ORDER G.P. Singh, - 1. The petitioner is a Government Company. The petitioner manufactures new prints and wrapper. The wrapper manufactured by the petitioner is used for wrapping the newsprint manufactured by it. The production of newsprint and wrapper in the financial year 1969-70 exceeded the production in 1964-65. The petitioner applied for tax credit certificate under section 280 ZD of the Income Tax Act, 1961, to the Central Authority constituted under the Tax Credit Certificate (Excise Duty on Excess Clearance) Scheme. 1965 which is a scheme framed under section 280 ZE by the Central Government. The Central Authority by order dated 24th May 1971 granted a tax credit certificate for Rs. 5,774/- only. The petitioner then filed an appeal under Paragraph 9 of the Scheme to the Appellate Authority, i.e. the Director of Inspection, Customs and Central Excise, New Delhi. By order dated 17th May 1978 the appeal was dismissed by the Director. By this petition under Article 226 of the Constitution the petitioner challenges these orders of the Central Authority and the Director. 2. Section 280ZD of the Act provides for grant of a tax credit certificate in relation to increased production of certain goods. The certificates can be granted for the financial year 1965-66 to 1969-70. The base year for determining increased production is the financial year 1964-65. If in any financial year between 1965-66 and 1969-70 a person manufactures or produces any goods he can be granted a tax credit certificate for an amount calculated at a rate not exceeding twenty five per cent of the amount of the duty of excise payable by him on that quantum of the goods cleared by him which exceeds the quantum of the goods cleared by him during the base year. The goods in respect of which a tax credit certificate can be granted and the rate at which the amount of such certificate is to be calculated are specified in the Scheme by the Central Government. 3. The goods in respect of which a tax credit certificate can be granted and the rate at which the amount of such certificate is to be calculated are specified in the Scheme by the Central Government. 3. Section 280 ZD (i) reads as follows: "280 ZD -(1) Subject to the provisions of this section, a person, who during any financial year commencing on the 1st day of April, 1965, or any subsequent financial year (not being a year commencing on the Ist day of April, 1970, or any financial year thereafter) manufactures or produces any goods, shall be granted a tax credit certificate for an amount calculated at a rate not exceeding twenty-five per cent of the amount of the duty of excise payable by him on that quantum of the goods cleared by him during the relevant financial year which exceeds the quanium of the goods cleared by him during the base year, whether the clearance in either case is for home consumption or export." 4. Paragraph 3 of the Scheme provides that subject to the provisions of the Scheme, a certificate shall be granted in respect of any class of goods specified in column (2) of Schedule I to the Scheme and falling under the item specified in the corresponding entry in column (3) thereof for the amount calculated at the rate specified in the corresponding entry in column (4) of the said Schedule, The Schedule in so far as relevant reads as follows: . SCHEDULE I SI. Class of good Item No. in Rate, being the percentage of duty the First of excise payable on the quantum Schedule of goods cleared in the relevant to the Act financial year in excess of the quantum cleared or deemed to have been cleared in the base year, 1 2 3 4 (3) Paper, all sorts, other than 1 2 3 4 (i) newsprint, and 17% 15% (ii) boards including paste-board, mill board, straw board, pulp board, card and coated board. Explanation- Newsprint referred to above shall be deemed to be paper containing mechanical wood pulp amounting to not less than fifty per cent of its fibre content. (4) Newsprint referred to in SI. No. (3), 17% 25% The Act referred to in column (3) of the Schedule is the Central Excises and Salt Act; 1944. 5. Explanation- Newsprint referred to above shall be deemed to be paper containing mechanical wood pulp amounting to not less than fifty per cent of its fibre content. (4) Newsprint referred to in SI. No. (3), 17% 25% The Act referred to in column (3) of the Schedule is the Central Excises and Salt Act; 1944. 5. Section 3 of the Central Excises and Salt Act provides for the levy and collection of excise duty on all excisable goods which are produced or manufactured in India, at the rates set forth in the First schedule to the Act. Section 37 empowers the Central Government to make rules for carrying into effect the purposes of the Act. Section 37 (2) (xvii), in particular, empowers the Central Government to "exempt any goods from the whole or any part of the duty imposed by the Act." Item No. 17 in the schedule to the Act deals with paper of all sorts. Clause (3) of this item refers to "printing and writing paper, packing and wrapping paper, strawboard and pulp-board, including grey board, corrugated board, duplex and triplex boards, other sorts." Rule 8 of the rules framed under the Act authorises the Central Government, by notification in the official Gazette, to exempt, subject to such conditions as may be specitied in the notification, any excisable goods from the whole or any part of duty leviable on such goods. By notification dated 21st July 1967 the Central Government exempted "all paper containing mechanical wood pulp amount to not less than 50 per cent of the fibrecotent, falling under Item No. 17 (3) of the First Schedule" from the whole of duty of excise leviable thereon. There is a proviso to this exemption in the notification which has the effect of limiting the exemption in those cases where it is proved to the satisfaction of the proper officer, as defined in the rules, that such paper is intended for use in the printing of newspapers, text-books or other books of general interest. 6. The Central Authority in disposing of the petitioner's application divided the newsprint cleared by the petitioner in the base year and in the financial year 1969-70 under three categories; (i) newsprint for newspapers; (iii) newsprint used as printing and writing papers; and (iii) newsprint used as wrapper. 