1981 (9) TMI 280 - HC - Central Excise

Summary

Issues Involved:
1. Whether the special duty of excise imposed by Section 80 of the Finance Act, 1965 was a distinct duty or a surcharge on excise duty under the Central Excises and Salt Act, 1944.
2. Whether the excise duty mentioned in Section 280ZD for tax credit certificates under the Income-tax Act, 1961, refers to excise duty actually paid or excise duty leviable.

Issue-wise Detailed Analysis:

1. Distinct Duty vs. Surcharge:
The primary question was whether the special duty of excise imposed by Section 80 of the Finance Act, 1965, constituted a distinct duty or was merely a surcharge on the excise duty under the Central Excises and Salt Act, 1944. The court examined the language of Section 80, which states that the special duty is "in addition to the duties of excise chargeable on such goods under the Central Excises Act or any other law for the time being in force." This indicates that the special duty is a separate and distinct duty from the regular excise duty. The court referenced the decision in The Associated Cement Co. Ltd. v. Director of Inspection, where it was determined that these are two different types of duties. The court agreed with this interpretation, emphasizing that the special duty is not a surcharge but a distinct duty.

2. Excise Duty for Tax Credit Certificates:
The second issue concerned whether the term "duty of excise payable" in Section 280ZD of the Income-tax Act, 1961, referred to the duty actually paid or the duty leviable. The court noted that Section 280ZD specifies that the tax credit certificate is calculated based on the "duty of excise payable" on the quantity of goods cleared during the financial year exceeding the base year. The court agreed with the learned single judge's interpretation that "payable" should be understood as the duty lawfully paid, not merely the duty leviable. The court emphasized that it would be inequitable to claim a tax credit certificate on the duty leviable when a lesser amount is actually paid due to exemption notifications. The court referenced several cases, including J.K. Steel Ltd. v. Union of India and others, N.B. Sanjana, Assistant Collector of Central Excise, Bombay and others v. The Elphinstone Spinning and Weaving Mills Co. Ltd., and Assistant Collector of Central Excise, Calcutta v. National Tobacco Co. of India Ltd., to support the distinction between levy and collection, noting that levy and collection are distinct processes.

The court concluded that the term "payable" in Section 280ZD must be interpreted as the duty lawfully paid, aligning with the actual payment rather than the theoretical levy. The court also referenced the decision in Orient Weaving Mills (P) Ltd. and another v. Union of India and others, where the Supreme Court held that exemption notifications should be read as part of the statute, reducing the rate of levy accordingly.

Conclusion:
The court dismissed the four appeals and the writ petition, finding no merit in the arguments presented. The court upheld the decision of the learned single judge, affirming that the special duty of excise imposed by the Finance Act, 1965, is a distinct duty and that the term "payable" in Section 280ZD refers to the duty lawfully paid. The parties were left to bear their own costs due to the peculiar circumstances of the case.