Doddakale Gowda, J.
1. The question that arises for consideration is whether the Central Govt. while framing a scheme to give effect to Chap. XXII-B of the I.T. Act is competent to prescribe the time-limit to claim the benefit of this chapter.
2. The object of Chap. XXII-B inserted in the I.T. Act with effect from April 1, 1965, by s. 22 of the Finance Act, 1965, in a nutshell, is to grant tax credit certificate to certain assessees. Section 280ZE enables the Central Govt. by notification in the Official Gazette to frame one or more scheme or schemes called 'tax credit certificates scheme or schemes' to give effect to this chapter. Section 280Z provides for grant of tax credit certificates to this certain equity shareholders at the rates specified in sub-s. (3). Section 280ZA deals with grant of tax credit certificates in case of shifting of an industrial undertaking, with the prior approval of the Board, from an urban area to an area not being the area in which such undertaking is situate, at the rates computed in succeeding sub-sections. Section 280ZB deals with grant of tax credit certificate to companies engaged in the manufacture or production of the articles mentioned in the First Schedule to the Industries (Development and Regulation) Act, 1951, in respect of its profits and gains attributable to such manufacture or production subject to such terms and conditions stipulated there in. Section 280ZC deals with grant of tax credit certificates to persons who export any goods or merchandise out of India after the 28th day of February, 1965, and receives the sale proceeds thereof in Indian in accordance with the Foreign Exchange Regulation Act and the Rules made thereunder for an amount calculated at the rate not exceeding 15 per cent. on the sale proceeds.
3. The relevant sections for the purpose of this case is s. 280ZD which deals with grant of tax credit certificate in relation to the increased production of certain goods. A person who manufactures or produces any goods in excess of the quantum of goods cleared by him during the base year is entitled to grant of tax credit certificate for an amount calculated at a rate not exceeding 25 per cent. of the amount of the duty of excise payable by him on the goods cleared by him during the relevant financial year. For this purpose the financial year commencing on September 1, 1964, is taken as the base year. This benefit is available for the financial years 1965-66 to 1969-70. The ITO on production of tax credit certificate is required to adjust the amount mentioned in the certificate against any liability under the I.T. Act, if any, existing on the date on which the certificate is produced and in case the amount mentioned in such certificate exceed the liability or there is no liability at all, the excess or whole of such amount, as the case may be, has to be refunded to such persons.
4. By virtue of this power the Central Govt. has framed a scheme known as 'Tax Credit Certificate (Excise Duty on Excess Clearance) Scheme, 1965'. (The Law and Practice of Income-tax by Kanga and Palkhivala, 7th Edn., Vol. II, p. 753).
5. Paragraph 3 of the Scheme provides for grant of tax credit certificate in respect of any class of goods specified in col. (2) of Sch. I to this Scheme and falling under the item specified in the corresponding entry in col. (3) thereof for the amount calculated at the rate specified in the corresponding entry in col. (4) of the said Schedule.
6. Under para 5. a person eligible for the grant of a certificate is required to make an application to the Central authority in Form A in respect of each financial year for which he is so eligible and such application has to be accompained by a declaration in Form B of the goods cleared or deemed to have been cleared in the base year, and the goods cleared in the relevant financial year, verified by the factory officer and countersigned by the circle officer. An application in Form A has to be presented to the Central authority on or before 30th June, following the last day of that financial year. Delay not exceeding 60 days in presenting the application is condonable.
7. The petitioner as a manufacturer of paper (item No. 3 of Sch. I of the Scheme), submitted applications on June 7, 1967, and June 28, 1968, for the financial years 1966-67 and 1967-68, requesting grant of tax credit certificates in respect of excess clearances. These applications were presented before the Inspector of Central Excise for onward transmission to the Director of Inspection and Audit, Customs and Central Excise, New Delhi, after verification and countersigned by the circle officer. On June 10, 1967, the Excise Superintendent who is none other than the factory officer returned the applications for rectification of certain errors and to file a correct statement so as to enable him to certify and transmit the same to the competent authority for necessary sanction. Consideration correspondence has taken place between the petitioner and the factory officer, regarding furnishing of particulars and verification in view of the varying rates of excise duty for different varieties of paper, for the purpose of figuration of 'excess clearance' up to the end of the financial year. Without the verification and the counter-signature, Forms A and B could not have been presented before the competent authority. The delayed verification for the financial year 1966-67 resulted in further delay in filing an application for the succeeding year also. After the process was completed applications were re-presented on July 10, 1968, and July 20, 1968, for the years 1966-67 and 1967-68, respectively. Since the applications reached the first respondent after the expiry of the period prescribed in sub-para (3) of para. 5 of the Scheme, grant of tax credit certificate has been denied.