6. The Central Authority in disposing of the petitioner's application divided the newsprint cleared by the petitioner in the base year and in the financial year 1969-70 under three categories; (i) newsprint for newspapers; (iii) newsprint used as printing and writing papers; and (iii) newsprint used as wrapper. The excise duty payable on the first category is wholly exempt under the Central Governments notification dated 21st July 1967. Although it was found by the Central Authority 'that there was excess clearance of this category of newsprint and proporationate increase in production, yet the petitioner was denied any tax credit certificate as there was no duty of excise payable by it at all in respect of this category. As regards the second category, the Central Authority noticed a shortfall of clearance in the relevant financial year as against the clearance in the base year. This category of newsprint is not exempt from duty under the notification mentioned above, but the Central Authority did not allow any tax credit on the ground that this was a separate variety of newsprint and as there was no increase in clearance the petitioner was not entitled to any tax credit. As regards the third category, the Central Authority found that there was increase in clearance and it allowed tax credit in respect of this category at 25 per cent of the excise duty paid on the excess clearance. As earlier stated, the view taken by the Central Authority was upheld in appeal by the Director. 7. The first contention raised by the learned counsel for the petitioner is that the Central Authority and the Director were both in error in taking notice of the exemption of duty in respect of newsprint intended for use in printing of newspapers. The argument of the learned counsel is that the words "the amount of the duty of excise payable" as used in section 280 ZD (1) denote the duty which is leviable or Imposable under section 3 of the Central Excise and Salt Act read with the Schedule and that it is immaterial that the duty on the goods is not paid because of exemption granted under the notification issued by the Central Government under rule I) of the rules framed under the Act Learned counsel makes a distinction between "the amount of the duty of excise payable" and "the amount of the duty of excise paid. On this basis, it is submitted by the learned counsel that tax credit certificate should have also been granted in respect of that category of newsprint which was sold to newspapers. 8. A person is entitled to a tax credit certificate under section 280-ZD of the Income-tax Act “for an amount calculated at a rate not exceeding 25 per cent of the amount of duty of excise payable by him on that quantity of goods cleared by him during the relevant financial year which exceeds the quantum of the goods cleared by him during the base year." A reading of this provision makes it clear that the first condition for entitlement a tax credit certificate is that the clearance of the goods manufactured or produced should have exceeded in the relevant financial year as compared to the clearance in the base year. The second condition is that the duty of excise must be payable on the goods cleared during the relevant financial year for the tax credit certificate is linked with the amount of the duty of excise payable on the excess quantity of the goods cleared in the relevant financial year. If the excise duty on the goods is exempt in the relevant financial year, it would be difficult to hold that any duty of excise is payable. We are unable to agree with the argument of the learned counsel for the petitioner that for determining whether any duty of excise is payable on the goods we have only to see section 3 of the Central Excise and Sail Act and the Schedule and we have to omit from consideration any exemption granted by the Central Government under rule 8. Section 3 and the Schedule cannot be read in isolation; they have to be read along with section 37 (2) (xvii) which empowers the Central Government to exempt any goods from the whole or any part of duty imposed by the Act. Rule 8 of the rules, as already noticed, has been made in exercise of the rule-making powers conferred by section 37 (2) (XVII). To the extent to which exemption is granted by a notification issued under rule 8, the duty ceases to be leviable or imposable under section 3 read with the Schedule, and to that extent it cannot also be said to be assessable or payable. To the extent to which exemption is granted by a notification issued under rule 8, the duty ceases to be leviable or imposable under section 3 read with the Schedule, and to that extent it cannot also be said to be assessable or payable. The duty payable is one which can be assessed and for which a demand can be made [See Commissioner of Income Tax, West Bengal-I v. Vegetable Products Ltd. 88 ITR 192 (SC). The duty which is exempt cannot be assessed and is payable. The argument that the amount of tile duty which is exempt is payable although It has not to be paid is wholly unsubstantial. The amount of the duty which is payable has to be paid. To the extent the duty is exempt it is neither assessable nor payable and so has not to be paid. The view taken by us was also taken by the Madras High Court in Seshasavee Paper and Boards Ltd. v. Dy. Director of Inspection (1978) 114 ITR 616. We are of opinion that the Central Authority and the Director were fight in holding that no excise duty was payable in the financial year on the newsprint sold by the petitioner to the newspapers. 9. The second contention raised by the learned counsel for the petitioner is that the Central Authority and the Director should not have divided the newsprint manufactured by the petitioner into three categories depending upon its use. It is submitted by the learned counsel that the newsprint manufactured by the petitioner whether used for newspaper or as wrapper or for other purposes was of the same variety and that tax credit certificate should have been granted treating the entire production of newsprint as of one variety of paper. 10. The words "any goods" or "such goods" as used in section 280-ZD have not been defined in the section or in the Scheme. It, however, stands to reason that different varieties of goods have to be considered separately for the purpose of grant or tax credit certificate. 