Section 280ZD — Tax credit certificates in relation to increased production of certain goods
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: OMITTED by the Finance Act, 1990, w.e.f. 1-4-1990 (originally inserted by the Finance Act, 1965, w.e.f. 1-4-1965).
Finance Act, 2026: Makes no change. The Finance Act, 2026 does not touch any section of Chapter XXII-B; the chapter remained omitted before, and remains omitted after, the 2026 amendments.
Mechanism: Production-incentive provision — tax credit certificate at a rate not exceeding 25% of the excise duty on the quantum of goods cleared in the relevant year in excess of the base-year (1964-65) clearance; operated through the Tax Credit Certificate (Excise Duty on Excess Clearance) Scheme, 1965.
Litigation profile: The most litigated computational section of the chapter; the leading authority is a detailed High Court construction of 'class of goods' and the unit of computation.
A. COMMENTARY
1. The increased-production incentive
Section 280ZD rewarded growth in output of excisable goods. A person who manufactured or produced goods was entitled to a tax credit certificate for an amount calculated, at a rate fixed by the Scheme not exceeding 25%, on the excise duty referable to the quantum of goods cleared during the relevant financial year in excess of the quantum cleared during the 'base year' (the financial year 1964-65, or, for an undertaking not then in production, the first year of production). The benefit was available for the financial years 1965-66 to 1969-70 and was operated through the Tax Credit Certificate (Excise Duty on Excess Clearance) Scheme, 1965, framed under ss. 280ZD and 280ZE.
2. The two computational battlegrounds
Because the certificate turned on a year-on-year comparison of 'quantum of goods cleared', two questions of construction dominated the litigation. First, what is the unit 'goods' — the broad excise tariff entry (e.g., 'paper, all sorts') or each distinct commercial variety within it? Second, where the same goods are made in several factories of one assessee, is the excess computed factory-by-factory or on the aggregate of all factories? The Calcutta High Court in Titaghur Paper Mills answered both: 'goods' is read class-wise (each marketable variety is a separate class), but for any one class the excess is worked out on the assessee's aggregate clearances across all its factories making that class. The reasoning rests on the Central Excises and Salt Act, 1944 (and Union of India v. Delhi Cloth & General Mills on what becomes 'goods') and on the Scheme's own Forms A/B/C and cl. 5 proviso.
3. Interface with excise rebate schemes
Because the incentive was measured by reference to excise duty on excess clearance, s. 280ZD claims frequently moved in the same orbit as excise rebate notifications for excess/incremental production (for example, in the sugar sector). The Someshwar Sahakari Sakhar Karkhana litigation illustrates the overlap, the incentive and the excise rebate both rewarding production above a base. The practitioner must keep the income-tax certificate (s. 280ZD) and the excise rebate distinct, even though they are computed on a common 'excess clearance' base.
4. Residual life
The benefit window closed in 1969-70 and the section was omitted in 1990; only the question of survival of accrued certificates/claims remains, governed by the omission-effect jurisprudence.
Finance Act, 2026 — position
Chapter XXII-B is wholly omitted and the Finance Act, 2026 leaves it untouched. The references to 'section 280...' in the Finance Act, 2026 relate to Chapter XXII (Offences and Prosecutions) — e.g. ss. 276B-276D, 277, 278, 280 — and to the corresponding provisions of the Income-tax Act, 2025; they have no bearing on the tax-credit-certificate sections 280Y-280ZE. No revival, re-enactment or saving of this chapter is proposed.
B. STATUTORY TEXT (verbatim from the bare Act)
The section stands omitted. The current bare Act (as amended up to the Finance Act, 2025) prints only the side-heading and the editorial omission note reproduced below; the original 1965-1990 text is not carried in the bare Act. Reproduced verbatim:
Tax credit certificates in relation to increased production of certain goods.
280ZD. [Omitted by the Finance Act, 1990, w.e.f. 1-4-1990.]
Chapter-level editorial note (verbatim):
[Chapter XXII-B, consisting of sections 280Y, 280Z, 280ZA, 280ZB, 280ZC, 280ZD and 280ZE, omitted by the Finance Act, 1990, w.e.f. 1-4-1990. No tax credit certificate granted under section 280Z or section 280ZC shall be produced before the Assessing Officer after the 31st day of March, 1991 for the purposes of sub-section (6) of section 280Z or, as the case may be, sub-section (4) of section 280ZC. Earlier Chapter XXII-B was inserted by the Finance Act, 1965, w.e.f. 1-4-1965.]
