Holding

The special excise duty under the Finance Act is not ‘duty of excise’ as defined in s.280ZD; tax credit is available only on duty levied under the Central Excise and Salt Act, 1944, and the limitation period cannot be condoned.

Summary

Associated Cement Co. Ltd. applied for a Tax Credit Certificate under the 1965 Scheme framed under s.280ZD of the Income Tax Act, seeking credit for both the regular central excise duty (under the Central Excise and Salt Act, 1944) and the special excise duty imposed by s.80 of the Finance Act, 1965. The authority granted credit only for the regular excise duty, holding that the special duty was not covered by the definition of ‘duty of excise’ in clause (b) of sub‑section (6) of s.280ZD. The company challenged this decision; the Delhi High Court upheld the authority’s view, and the Supreme Court affirmed the High Court, ruling that ‘duty of excise’ for the purpose of s.280ZD means only duty levied under the Central Excise and Salt Act, 1944, not the special duty under the Finance Act. The Court also rejected the company’s claim that the limitation period for a supplementary application could be condoned on the basis of a trade notice. Consequently, the appeals and special leave petitions were dismissed.

Issues considered

Whether the special excise duty levied under s.80 of the Finance Act, 1965 falls within the meaning of ‘duty of excise’ for the purpose of s.280ZD of the Income Tax Act, 1961.
Whether the limitation period for filing a supplementary application for a tax credit certificate can be condoned based on a subsequent trade notice clarifying the law.

Legislation cited

Subjects

Tax Credit CertificateExcise dutySpecial dutyIncome Tax ActFinance ActDefinition of dutyLimitation periodExcess clearanceCement industry

Judgment

575

ASSOCIATED.CEMENT CO. LTD.

v. B

DIRECTOR OF INSPECTION, CUSTOMS &
CENTRAL EXCISE, NEW DELHI.

March 29, 1985
c
[V.D. TULZAPUR.KAR, V. BALAKRISHNA ERADI AND
R.B.MISSRA, JJ.]

Income Tax Act 1961, Section 280ZD Tax Credit Certificate (Excise I>uty
on ExceJs Clearance) Scheme 1985 & Finance Act 1965, Section 80
D
Manufacturer of cement-Whether entilled to Tax Credit Certificate in
respect of special Excise duty levied under Finance Act 1965,

Words & Phrases :

'Duty of excise'-Meaning of-Section 280ZD (6) (b) Income Tax Act
1961.
E

The Tax· Credit Certificate (Excise Duty on Excess Clearance) Scheme
1965 was fra~ed by the Central Government und.er s. 280ZD of the Income
Tax Act 1961. It was made applicable to the Cement Industry in 1965. For
the year 1965-66, the excise duty for Cement levied under the Central Excise
and Sa It Act 1944 was Rs. 23.60 per ton, but under s. 80 of the Finance Act
1965 a special duty of excise equal to 25% of the total amount of e11:cise char- F
geable under the Excise Act on various articles including cement was
levied.

The appellant company on the excess Clearance of cement made during
the concerned year 1965-66 over and above the quantity cleared in the base
year (financial year 1964-65) applied for the grant of tax credit certificate to
the concerned authority. The authority however, granted the Tax Credit
Certificate only in respect of the Central Excise Duty levied under the Ex-
cise Act, taking the view that the appellant was not entitled to have any tax
credit in respect of any other excise duty levied under a djfferent enactment,
qarpelr 1 s, 80 of the Finance Act 1
576 SUPREME COURT ~EPORTS f.1985) 3 S.CR.

A The appellant company challenged in the High Court. The aforesaid
view, but it was rejected on. the ground that tax credit would not be available
to ~he appellant-company in respect of the special excise duty levied under.
~. 80 of the I inance Act, 1965 having regard to the special meaning assigned.
to the expression 'duty of excise' by clause (b) of sub-section (6) of section
280ZD

B Dismissing the appeals and Special leave Petitions to this Court.
HELD : 1., Under s. 280ZD (!) a manufacturer of the concerned
goods is entitled to be granted a tax credit certificate for an amount calculated
at the rate not exceeding 25% of "the amount of duty of excise payable by
him" on that quantum of the goods cleared by him during the relevant finan-
cial year "'hich excer.ds the quantum of goods cleared by him during.the base
c year and clause (b) of sub-section (6) of section 280ZD defines the expression
'duty of excise' for the purpose in a special manner, as "the duty of excise
leviable under the Central Excise and Salt Act 1944". [578C·E]

