1985 (1) TMI 312 - AT - Central Excise

Summary

Issues Involved:
1. Classification of Wood-based Compreg Board under Central Excise Tariff.
2. Applicability of Rule 9A of Central Excise Rules, 1944.
3. Retrospective application of tariff amendments.
4. Determination of excise duty rate based on the time of manufacture vs. the time of removal.

Detailed Analysis:

1. Classification of Wood-based Compreg Board under Central Excise Tariff:
The respondents, manufacturers of Wood-based Compreg Board, initially classified their goods under Tariff Item 68 of the Central Excise Tariff (CET), which was applicable before 28-2-1982. Following the Finance Bill of 1982, the classification was revised to Tariff Item 16B, effective from 28-2-1982, which imposed a higher excise duty rate. The respondents filed classification lists accordingly but faced rejection from the Superintendent of Central Excise, who cited Rule 9A of the Central Excise Rules, 1944, asserting that the applicable duty rate should be the one in force on the date of goods' clearance.

2. Applicability of Rule 9A of Central Excise Rules, 1944:
The primary argument from the appellant (Collector of Central Excise) was based on Rule 9A, which stipulates that the rate of duty applicable to excisable goods should be the rate in force on the date of removal of the goods. The Collector argued that the Collector (Appeals) had bypassed this rule, resulting in an incorrect decision. It was contended that Rule 9A should be interpreted to determine the rate of duty at the time of removal, not manufacture, to avoid rendering the rule ineffective or inconsistent with Section 3 of the Central Excises and Salt Act.

3. Retrospective Application of Tariff Amendments:
The respondents argued that applying the new tariff classification (Item 16B) to pre-budget stock would amount to retrospective application, which is not permissible without explicit legislative intent. They cited the Supreme Court's advisory opinion in the Sea Customs Act case, emphasizing that excise duty is a tax on manufacture, not removal, and that the tariff description at the time of manufacture should determine classification. However, the appellant countered that the application of Rule 9A does not amount to retrospective application, as it aligns with the Provisional Collection of Taxes Act, which allows immediate effect of tariff changes upon the introduction of the Finance Bill.

4. Determination of Excise Duty Rate Based on Time of Manufacture vs. Time of Removal:
The Tribunal examined various judicial precedents to address whether the excise duty rate should be determined at the time of manufacture or removal. The Madhya Pradesh High Court's decision in the Kirloskar Brothers case and the Andhra Pradesh High Court's decision in the Sirpur Paper Mills case were discussed. The Tribunal noted that the Kirloskar Brothers case distinguished between goods wholly exempt at the time of manufacture and those partially exempt or dutiable, while the Sirpur Paper Mills case emphasized the taxable event as the completion of manufacture. However, the Tribunal found the Allahabad High Court's judgment in Kesar Sugar Works, which held that duty is leviable based on the tariff in force at the time of removal, to be directly applicable to the present case.

Conclusion:
The Tribunal concluded that the classification and duty rate applicable to the respondents' goods should be determined based on the tariff in force at the time of removal, as stipulated by Rule 9A. The appeal by the Collector of Central Excise was allowed, and the Order-in-Appeal by the Collector (Appeals) was set aside. The Tribunal restored the Superintendent's original order, affirming the application of the revised Tariff Item 16B to the respondents' goods cleared after 28-2-1982.