Exempt duty is not "payable" for tax credit, while commercial identity governs classification of goods for statutory benefits.

Duty exempted under a valid exemption notification is not duty "payable" for purposes of tax credit under Section 280ZD of the Income-tax Act, so exempt newsprint could not qualify for credit on that basis. For classification, goods must be assessed by their commercial identity when computing statutory benefits: wrapper paper could be treated as a separate variety because of its distinct thickness and market identity, but the classification of newsprint sold to newspapers and other newsprint required fresh examination. The exemption issue was therefore resolved against the assessee, while the classification issue was remitted for reconsideration.

---

---

Issues: (i) Whether excise duty exempted under a notification issued under the Central Excise Rules could still be treated as "payable" for the purpose of calculating tax credit under Section 280ZD of the Income-tax Act, 1961; (ii) Whether newsprint manufactured by the petitioner had to be treated as one class of goods or as separate varieties for computing entitlement to the tax credit certificate.

Issue (i): Whether excise duty exempted under a notification issued under the Central Excise Rules could still be treated as "payable" for the purpose of calculating tax credit under Section 280ZD of the Income-tax Act, 1961.

Analysis: The entitlement under Section 280ZD depends on the duty of excise "payable" on the excess clearances in the relevant financial year. Where a notification validly exempts the goods from duty, the duty is not merely unpaid but ceases to be leviable to the extent of the exemption. The statutory scheme must therefore be read with the power of exemption under the Central Excises and Salt Act and the rules made thereunder.

Conclusion: The exempted newsprint could not be treated as goods on which excise duty was payable, and the petitioner was not entitled to tax credit on that basis.

Issue (ii): Whether newsprint manufactured by the petitioner had to be treated as one class of goods or as separate varieties for computing entitlement to the tax credit certificate.

Analysis: For the purpose of tax credit, different commercial varieties of goods may be treated separately if they are understood in the market as distinct goods. Wrapper paper was held to be a different variety because of its admitted thickness and separate commercial identity. However, newsprint sold to newspapers and newsprint sold to others had not been examined on the correct footing of commercial identity, and the mere fact that one category enjoyed exemption did not by itself establish a different class of goods. The appeal required reconsideration on that aspect.

Conclusion: Wrapper paper could be treated separately, but the classification of newsprint sold to newspapers and other newsprint required fresh examination; the matter was therefore remitted for reconsideration.

Final Conclusion: The exemption issue was decided against the petitioner, while the classification issue was left for fresh determination, resulting in partial relief and a remand for reconsideration of the appeal.

Ratio Decidendi: Duty exempted under a valid exemption notification is not duty "payable" for tax credit purposes, and goods must be classified according to their commercial identity when computing statutory benefits.

---