C. AUTHORITIES
Anchored by a detailed High Court construction of the section and its Scheme, read with the excise-rebate interface and the omission cluster.
Cluster — Construction of s. 280ZD: ‘class of goods’ and the unit of computation
Titaghur Paper Mills Co. Ltd. v. Union of India (Calcutta High Court, 6 June 1973)
Facts: A paper manufacturer with three mills (West Bengal and Orissa) making 32 varieties of paper claimed the certificate variety-wise and factory-wise; the authority restricted the claim by netting an overall figure across all units.
Held — 'goods' is class-wise: Each distinct marketable variety/quality of paper is a separate 'class of goods'; the certificate is not computed by lumping all varieties together, since each comes to the market as a distinct article (applying Union of India v. Delhi Cloth & General Mills, AIR 1963 SC 791, on what is 'goods').
Held — quantum is assessee-wise: For any one class of goods made in more than one factory of the assessee, the relevant-year excess over the base year is computed on the aggregate of all such factories, not factory-by-factory — as Forms A/B/C and the cl. 5 proviso of the Scheme (Form-B declaration per factory) show.
Significance: The fullest judicial exposition of s. 280ZD and its Scheme; defines both the numerator unit ('class of goods') and the aggregation rule for 'quantum cleared'.
CIT / Union of India v. Someshwar Sahakari Sakhar Karkhana Ltd. (Bombay High Court)
Context: Sugar-cooperative litigation in the same field — incentive/rebate for excess (incremental) clearance of excisable sugar measured against a base period.
Use: Illustrates the interface between the s. 280ZD increased-production certificate and the parallel central-excise rebate for excess production, and the care needed to keep the two distinct though computed on a common 'excess clearance' base. To be read with the full report; cited for the production-incentive context rather than as settling a point of income-tax law.
Cluster — Legal effect of the omission of the chapter (General Clauses Act)
Because every section of Chapter XXII-B has been omitted, the practitioner question is no longer how the incentive worked but what survives the omission — accrued tax-credit certificates, pending claims, and pending proceedings. The governing authorities are the following, applied here as cognate authority (none arose on a tax-credit-certificate section, but each settles the principle on which any residual XXII-B claim now turns).
Section: 280Y(d) / 280ZA / 54G read with ss. 6 & 24, General Clauses Act, 1897.
Holding: The omission of s. 280ZA (and the consequential redundancy of s. 280Y(d), which only defined 'urban area' for s. 280ZA) and its re-enactment with modification as s. 54G was treated as a 'repeal' for the purposes of the General Clauses Act. The Court held that the expression 'repeal' in ss. 6 and 24 takes in an omission — even an implied repeal — so long as a provision is obliterated; accordingly the 1967 notification declaring Thane an urban area, issued under s. 280Y(d), continued to enure for s. 54G by virtue of s. 24.
Why it matters here: This is the leading modern pronouncement that directly construes Chapter XXII-B. It establishes that the dismantling of the chapter is a 'repeal', so saved rights and subordinate legislation made under the chapter do not automatically perish. It expressly disapproved the contrary reading that 'omission' is something wholly outside 'repeal'.
Read with: CIT v. Venkateswara Hatcheries (P) Ltd., (1999) 3 SCC 632 and State of Punjab v. Harnek Singh, (2002) 3 SCC 481 (both referred); and the omission/repeal debate noted below.
General Finance Co. v. ACIT, (2002) 257 ITR 338 (SC)
Section: s. 6, General Clauses Act, applied to an omitted penal provision (s. 276DD).
Holding: An 'omission' of a provision is distinct from a 'repeal'; s. 6 of the General Clauses Act, in terms, saves only the consequences of a 'repeal' and does not, of its own force, save proceedings under a provision that is merely omitted. A prosecution under the omitted s. 276DD could therefore not be launched or continued by invoking s. 6 after the omission. The Court, following Rayala Corporation and Kolhapur Canesugar, declined to treat omission as repeal for s. 6.
Why it matters here: The point of tension with Fibre Boards. For pending penal or recovery action keyed to an omitted XXII-B section, General Finance supplies the assessee's argument that nothing survives; Fibre Boards supplies the Revenue's. The two are reconciled on the footing that what is omitted-and-simultaneously-re-enacted (280ZA to 54G) is a 'repeal', whereas a bare omission with nothing put in its place (the penal context) is not saved by s. 6.
