PETITIONER:
M/S PONDS INDIA LTD.
Vs.
RESPONDENT:
COLLECTOR OF CENTRAL EXCISE,MADRAS
DATE OF JUDGMENT: 27/01/1997
BENCH:
S.P. BHARUCHA, FAIZAN UDDIN
ACT
HEADNOTE
JUDGMENT
JUDGMENT BHARUCHA. J.
These appeals challenge the correctness of a judgment and order of the Customs, Excise & Gold (Control) Appellate Tribunal. The Tribunal had before it the Revenue’s appeals against orders of the Collectors (Appeals) in the cases of a number of assesses, of which the appellants were two. The Tribunal reversed the orders of the Collectors and held that the collection of special excise duty on clearances on or after 1st March, 1988, of goods which had been manufactured prior to that date was valid.
Special excise duty is levied under the provisions of the Finance Acts. there was no levy for a long period of time of special excise duty until it was levied with effect from 1st March, 1978, under the provisions of Section 37 of the Finance Act, 1978, which read thus:
"(1) In the case of goods
chargeable with duty of excise
under the Central Excise Act as
amended from time to time, read
with any notification for the time
being in force issued by the
Central Government in relation to
the duty so chargeable there shall
be levied and collected a special
duty of excise equal to five per
cent of the amount so chargeable on
such goods.
(2) Sub-section (1) shall cease to
have effect after the 31st day of
March, 1979 except as respects
things done or omitted to be done
before such cesser ad Section 6 of
the General Clauses Act, 1897 (10
of 1897) shall apply upon such
cesser as if the said sub-section,
had then been [repealed] by a
Central Act.
(3) The special duty of excise
referred to in sub-section (1)
shall be in addition to any duties
of excise chargeable on such goods
under the Central Excise Act or any
other law for the time being in
force.
(4) The provisions of the Central
Excise Act and the rules made
thereunder, including those
relating to refunds and exemptions
from duties shall, as far as may
be, apply in relation to the levy
and collection of the special
duties of excise leviable under
this section in respect of any
goods as they apply in relation to
the levy and collection of the
duties of excise on such goods
under that Act of those rules, as
the case may be."
The judgment of this Court in the case of Collector of Central Excise, Hyderabad vs/ Vazir Sultan Tobacco Co. Ltd., 1996 (83) E.L.T. 3, dealt with a case where goods had been manufactured prior to 1st March, 1978, and cleared thereafter. The Judgment, in paragraphs 9, 10 and 15, reads thus:
"9. Rules 9 says that "no excisable
goods" should be removed from the
place of their manufacture until
excise duty leviable thereon has
been paid "at such place and in
such manner" as is prescribed in
these Rules. It is relevant to
notice that the Rule specifically
uses the expression "excisable
goods" - and not "goods" - and for
good reason. The expression
"excisable goods" has been defined
in clause (d) of Section 2 to mean
"goods specified in the First
Schedule as being subject to a duty
of excise and includes salt." The
goods removed must be excisable
goods first - which means that the
goods were subject to the levy of
duty before their removal. Rule 9A
is to the same effect. Sub-rules
(1) to (3A) of Rule 9 A may be set
out in their entirety in view of
the reliance placed by both the
counsel upon them. They read:
"(1) The rate of duty and tariff
valuation, if any, applicable to
any excisable goods shall be the
rate and valuation in force.
(i) in the case of goods removed
from the premises of a curer on
payment of duty, on the date on
which the duty is assessed; and
(ii) in the case of goods removed
from a factory or a warehouse
subject to sub-rules (2), (3) and
(3A), on the date of the actual
removal of such goods from such
factory or warehouse.
(2) If the goods have previously
been removed from a warehouse to be
re-warehoused, and the duty is paid
on such goods without their being
re-warehoused, the rate and
valuation, if any, applicable
thereto shall be the rate and
valuation, if any, in force on the
date on which duty is paid or, if
the duty is paid through an
account-current maintained with the
Collector under rule 9, on the date
on which an application in the
proper form is delivered to the
officer-in-charge of the warehouse
from which the goods were removed.
(3) Where any person who has
removed excisale goods for export
in bond fails to export or to
furnish proof of such export to the
satisfaction of the Collector or
diverts the goods for home
consumption, the rate of duty
leviable and the tariff valuation,
if any, in respect of such goods
shall be the rate and valuation in
force on the date on which the duty
is paid.
(3A) Where duty becomes chargeable
on any material or component parts
in respect of which credit of duty
had been allowed under rule 56A,
the rate of duty leviable and the
tariff valuation, if any, in
respect of such material or
component parts shall be the rate
and valuation in force on the date
on which the duty is paid."
According to sub-rule (1) of Rule
9A, the rate of duty [apart from
tariff valuation] applicable to any
"excisable goods" shall be the rate
in force on the date of actual
removal of such goods from the
factory or the warehouse, as the
case may be. This is the general
rue. Sub-rules (2), (3) and (3A)
provide certain exceptional
situations which are not relevant
for the purpose of these appeals.