8. Sub-paragraph (3) of para 5 which provides for condonation of delay caused in presenting an application not exceeding 60 days and consequential prohibition from entertaining an application thereafter is challenged as ultra vires.
9. So the question that requires consideration is whether the prescription of a period of limitation is a substantial right or a procedural matter which can be provided in the Scheme.
10. The contention of Sri Sarangan, learned counsel for the petitioner, is that the benefit conferred under the Act has been denied by the executive by prescribing a period of limitation for making an application to avail of the benefit of this chapter. It is submitted that the benefit conferred by the Legislature has been denuded by the executive. In other words, his contention is that the executive while framing a scheme has transgressed beyond the provisions of the Act.
11. For a proper appreciation of the rival contention, it is necessary to extract sub-s. (2) of s. 280ZE which provide for the details of the scheme to be framed :
'280ZE. Tax credit certificate scheme. -......
(2) A scheme framed under sub-section (1) may provide for -
(a) the form and manner in which, and the authority to which, applications for the grant of tax credit certificates shall be made;
(b) the form in which, and the intervals at which, and the authority by which, such certificates shall be issued;
(c) 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;
(d) the determination of the rights and obligations of a person to whom such certificate has been granted and the circumstance 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;
(e) the determination of the rights and obligations of persons who jointly subscribe to an eligible issue of capital;
(f) the determination of the rights and obligations of persons who subscribe to an eligible issue of capital, on behalf, or for the benefit, of any other person;
(g) 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;
(h) the goods or merchandise and the rate or rates for the purposes of section 280ZC and section 280ZD and the destination of the export of such goods or merchandise for the purposes of section 280ZC;
(i) any other matter which may be necessary or proper for the effective implementation of the provisions of this Chapter or the scheme.'
12. Section 280ZE except enabling the Central Govt. to frame a scheme of incentives for increased productivity in specified goods nowhere does it empower the Central Govt. to prescribe the period of limitation for claiming the benefit of this chapter. Any quantum of goods produced in any year which exceeds the quantum of goods for the base year commencing from September 1, 1964, is eligible for the concession which is based upon customs duty imposed on the excise clearance. The goods in respect of which tax credit certificate can be granted and the rate at which the amount of such certificate has to be calculated are all matters of detail to be specified in the scheme. It is competent to the Central Govt. to prescribe different rates in respect of different goods. The Central Govt. should have regard for the need for stimulating the industrial output, the need for financial assistance to an industrial undertaking engaged in manufacture and other relevant factors. Clause (i) of sub-s. of s. 280ZE, relied on by the counsel for the Revenue, will not confer a power to prescribe the period of limitation as so to deprive the right to avail of the benefit conferred by this Chapter. Incidentally, it is necessary to mention that no time limit is prescribed in the Tax Credit Certificate (Corporation Tax) Scheme of 1966 and the Tax Credit Certificate (Equity Shares) Scheme of 1965. In the Tax Credit Certificate (Exports) Scheme, 1965, though a time-limit is prescribed, power is given to condone the delay without any restriction. The sub-section only mentioned the contents of the scheme - such as, to provide for the form and the manner in which the application for grant of tax credit certificate has to be filed and for verification of the particulars furnished by the claimant by the factory officer and the circle and the circle officer. It is only on such verification and being satisfied about the particulars furnished by the petitioner, application is forwarded to the Central authority for the purpose of grant of tax credit certificate. Delayed verification of particulars by the prescribed officers cannot deprive the right of the petitioner to claim the grant of of tax credit certificate.
13. Sri Sarangan in support of his contention relied on two decisions of the Supreme Court, (1) STO v. K. I. Abraham : [1967]3SCR518 , (2) Bharat Barrel & Drum . v. Employees' State Insurance Corporation : (1971)IILLJ647SC . In the former case the Supreme Court while examining the validity of r. 6 of the Central Sales Tax (Kerala) Rules, 1957, framed by virtue of power conferred under sub-ss. (3) and (4) of s. 13 of the Central Sales Tax Act which had prescribed the period of limitation for filing the declaration in Form C to claim the entire turnover or part of the turnover as inter-State transaction, has stated thus (p. 372 of 20 STC :
'The decision of the question at issue therefore depends on the construction of the phrase 'in the prescribed manner' in section 8(4) read with section 13(4)(e) of the Act. In our opinion, the phrase 'in the prescribed manner' occurring in section 8(4) of the Act only confers power on the rule-making authority to prescribe a rule stating what particulars are to be mentioned in the prescribed form, the nature and value of the goods sold, the parties to whom they are sold, and to which authority the form is to be furnished. But the phrase 'in the prescribed manner' in section 8(4) does take in the time-eliement. In other words, the section does not authorise the rule-making authority to prescribe a time-limit within which the declaration is to be filed by the registered dealer.'