Rayala Corporation (P) Ltd. v. Director of Enforcement, (1969) 2 SCC 412 (SC)
Holding: A rule that is simply omitted (there, r. 132A of the Defence of India Rules) is not 'repealed' within s. 6 of the General Clauses Act, so proceedings cannot be commenced after the omission in the absence of an express saving.
Why it matters here: Foundational authority for the 'omission is not repeal' line relied on in General Finance and considered in Fibre Boards; bears directly on whether residual XXII-B claims/notices survive 1-4-1990.
Kolhapur Canesugar Works Ltd. v. Union of India, (2000) 2 SCC 536 (SC, Constitution Bench)
Holding: Where a rule is deleted/omitted and no contrary intention or saving appears, s. 6 of the General Clauses Act is not attracted; whether pending proceedings continue depends on the language of the repealing/omitting provision and any saving clause.
Why it matters here: Confirms that the survival of accrued XXII-B rights and pending claims must be located in the omitting Finance Acts and the transitional bar (production of 280Z/280ZC certificates barred after 31-3-1991), not in any general presumption of continuance.
State of Orissa v. M.A. Tulloch & Co., AIR 1964 SC 1284 (SC, Constitution Bench)
Holding: Repeal may be express or implied; the form is immaterial so long as the earlier law is displaced. An implied repeal is as much a 'repeal' as an express one.
Why it matters here: Relied on in Fibre Boards to hold that the omission/replacement of XXII-B provisions is a 'repeal' attracting the saving in s. 24 of the General Clauses Act.
Shree Bhagwati Steel Rolling Mills v. CCE, 2015 (326) ELT 209 (SC)
Holding: Reiterating the approach in Fibre Boards, the Court held that 'repeal' in s. 6 of the General Clauses Act covers the obliteration of a provision howsoever effected; when s. 6 speaks of repeal of 'any enactment' it includes any provision of an Act, whether repealed or omitted.
Why it matters here: The most recent Supreme Court reinforcement of the Fibre Boards view, useful where the Revenue contends that an accrued XXII-B liability or right is preserved notwithstanding omission.
CHAPTER XXII-B — TAX CREDIT CERTIFICATES (HISTORIC)
Section 280ZD — Tax credit certificates in relation to increased production of certain goods
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: OMITTED by the Finance Act, 1990, w.e.f. 1-4-1990 (originally inserted by the Finance Act, 1965, w.e.f. 1-4-1965).
Finance Act, 2026: Makes no change. The Finance Act, 2026 does not touch any section of Chapter XXII-B; the chapter remained omitted before, and remains omitted after, the 2026 amendments.
Mechanism: Production-incentive provision — tax credit certificate at a rate not exceeding 25% of the excise duty on the quantum of goods cleared in the relevant year in excess of the base-year (1964-65) clearance; operated through the Tax Credit Certificate (Excise Duty on Excess Clearance) Scheme, 1965.
Litigation profile: The most litigated computational section of the chapter; the leading authority is a detailed High Court construction of 'class of goods' and the unit of computation.
A. COMMENTARY
1. The increased-production incentive
Section 280ZD rewarded growth in output of excisable goods. A person who manufactured or produced goods was entitled to a tax credit certificate for an amount calculated, at a rate fixed by the Scheme not exceeding 25%, on the excise duty referable to the quantum of goods cleared during the relevant financial year in excess of the quantum cleared during the 'base year' (the financial year 1964-65, or, for an undertaking not then in production, the first year of production). The benefit was available for the financial years 1965-66 to 1969-70 and was operated through the Tax Credit Certificate (Excise Duty on Excess Clearance) Scheme, 1965, framed under ss. 280ZD and 280ZE.
2. The two computational battlegrounds
Because the certificate turned on a year-on-year comparison of 'quantum of goods cleared', two questions of construction dominated the litigation. First, what is the unit 'goods' — the broad excise tariff entry (e.g., 'paper, all sorts') or each distinct commercial variety within it? Second, where the same goods are made in several factories of one assessee, is the excess computed factory-by-factory or on the aggregate of all factories? The Calcutta High Court in Titaghur Paper Mills answered both: 'goods' is read class-wise (each marketable variety is a separate class), but for any one class the excess is worked out on the assessee's aggregate clearances across all its factories making that class. The reasoning rests on the Central Excises and Salt Act, 1944 (and Union of India v. Delhi Cloth & General Mills on what becomes 'goods') and on the Scheme's own Forms A/B/C and cl. 5 proviso.