10. The words "any goods" or "such goods" as used in section 280-ZD have not been defined in the section or in the Scheme. It, however, stands to reason that different varieties of goods have to be considered separately for the purpose of grant or tax credit certificate. For example, item No. 17 (3) in the Schedule to the Central Excises and Salt Act clubs together printing and writing paper, packing and wrapping paper, straw-board and pulp-board including grey-board corrugated boards, duplex and triplex boards, other sorts for purposes of duty, but the different kinds of paper mentioned in this item have to be treated separately for finding out the amount of tax credit certificate to which a person is entitled under section 280-ZD. The test to find out whether the goods manufactured or produced by a person fall under different categories and have to be treated separately i.e. as different kmds of goods, would be to see whether in commercial sense they are understood as different goods. In this connection, we may refer to the decision of the Calcutta High Court in Union of India v. Titagarh Paper Mills Co. (1978) 112 ITR 100 P. 108 where it is observed that the term "good." can be understood to mean an article which is ordinarily bought and sold in the market and that different varieties of paper manufactured or produced by a paper Mill cannot be considered to be one and the same goods, for they are bought and sold as distinct verities in the market. The petitioner is a manufacturer of newsprint and wrapper used for wrapping the newsprint. This is so stated in paragraph 2 of the petition During the course of argument, learned counsel for the petitioner frankly admitted that the paper manufactured to be used as wrapper is slightly thicker than the paper to be used as newsprint. From the very fact that the petitioner has itself referred to the paper manufactured for use as wrapper separately, it is clear to us that the wrapper is a different variety of paper from other newsprint. Learned counsel has drawn our attention to the explanation contained in Schedule I to the Scheme which provides that newsprint shall be deemed to be paper containing mechanical wood-pulp amounting to not less than 50 per cent of its fibre content. Learned counsel has drawn our attention to the explanation contained in Schedule I to the Scheme which provides that newsprint shall be deemed to be paper containing mechanical wood-pulp amounting to not less than 50 per cent of its fibre content. Learned counsel has further referred to the fact that newsprint of all varieties is clubbed at serial No. (4) in the Schedule to the Scheme and the rate applicable to it is the uniform rate of 25 per cent. From this the learned counsel argues that it is clear that all paper containing mechanical wood-pulp amounting to not less than 50 per cent of its fibre content must be treated to be one variety of goods coming under the description of newsprint and it is immaterial that the paper manufactured as wrapper is otherwise of a different variety and differs in thickness from other newsprint paper. We are unable to agree that the explanation contained in-schedule I which defines newsprint, is decisive of the question that all paper falling within the definition must be deemed to be of the same category or variety. The purpose of the Explanation is to define the newsprint for purposes of rate of tax credit and to bring all papers containing mechanical wood-pulp amounting to not less than 50 per cent of its fibre content within serial No.4 and outside serial No.3. The purpose of the Explanation is not to say that all paper containing mechanical wood-pulp amounting to not less than 50 per cent of its fibre content would be deemed to be one class of goods for purposes of calculation of duty under section 280-ZD. On the admitted position before us that the paper manufactured by the petitioner as wrapper is thicker, it has to be held that it is a paper of a different variety and the Central Authority was, therefore light in treating the wrapper separately for calculating the amount for which tax credit certificate was to be issued. There is, however, no material to find out why newsprint which was not sold to or used for newspapers was treated separately. It is true that newsprint intended for use in the printing of newspapers was exempt from duty. But from this alone, it cannot be said that newsprint which was not sold to newspapers and which did not qualify for exemption was paper of different variety. It is true that newsprint intended for use in the printing of newspapers was exempt from duty. But from this alone, it cannot be said that newsprint which was not sold to newspapers and which did not qualify for exemption was paper of different variety. The variety of paper does not change because of its use. If commercially newsprint sold to newspapers and newsprint sold to others were of the same variety, they have to be treated as one class of goods for purposes of calculating the amount of Tax Credit Certificate and they cannot be treated as different and distinct goods. Neither the Central Authority nor the Director has examined the case from this point of view. If the petitioner is correct in its submission that newsprint sold to newspapers and newsprint sold to others were of the same variety, then there would be no justification for treating them separately as was done by the Central Authority in the chart annexed to its order and they would have to be treated as one for determining increase in clearance in the relevant financial year. It is true that even then the petitioner would be entitled only to a Tax Credit Certificate for an amount calculated at 25 per cent of the amount of duty payable and the amount of duty exempt in respect of sales made to newspapers would not be taken into account in calculating the amount of Tax Credit Certi1icate. But it would then not be possible to deny Tax Credit Certificate on the ground of shortfall shown in the Central Authority's order in respect of newsprint would not be persons other than newspapers for this would not be treated as a separate category and would have to be dealt with along with category (i) i.e. newsprint sold to newspapers. As the case has not been examined from this angle, it will have to be remanded to the Director. 11. The petition is partly allowed. The impugned order of the Director is quashed and he is directed to rehear and decide the appeal in accordance with law in the light of the observations made above. There will be no order as to costs. The security amount be refunded to the petitioner.