It is the general rule contained in
sub-rule (1) - and in particular
claue (ii) of sub-rule (1) - that
is relevant here. In other words,
the rate of duty as well as the
valuation of goods shall be the
rate and the valuation as on the
date of actual ’removal". This rule
too opens with the expression
"excisable goods".
10. Sri Vellapally contended that
if the above interpretation is
adopted, it may lead to an
enigmatic situation. He explains
his apprehension thus: the special
excise duty is levied only for the
period March 1, 1978 to February
28, 1979. Take a case, where the
goods are manufactured on or before
February 28, 1979 are removed on or
after March 1, 1979, what would be
the rate of duty [and which would
be relevant date for valuation
purposes]; the assesse may say that
on the date of removal, neither the
levy is in force nor are Rules 9
and 9A and, hence, he need not pay
any special excise duty on such
goods. We do not see any valid
basis for this apprehension. In the
situation contemplated by Sri
Vellapally, the date of removal has
to be taken as February 28, 1979.
It cannot be otherwise. If Rules 9
and 9A are held inapplicable, it
would logically follow that the
moment the goods are manufactured,
the levy becomes payable and, in
the circumstances, the last date of
levy can reasonably be taken to be
the date of removal. Of course, an
absurd consequence would follow if
it is held that in the above
situation, no special excise duty
is payable if the removal is on or
after March 1, 1979 if the removal
is on or after March 1, 1979. Such
an absurd consequence could not be
presumed to have been intended by
the Parliament.
15. Before we conclude, it is
necessary to notice a few facts
having a bearing upon the relief to
be granted in these matters. The
special excise duty was being
levied from 1963 upto 1971 by
various Finance Acts passed from
time to time. It was discontinued
from 1972 until 1978 when it was
revived by the Finance Act, 1978,
Thereafter, it was being levied
from year to year by annual Finance
Acts. The provisions of these
Finance Acts, insofar as the levy
of special excise duty is
concerned, are identical. In the
Finance Acts of 1987 and 1988,
however, the rate of special excise
duty was raised to ten per cent but
then notifications were issued
exempting the duty on all goods in
toto. In other words, with effect
from March 1, 1986, there was, in
effect, no special excise duty
until February 28, 1988. With
effect from March 1, 1988, the duty
was again imposed @ 5% while
exempting certain essential
commodities and other priority
items from the said impost. We have
held hereinabove that the goods
manufactured/produced before March
1, 1978 but cleared on or after
March 1, 1978 are not exigible to
special excise duty. At the same
time, we have also expressed the
view that the goods
manufactured/produced on or before
February 28, 1979 but cleared
thereafter would be liable to pay
the said duty at the rate and
valuation in force as on February
28, 1979................"
For the period 1st March, 1987, until 28th February, 1988, special excise duty had been levied under a provision in the Finance Act, 1987, similar to that quoted, but during this period, by reason of a notification issued under the provisions of Rule 8 of the Central Excise Rules with simultaneous effect, there was a total exemption from the levy. By the Finance Act, 1988, special excise duty was also levied; there was no exemption notification, so that it was payable. The question in these appeals is whether the goods which had been manufactured prior to 28th February, 1988 and cleared after 1st March, 1988, ("the said goods"), were subject to the payment of special excise duty.
Counsel for the appellants submitted that, on the principle of the judgment in the case of Vazir Sultan Tobacco Co. Ltd., the said goods manufactured by the appellants prior to 28th February, 1988, and cleared after 1st March, 1988, were not liable to the fresh special excise duty levied by the Finance Act, 1988. In the submission of learned counsel for the Revenue, they were, for Rule 9A was applicable.
Under the terms of the Finance Acts, special excise duty is so levied as to cease to have effect at the close of the financial year. It is an annual levy. It may or may not be levied in the following year.
As we understood the judgment in the case of Vazir Sultan Tobacco Co. Ltd., this is the view taken: The date of manufacture is the date upon which the levy attaches to the goods; the date of payment is deferred to the date of clearance, the rate being the rate which is effective on the date of clearance. Where goods have been manufactured while the levy of special excise duty is operative and have not been cleared until the last date of that levy, the goods must be deemed to have been removed on that last date.
In the instant case, therefore, the said goods must be deemed to have been cleared on the last date of the levy of the special excise duty that was in force when they were manufactured; that is to say, they must be deemed to have been cleared on 28th February, 1988. On that day the said goods were, by reason of the exemption notification aforementioned, wholly exempt from the special excise duty. The appellants were, therefore, not liable to pay any special excise duty upon the said goods.
It is not possible to accept the Revenue’s contention that the said goods would be liable to bear special excise duty as levied after 1st March, 1988, for the reason that the special excise duty that operated subsequent to 1st March, 1988 was a new levy under a different statute and distinct from that which operated during the period 1st March, 1987 until 28th February, 1988. Rule 9A does not operate in such circumstances.
The appeals are, accordingly, allowed and the judgment and order under appeal is set aside insofar as it relates to the two appellants.
No order as to costs.