3. Interface with excise rebate schemes
Because the incentive was measured by reference to excise duty on excess clearance, s. 280ZD claims frequently moved in the same orbit as excise rebate notifications for excess/incremental production (for example, in the sugar sector). The Someshwar Sahakari Sakhar Karkhana litigation illustrates the overlap, the incentive and the excise rebate both rewarding production above a base. The practitioner must keep the income-tax certificate (s. 280ZD) and the excise rebate distinct, even though they are computed on a common 'excess clearance' base.
4. Residual life
The benefit window closed in 1969-70 and the section was omitted in 1990; only the question of survival of accrued certificates/claims remains, governed by the omission-effect jurisprudence.
Finance Act, 2026 — position
Chapter XXII-B is wholly omitted and the Finance Act, 2026 leaves it untouched. The references to 'section 280...' in the Finance Act, 2026 relate to Chapter XXII (Offences and Prosecutions) — e.g. ss. 276B-276D, 277, 278, 280 — and to the corresponding provisions of the Income-tax Act, 2025; they have no bearing on the tax-credit-certificate sections 280Y-280ZE. No revival, re-enactment or saving of this chapter is proposed.
B. STATUTORY TEXT (verbatim from the bare Act)
The section stands omitted. The current bare Act (as amended up to the Finance Act, 2025) prints only the side-heading and the editorial omission note reproduced below; the original 1965-1990 text is not carried in the bare Act. Reproduced verbatim:
Tax credit certificates in relation to increased production of certain goods.
280ZD. [Omitted by the Finance Act, 1990, w.e.f. 1-4-1990.]
Chapter-level editorial note (verbatim):
[Chapter XXII-B, consisting of sections 280Y, 280Z, 280ZA, 280ZB, 280ZC, 280ZD and 280ZE, omitted by the Finance Act, 1990, w.e.f. 1-4-1990. No tax credit certificate granted under section 280Z or section 280ZC shall be produced before the Assessing Officer after the 31st day of March, 1991 for the purposes of sub-section (6) of section 280Z or, as the case may be, sub-section (4) of section 280ZC. Earlier Chapter XXII-B was inserted by the Finance Act, 1965, w.e.f. 1-4-1965.]
C. AUTHORITIES
Anchored by a detailed High Court construction of the section and its Scheme, read with the excise-rebate interface and the omission cluster.
Cluster — Construction of s. 280ZD: ‘class of goods’ and the unit of computation
Titaghur Paper Mills Co. Ltd. v. Union of India (Calcutta High Court, 6 June 1973)
Facts: A paper manufacturer with three mills (West Bengal and Orissa) making 32 varieties of paper claimed the certificate variety-wise and factory-wise; the authority restricted the claim by netting an overall figure across all units.
Held — 'goods' is class-wise: Each distinct marketable variety/quality of paper is a separate 'class of goods'; the certificate is not computed by lumping all varieties together, since each comes to the market as a distinct article (applying Union of India v. Delhi Cloth & General Mills, AIR 1963 SC 791, on what is 'goods').
Held — quantum is assessee-wise: For any one class of goods made in more than one factory of the assessee, the relevant-year excess over the base year is computed on the aggregate of all such factories, not factory-by-factory — as Forms A/B/C and the cl. 5 proviso of the Scheme (Form-B declaration per factory) show.
Significance: The fullest judicial exposition of s. 280ZD and its Scheme; defines both the numerator unit ('class of goods') and the aggregation rule for 'quantum cleared'.
CIT / Union of India v. Someshwar Sahakari Sakhar Karkhana Ltd. (Bombay High Court)
Context: Sugar-cooperative litigation in the same field — incentive/rebate for excess (incremental) clearance of excisable sugar measured against a base period.
Use: Illustrates the interface between the s. 280ZD increased-production certificate and the parallel central-excise rebate for excess production, and the care needed to keep the two distinct though computed on a common 'excess clearance' base. To be read with the full report; cited for the production-incentive context rather than as settling a point of income-tax law.
Cluster — Legal effect of the omission of the chapter (General Clauses Act)
Because every section of Chapter XXII-B has been omitted, the practitioner question is no longer how the incentive worked but what survives the omission — accrued tax-credit certificates, pending claims, and pending proceedings. The governing authorities are the following, applied here as cognate authority (none arose on a tax-credit-certificate section, but each settles the principle on which any residual XXII-B claim now turns).
