1984 (1) TMI 313 - AT - Central Excise

Summary

Issues Involved:
1. Levy of special excise duty on goods manufactured before the levy but cleared after its imposition.
2. Applicability of Rule 9A of the Central Excise Rules.
3. Retrospective application of the Finance Bill of 1978.

Detailed Analysis:

1. Levy of Special Excise Duty on Goods Manufactured Before the Levy but Cleared After Its Imposition:
The primary issue concerns whether special excise duty, introduced by the Finance Bill of 1978 effective from 1-3-1978, applies to goods manufactured before this date but cleared thereafter. The appellants argued that special excise duty is a new levy and should only apply to goods manufactured from the midnight of 28-2-1978/1-3-1978 onwards. They contended that since the goods were fully manufactured before the imposition of the special excise duty, the duty should not be applicable to them. The respondents, however, argued that the rate of duty should be determined based on the date of clearance, not manufacture, citing several judicial precedents.

2. Applicability of Rule 9A of the Central Excise Rules:
The appellants contested the lower authorities' reliance on Rule 9A to justify the levy of special excise duty. They argued that the charging section is Section 3 of the Central Excises and Salt Act, and since the goods were fully manufactured before 1-3-1978, the special duty, being a new impost effective from 1-3-1978, should not apply. The respondents countered that Rule 9A, which states that the rate of duty is determined at the time of removal of goods, supports their position that the special excise duty is applicable.

3. Retrospective Application of the Finance Bill of 1978:
The appellants argued that the Finance Bill of 1978 did not make the levy of special excise duty retrospectively applicable. They emphasized that since the special excise duty was a new and additional impost, it should not apply to goods manufactured before its imposition. The respondents, however, maintained that the duty should be levied based on the date of clearance, not manufacture, and cited several judicial pronouncements supporting their stance.

Judgment Analysis:

Majority Opinion:
The majority held that the special excise duty is closely related to the manufacture or production of goods and is a duty of excise. They noted that the special excise duty, though a new levy, was effectively a surcharge on the basic excise duty already leviable on excisable goods. They concluded that the relevant date for determining the levy of special excise duty is the date of removal of the goods from the factory or warehouse, as per Rule 9A(1)(ii). Since the goods were removed on or after 1-3-1978, the special excise duty was applicable. The appeal was dismissed.

Dissenting Opinion:
One member dissented, arguing that the incidence of a duty of excise is upon the act of manufacture, not removal. They emphasized that the special excise duty, being a new levy effective from 1-3-1978, should not apply to goods manufactured before this date, even if removed later. They contended that the legislative intent was not to levy the special excise duty retrospectively. The dissenting member proposed allowing the appeal.

Conclusion:
The majority upheld the levy of special excise duty on goods manufactured before 1-3-1978 but cleared thereafter, based on the date of removal as per Rule 9A(1)(ii). The dissenting opinion, however, maintained that the duty should not apply retrospectively to goods manufactured before the imposition of the special excise duty.