2. Sub clause (3) & (4) of s. 80 of the Finance Act, 1965 refer to the
procedural aspect such as the quantification and collection of duty. Simply
because the quantification and c0Jlec1ion of special duty under the Finance Act
D · is to be done in the manner indicated under the Excise Act, such duty does
not become Ieviable that is chargeable under the Excise Act. [578G-HJ
Se,f/iasayee Paper & Boards Ltd. v. Deputy Director of Inspection, Customs
and Central Excise, New Delhi, and Anr,. 114 ITR 616, over~ruled.

CIVIL APPELLATE JURISDICflO~: Civil· Appeal Nos. 1201-03
of 1972
E
From the Judgment and Od·" dt. 30.4.1971 of the High
Court of Delhi in Civil Writ No. 1217/67, 425/68 & !6/70.
WITH
Special Leave Petitions (Civil) Nos. '.'.820-23 of 1977.
arom theJ udgment and order dt. 18.1.1977 of the High Court of·
Delhi in Letters Patent Appeals Nos. 3 to 6 of 197.7.
F
Anil Devan, A.N. Haksar and D.N. Misra for the Appellant ~
in C.A. Nos. 1201-03/72. '
B.P. Maheshwari for the Petitioner; in SLPs Nos. 2820-23 l
of 1977.
G Abdul Khader, T.V.N. Chari and R.N. Poddar for the
Respondents in C.A. Nos. 1201-03/72.

The Order of the Court was delivered by
TULZAPURKAR, J. Two contentions under a Scheme called
ff "Tax Credit Certificate (Excise Duty on Excess Clearance) Scheme,
ASSOCIATED CEMENT co. v. CENTRAL EXCISE (Tulzapurkar, J.) 577

1965" framed by the Central Government under s. 280 ZD of the
Income Tax Act, 1961, which were negatived by the High Court, A
have again been pressed by the appellant company before us in these
appeals but after hearing counsel for the appellant company at some
length and after going through the relevant provision of the said
Scheme, relevant section of the Income Tax Act, 1961 ands. 80 of
the Finance Act 1965 we are satisfied that the High Court was right
B
in the view which it took on both the contentions and the appeals
deserve to be dismissed.
With a view to encourage investment in new equity shares and
to stimulate industrial output the Government of India introduced
certain special provisions in Chapter XXII-B of the Income Tax
Act, 1961 for the grant of tax credit certificate and s. 230ZD is one c
of such Provisions which provides for the grant of tax credit
ceritificate by way of incentive for increased production of goods
and the "Tax Credit Certificate (Excise Duty on Excess Clearance)
Scheme I 965" was framed by the Central Government under this
section and it was made applicable to the cement industry inl965.
D
Under the Scheme the amount of tax credit to which a manu-
facturer of cement is entitled is calculated . at a rate not exceeding
25% of the amount of the duty of excise payable by him on the
quantity of excess production during the financial year as compared
to the production in the base year ~nd the financial year 1964-65 is
defined as the base year in relation to an existing undertaking. E
For the year 1965-66. being the concerned year in the instant case
the excise duty for cement levied under the Central Excises and
Salt Act, 1944 (for short the Excise Act) was Rs. 23.60 per ton but
under s. 80 of the Finance Act I 965 a special duty of excise equal
to 25% of the total amount of excise chargeable under the Excise·
,.., Act on various articles including cement was levied. On the excess F
clearance of cement made during the concerned year over and
above the quantity cleared in the base year the appellant Company
applied for the grant of tax credit certificate to the concerned
authority under the Scheme for an amount calculated at the rate
of 25% of the entire amount of duty of excise paid by it, that is to
G
say, 25% of the basic excise duty levied under the Excise Act at
Rs. 23.60 per tonn plus the amount of special excise duty paid by
it under s. 80 of the Finance Act. The concerned authority granted
. tax credit certificate only in respect of the Central Excise Duty ·
levied under the Excise Act, taking the view that the appellant was
not entitled to have any tax credit in respect of any other excise H
duty levied under a different enactment, namely, s. 80 of the
SUPR~ME COURf REPORTS [l9g;j 3 s.c.ll.
Finance Act. The appellant challenged before the High Court
A
the aforesaid view of the authorities but the Higb Court
negatived the challenge principally on the ground that tax credit
would not be available to the appellant company in respect of
the special excise duty levied under s. 80 of the Finance Act having
regard to the special meaning assigned to the expression 'duty of
B excise' by clause (b) of sub-s(6) of s. 2~0ZD.