Fibre Boards (P) Ltd. v. CIT, (2015) 376 ITR 596 (SC)
Section: 280Y(d) / 280ZA / 54G read with ss. 6 & 24, General Clauses Act, 1897.
Holding: The omission of s. 280ZA (and the consequential redundancy of s. 280Y(d), which only defined 'urban area' for s. 280ZA) and its re-enactment with modification as s. 54G was treated as a 'repeal' for the purposes of the General Clauses Act. The Court held that the expression 'repeal' in ss. 6 and 24 takes in an omission — even an implied repeal — so long as a provision is obliterated; accordingly the 1967 notification declaring Thane an urban area, issued under s. 280Y(d), continued to enure for s. 54G by virtue of s. 24.
Why it matters here: This is the leading modern pronouncement that directly construes Chapter XXII-B. It establishes that the dismantling of the chapter is a 'repeal', so saved rights and subordinate legislation made under the chapter do not automatically perish. It expressly disapproved the contrary reading that 'omission' is something wholly outside 'repeal'.
Read with: CIT v. Venkateswara Hatcheries (P) Ltd., (1999) 3 SCC 632 and State of Punjab v. Harnek Singh, (2002) 3 SCC 481 (both referred); and the omission/repeal debate noted below.
General Finance Co. v. ACIT, (2002) 257 ITR 338 (SC)
Section: s. 6, General Clauses Act, applied to an omitted penal provision (s. 276DD).
Holding: An 'omission' of a provision is distinct from a 'repeal'; s. 6 of the General Clauses Act, in terms, saves only the consequences of a 'repeal' and does not, of its own force, save proceedings under a provision that is merely omitted. A prosecution under the omitted s. 276DD could therefore not be launched or continued by invoking s. 6 after the omission. The Court, following Rayala Corporation and Kolhapur Canesugar, declined to treat omission as repeal for s. 6.
Why it matters here: The point of tension with Fibre Boards. For pending penal or recovery action keyed to an omitted XXII-B section, General Finance supplies the assessee's argument that nothing survives; Fibre Boards supplies the Revenue's. The two are reconciled on the footing that what is omitted-and-simultaneously-re-enacted (280ZA to 54G) is a 'repeal', whereas a bare omission with nothing put in its place (the penal context) is not saved by s. 6.
Rayala Corporation (P) Ltd. v. Director of Enforcement, (1969) 2 SCC 412 (SC)
Holding: A rule that is simply omitted (there, r. 132A of the Defence of India Rules) is not 'repealed' within s. 6 of the General Clauses Act, so proceedings cannot be commenced after the omission in the absence of an express saving.
Why it matters here: Foundational authority for the 'omission is not repeal' line relied on in General Finance and considered in Fibre Boards; bears directly on whether residual XXII-B claims/notices survive 1-4-1990.
Kolhapur Canesugar Works Ltd. v. Union of India, (2000) 2 SCC 536 (SC, Constitution Bench)
Holding: Where a rule is deleted/omitted and no contrary intention or saving appears, s. 6 of the General Clauses Act is not attracted; whether pending proceedings continue depends on the language of the repealing/omitting provision and any saving clause.
Why it matters here: Confirms that the survival of accrued XXII-B rights and pending claims must be located in the omitting Finance Acts and the transitional bar (production of 280Z/280ZC certificates barred after 31-3-1991), not in any general presumption of continuance.
State of Orissa v. M.A. Tulloch & Co., AIR 1964 SC 1284 (SC, Constitution Bench)
Holding: Repeal may be express or implied; the form is immaterial so long as the earlier law is displaced. An implied repeal is as much a 'repeal' as an express one.
Why it matters here: Relied on in Fibre Boards to hold that the omission/replacement of XXII-B provisions is a 'repeal' attracting the saving in s. 24 of the General Clauses Act.
Shree Bhagwati Steel Rolling Mills v. CCE, 2015 (326) ELT 209 (SC)
Holding: Reiterating the approach in Fibre Boards, the Court held that 'repeal' in s. 6 of the General Clauses Act covers the obliteration of a provision howsoever effected; when s. 6 speaks of repeal of 'any enactment' it includes any provision of an Act, whether repealed or omitted.
Why it matters here: The most recent Supreme Court reinforcement of the Fibre Boards view, useful where the Revenue contends that an accrued XXII-B liability or right is preserved notwithstanding omission.