Case Note & Summary
The appeals challenged the correctness of a judgment and order of the Customs, Excise & Gold (Control) Appellate Tribunal, which had reversed orders of the Collectors (Appeals) and held that collection of special excise duty on clearances on or after 1st March 1988 of goods manufactured prior to that date was valid. The appellants, M/s Ponds India Ltd. and another assessee, argued that under the principle of the Supreme Court decision in Collector of Central Excise, Hyderabad v. Vazir Sultan Tobacco Co. Ltd., goods manufactured prior to 28 February 1988 and cleared after 1 March 1988 were not liable to the fresh special excise duty levied by the Finance Act, 1988. The Revenue contended that Rule 9A of the Central Excise Rules applied, making the rate of duty applicable on the date of actual removal, which was after 1 March 1988 when the new levy was in force. The Supreme Court analyzed the annual nature of special excise duty under the Finance Acts, noting that the levy attaches to goods at the time of manufacture, but payment is deferred to the date of clearance. The court further held that where goods have been manufactured while the levy 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 present case, the last date of the previous levy was 28 February 1988, on which date a notification under Rule 8 had wholly exempted the goods from special excise duty. Therefore, the appellants were not liable to pay any special excise duty on the goods cleared after 1 March 1988. The court rejected the Revenue's contention that the new levy under the Finance Act, 1988 could apply, holding that it was a new levy under a different statute and distinct from the previous levy, and Rule 9A did not operate in such circumstances. The appeals were allowed, the Tribunal's order was set aside insofar as it related to the two appellants, and no order was made as to costs.
Headnote
A) Excise Duty - Special Excise Duty - Annual Levy and Deemed Clearance - Finance Act, 1978, Section 37; Finance Act, 1988; Central Excise Rules, 1944, Rule 9A - The special excise duty is an annual levy that attaches to goods at the time of manufacture, but payment is deferred to the date of clearance; if goods manufactured during a levy period are not cleared by the last day of that levy, they are deemed to be cleared on that last day - In the instant case, goods manufactured prior to 28 February 1988 and cleared on or after 1 March 1988 were deemed to be cleared on 28 February 1988, on which date a notification under Rule 8 of the Central Excise Rules granted total exemption from special excise duty - Held that the appellants were not liable to pay special excise duty on such goods because the duty that operated subsequent to 1 March 1988 was a new levy under a different statute and distinct from the previous levy; Rule 9A did not operate in such circumstances (Paras 5-6). B) Central Excise - Rate of Duty - Applicability of Rule 9A - Central Excise Rules, 1944, Rule 9A - Rule 9A provides that the rate of duty applicable to excisable goods is the rate in force on the date of actual removal from factory or warehouse - However, where goods are deemed to have been removed on the last day of a previous levy period, they are not treated as removed on the actual date of clearance under a subsequent levy - Held that Rule 9A could not be invoked to subject goods manufactured during an exempt period to a new levy introduced after that period; the new levy was distinct and Rule 9A had no application (Paras 6).
Issue of Consideration
Whether goods manufactured prior to 28 February 1988 and cleared on or after 1 March 1988 were subject to special excise duty levied by Finance Act, 1988, given the total exemption notification in force on 28 February 1988
Final Decision
Appeals allowed; judgment and order of the Customs, Excise & Gold (Control) Appellate Tribunal set aside insofar as it related to the two appellants; no order as to costs. The court held that the appellants were not liable to pay special excise duty on goods manufactured before 28 February 1988 and cleared after 1 March 1988 because such goods were deemed cleared on 28 February 1988 when they were exempt by notification, and the new levy under Finance Act, 1988 was distinct and Rule 9A did not apply.
Law Points
- Special excise duty is an annual levy under Finance Acts
- levy attaches to goods at manufacture
- payment deferred to clearance
- if goods manufactured during levy period not cleared by last day
- deemed cleared on that last day
- if exempt on that date
- no duty payable
- new levy under different Finance Act distinct
- Rule 9A does not apply