14. In Bharat Barrel & Drum Manufacturing Co.'s case [1971] 40 FJR 339 (SC) the validity of the rule framed by the State of Bombay u/s. 96(1)(b) of the Employees' State Insurance Act, 1948, prescribing the period of limitation for claiming contribution was involved. The answer to this question would involve the determination of the further question whether the law relating to limitation is a procedural or substantive or partly procedural or party substantive.
15. At p. 346 it is stated thus :
'It does not, therefore, appear that the statement that substantive law determines rights and procedural laws deal with remedies is wholly valid, for neither the entire law of remedies belongs to procedure nor are rights merely confined to substantive law, because, as already noticed, rights are hidden even'in the interstices of procedure'. There is therefore no clear-cut division between the two.'
16. On an examination of the scheme of the Act it is stated thus (headnote of AIR) :
'The omissions to provide a period of limitation under sections 68 and 75 while providing for a limitation of claim by an employee for the payment of any benefit under the regulations, shows clearly that the legislature did not intend to fetter the claims under section 75(2)(d). Where the legislature clearly intends to provide specifically the period of limitation in respect of claims arising thereunder it cannot be considered to have left such matters in respect of claims under some similar provisions to be provided for by the rules to be made by Government under its delegated powered to prescribe the procedure to be followed in proceedings before such court.What is sought to be conferred under section 96(1)(b) is the power to make rules for regulating the procedure before the insurance court after an application has been filed and when it is seized of the matter. That apart, rule 17 bars the claim itself and extinguishes the right which is not within the pale of procedure. There is no gainsaying the fact that under rule 17 if an employee does not file an application before the insurance court within 12 months after the claim has become due or he is unable to satisfy the insurance court that there was a reasonable excuse for him in not doing so, his right to receive payment of any benefit conferred by the Act is lost. Such a provisions affects substantive rights and must therefore be dealt with by the legislature itself and is not to be inferred from the rule making power conferred by regulating the procedure unless that is specifically provided for.'
17. As stated by the Supreme Court there is no test to demarcate the bounds where the procedural law ends and substantial law begins.
18. A reading of the section in the light of the aforesaid passages would clearly establish that the prescription of a period of limitation was never intended to be delegated to the Central Govt. Parliament has prescribed the period of limitation wherever it intended limitation to operate. A scheme can cover such matters as are specified in the section and such other ancillary or incidental matters thereto. Considering the scope and object with which such incentives are provided to assessees the right to claim grant of tax credit certificate on fulfillment of certain conditions mentioned there in cannot be termed as procedural but a substantive right. Right to claim adjustment of tax liability to the extent of the amount mentioned in the tax credit certificate and to claim refund in case the amount exceeds the tax liability or there is no liability, is a substantive right. Sub-paragraph (3) of para. 5 of the Scheme extinguishes the right conferred under this chapter which is not within the pale of procedure. This clause in the scheme instead of furthering the implementation of its object hinders its implementation. This clause will defeat the policy of the Legislature and serves no purpose. In the guise of framing a scheme, a substantive right conferred under this Act cannot be curtailed or nullified by prescribing the time-limit. When Parliament has not prescribed any period of limitation for claiming the benefits under this chapter it is not open to the Central Govt. to transgress beyond its power to prescribe the time-limit in order to avail of the benefit of the scheme. Hence, sub-para (3) of para. 5 which empowers the authority to condone the delay not exceeding 60 days and consequential prohibition of entertaining any application filed thereafter is ultra vires and, therefore, viod.
19. In the result, this writ petition is allowed. Rule made absolute. Sub-paragraph (3) of para. 5 of the Tax Credit Certificate (Excise Duty on Excess Clearance) Scheme, 1965, is hereby quashed. Conseqently, orders dated December 4, 1976, and December 6, 1976, marked as annexes. C and D, respectively, made in appeal by the Director of Inspection and Audit (Customs and Central Excise) are hereby quashed and the respondents are directed to dispose of the claim of the petitioner for grant of tax credit certificate within three months. No costs.