged the validity of the amendment made in Section 80 HHC (3) of the Act by the Taxation Laws (Amendment) Act, 2005 as well as the assessment order dated 24.2.2006 ( Annexure No.7) for A.Y. 1998 -99 and demand notice dated 24.2.2006 ( Annexure No.3). By the impugned order the excessive deduction allowed under Section 80 HHC with regard to deduction claimed on DEPB scripts were disallowed. The validity of Section 80 HHC (3) of the Act as well as the assessment orders dated 24.2.2006 for A.Y. 1998 -99 and A.Y. 2003 -04 ( Annexure Nos. 10 and 11) and the demand notice dated 24.2.2006 (Annexure Nos. 8 and 9) challenged by the petitioner who is exporters and who was found to be not entitled for deduction under Section 80 HHC for reason that if duty draw back, DEPB and FDR interest is deducted from net profit then there negative figure is obtained. The assessee's export turnover was admittedly more than Rs.10 crores. Validity of Sections 3 & 4 of the Taxation Laws ( Amendment) Act, 2005 has been challenged. The challenge has been made on the ground that the amendment seeks to impose burden retrospectively on the assessees having export turnover exceeding Rs.10 crores. Validity of Sections 3 & 4 of the Taxation Laws ( Amendment) Act, 2005 has been challenged whereby Sections 28 and 80 HHC of the Act has been amended. The challenge has been made on the ground that the amendment seeks to impose burden retrospectively on the assessees having export turnover exceeding Rs.10 crores. Besides this the demand notice dated 16.3.2006 ( Annexure No.6) has also been challenged. In paragraph 4(d), it has been stated that the petitioner has preferred an appeal against the assessment order and the demand notices. Validity of Sections 3 & 4 of the Taxation Laws ( Amendment) Act, 2005 has been challenged whereby Sections 28 and 80 HHC of the Act has been amended. The challenge has been made on the ground that the amendment seeks to impose burden retrospectively on the assessees having export turnover exceeding Rs.10 crores. The petitioner also challenged notice of demand dated 24.3.2006 ( Annexure No.4) It has been stated in paragraph No.5(s) that the petitioner has preferred an appeal under the Act against the impugned demand notice. Also challenged the validity of Sections 3 & 4 of the Taxation Laws ( Amendment) Act, 2005 and the consequential amendments effect in Section 28 and 80HHC of the Act, questioned. Also challenged notice of demand and assessment order dated 28.2.2006 ( Annexure No.7). It is stated in paragraph no. 4(m) that the petitioner is an exporter having export turnover exceeding of Rs.10 crores. In paragraph no. 4(t), it is stated that the petitioner has preferred statutory appeal against the impugned assessment order and demand notice dated 28.2.2006 ( Annexure no.7). Petitioner has prayed for writ, order or direction in the nature of certiorari to quash the assessment orders dated 30.3.2006 for A.Y. 2003 -04 and 13.2.2006 for A.Y. 2000 -01 and to refund the amount of first and second installment of Rs.11,67,779/ - and Rs.9,36,906/ - alongwith interest. Validity of Section 80 HHC has not been challenged. In paragraph 29 the petitioner has stated to be an exporter having turnover of more than Rs.10 crores. Validity of Section 80 HHC(3) of the Act as amended by Taxation Laws (Amendment) Act, 2005 as well as the notice under Section 148 dated 27.3.2006 for A.Y. 1999 -2000 have been challenged. Validity of Section 3rd and 4th proviso to Section 80 HHC(3) of the Act as well as the assessment order dated 5.9.2006 have been challenged. In paragraph no. 6 of the writ petition the petitioner stated that benefit of customs duty, excise duty and sales tax under indirect scheme, namely, duty draw back scheme advanced licence scheme, DFRC and DEPB were granted which is not a profit but refund of custom duty, excise duty and sales tax paid on the material used as input for manufacture of export product. Validity of Section 80 HHC(3) of the Act as well as assessment proceedings for Assessment Years 2001 -02, 2002 -03, 2003 -04 and 2004 -05 have been challenged. The notices were issued on the ground that the assessee computed benefit under Section 80 HHC by taking export incentive including income on sale of import licence and the deduction was wrongly allowed to the extent of 50% of 90 % of the sale amount of import licence. Validity of the Taxation Laws (Amendment) Act, 2005 inserting 3rd and 4th Proviso in Section 80HHC and amendment in Section 28 of the Act as well as the demand notice and assessment order dated 7.8.2006 ( Annexure No. 5) have been challenged. In paragraph no. 6(s), the petitioner has stated that he has preferred an appeal against the impugned assessment order and demand notice. Validity of the Taxation Laws (Amendment) Act, 2005 inserting 3rd and 4th Proviso in Section 80HHC and amendment in Section 28 of the Act as well as the demand notice and assessment order dated 18.10.2006 ( Annexure No. 4) have been challenged. In paragraph no. 6(r), the petitioner has stated that he has preferred an appeal against the impugned assessment order and demand notice. Validity of amendment in Section 80 HHC(3) of the Act as well as assessment order dated 27.11.2006 ( Annexure No.1) has been challenged. Validity of amendment in Section 80 HHC(3) of the Act as well as assessment order dated 27.11.2006 ( Annexure No.1) has been challenged. Validity of the Taxation Laws (Amendment) Act, 2005 inserting 3rd and 4th Proviso in Section 80HHC and amendment in Section 28 of the Act as well as the demand notice and assessment order dated 26.9.2006 ( Annexure No. 4) have been challenged. In paragraph no. 6(r), the petitioner has stated that he has preferred an appeal against the impugned assessment order and demand notice. Validity of Section 80 HHC(3) of the Act and the assessment orders for the A.Y. 2001 -02, 2003 -04 and 2004 -05 have been challenged. Validity of the Taxation Laws (Amendment) Act, 2005 inserting 3rd and 4th Proviso in Section 80HHC and amendment in Section 28 of the Act as well as the demand notice and assessment order dated 31.12.2007 ( Annexure No. 7) have been challenged. In paragraph no. 6(s), the petitioner has stated that he has preferred an appeal against the impugned assessment order and demand notice. In this writ petition the petitioner has challenged the validity of 3rd and 4th Proviso of Section 80HHC(3) inasmuch as it provides conditions in Clause (a) and (b). The second relief sought is to quash the assessment proceeding for the A.Y.2002 -03, A.Y. 2003 -04 and A.Y. 2004 -05. In paragraph no. 23, it is stated that the turnover of the petitioner exceeds Rs.10 crores and that the grant has been introduced malafidely. Validity of the Taxation Laws (Amendment) Act, 2005 inserting 3rd and 4th Proviso in Section 80HHC and amendment in Section 28 of the Act as well as the demand notice and assessment order dated 30.12.2008 ( Annexure No. 7) have been challenged. In paragraph no. 6(u), the petitioner has stated that he has preferred an appeal against the impugned assessment order and demand notice.;