It is clear that under s. 280ZD (l) a manufacturer of the
concerned goods is entitled to be granted a tax credit certificate
for an amount calculated at the rate not exceeding 25% of "the
amount of duty of excise payable by him" on that quantum. of the ---..
c goods cleared by him during the relevant financial year which (
exceeds the quantum of goods cleared by him during the base year
,and clause (b) of sub-s. (6) of s. 280ZD defines the expression 'duty
of excise' for the purpose of the aforesaid provision in a special
manner and clause (b) says 'duty of excise' means the duty of
excise leviable under the Central excises and Salt Act, 1944".
D Obviously the special excise duty which was levied under s. 80 of
the Finance Act 1965 cannot be regarded as having been levied
under the Excise Act. Counsel for the appellant company,
however, urged before us that having regard to the provisions of
sub-clause (3) and (4) of s. 80 of the Finance Act the special excise
duty leviable thereunder should be regarded as duty of excise
E leviable under the Excise Act. It is not possible to accept this
contention. It is true that the expression 'leviable' is an expression
of wide import and includes stages of quantification and recovery
of the duty but in the context in which that expression has been
used in clause (b) of sub-s. (6) of s. 280 ZD it is clear that it has
F been used in the sense of chargeability of the duty. In other words
the duty of excise in respect whereof tax credit is available would
be in respect of such duty of excise as chargeable under the Excise
Act and clearly the special excise duty in respect whereof additional
tax credit is sought by the appellant company is not chargeable
under the Excise Act but chargeable under the Finance Act. Sub·
G clauses (3) & (4) of s. 80 of the Finance Act on which reliance has
been placed by counsel for the appellant company in terms refer
to the procedural aspect such as the quantification and collection
of duty and simply because the quantification and collection of the
special duty under the Finance Act is to be done in accordance
with the provisions of the Excise Act such duty does not become
H leviable, I.hat is to say, chargeable under the Excise Act. It is,
Asfod1um:I CBMENr co. v. CE~TRAL EXCISE (fulzapurkar, J.} ~79

therefore, not possible to accept the contention of the counsel A
that such special dnty of excise leviable under the Finance Act
should also he included or taken into account for the purpose of
granting tax credit certificate under the Scheme read with S. 280ZD
of the Income Tax Act 1961 .. Reference was made by counsel for
the appellant to a decision of the Madras High Court in Seshasayee
Paper & Boards Ltd. v. Deputy Director of Inspection Customs and
B
Central Excise, New Delhi and Anr.(1) where the view taken by
that Court seems to support his contention but having regard to
the special definition of the expression 'duty of excise' given in
s. 280ZD (6) (b) and the construction which we have put on the
word 'leviable, we do not approve the decision of the Madras
High Court:
c
The other contention urged by counsel for the appellant
relates to the question of limitation but on this aspect the admitted
facts are that the first application for tax credit certificate was made
by the appellant on June 24, 1966 and the same had been disposed
of in December 1966. Thereafter a supplementary application was D
made on August 26, 1967 which was obviously barred by limitation
as per para 5.2 of the Scheme. Further, even the power to condone
delay conferred on the Central Authority under para 5.3 would
not cover the appellant's case for under that provision a delay fol' a
period not exceeding 60 days could alone be condoned. Counsel,
E
however, urged that the delay in filing the supplementary
application ought to have been condoned having regard to the
trade notice that· had bee[) issued on· June 29, 1967 inasmuch as
the supplementary application could be said to have been made
because of the clarification issued under that trade notice. It is,
however, clear that by the trade notice no amendment was effected F
but merely a clarification of the existing position in law was given
and, therefore, the ·trade notice could not furnish starting point of
limitation for the supplementary application.
In our view both the contentions were rightly rejected by
the High Court and the appeals are dismissed but without
cost. G
In view of what is stated above the special leave petitions are
also dismissed.
N.V.K. Appeals & Petitfons dismissed.

(!) 114 ITR 636 H