1984 (12) TMI 304 - AT - Central Excise

Summary

Issues Involved:

1. Applicability of exemption notification to goods manufactured during the exemption period but cleared after the exemption withdrawal.
2. Conflicting judicial precedents on the applicability of duty based on the date of manufacture versus the date of clearance.
3. Interpretation and binding nature of Supreme Court orders dismissing Special Leave Petitions (SLPs) on merits.
4. Determination of the correct rate of duty applicable at the time of removal of goods.

Issue-wise Detailed Analysis:

1. Applicability of exemption notification to goods manufactured during the exemption period but cleared after the exemption withdrawal:

The appellants, M/s. Castrol Limited, were manufacturing blended and compounded lubricating oil without the use of power and were enjoying exemption under Notification No. 143/71, dated 26-7-1971. Upon the replacement by Notification No. 36/1973, dated 1-3-1973, they became disentitled to the exemption. They claimed that stocks held on the midnight of 28-2-1973, manufactured during the exemption period, should not attract duty even if cleared after the exemption was withdrawn. The department argued that duty was payable at the time of clearance, as the exemption was no longer in force. The Assistant Collector of Central Excise, Ranchi, and the Appellate Collector of Central Excise, Calcutta, rejected the refund application, affirming that duty was rightly collected based on the date of clearance.

2. Conflicting judicial precedents on the applicability of duty based on the date of manufacture versus the date of clearance:

The appellants relied on several High Court decisions and a Supreme Court order supporting their contention that no duty can be recovered if the manufacture occurred during an exemption period, even if clearances were made post-withdrawal. These decisions included:
- Kirloskar Brothers Limited v. Union of India [1978 E.L.T. 33] (Madhya Pradesh)
- Union of India v. Delhi Cloth and General Mills [1978 E.L.T. 177 (Allahabad)]
- Sirpur Paper Mills Limited v. Union of India [1984 (17) E.L.T. 217] (Andhra Pradesh)

The department cited contrary judgments, asserting that duty is payable at the time of clearance, irrespective of the exemption status during manufacture:
- Union of India v. Elphinstone Spinning and Weaving Mills (1978 E.L.T. 680) (Bombay)
- Alembic Chemical Works Company Limited v. Union of India (1979 E.L.T. 258) (Gujarat)
- Kesar Sugar Works v. Union of India (1983 E.C.R 139) (Allahabad)
- Shree Synthetics Limited v. Union of India (1982 E.L.T. 97) (Madhya Pradesh)

3. Interpretation and binding nature of Supreme Court orders dismissing Special Leave Petitions (SLPs) on merits:

The Madhya Pradesh High Court's decision in Kirloskar Brothers was upheld when the Supreme Court dismissed the SLP on merits without a detailed judgment. The Andhra Pradesh High Court in 1984 (17) E.L.T. 217 interpreted this dismissal as an affirmation of the principles laid down in the High Court judgment. Conversely, the Madhya Pradesh High Court in 1982 E.L.T. 97 viewed the dismissal as too vague to declare any law under Article 141 of the Constitution. However, the Andhra Pradesh High Court's interpretation was preferred, suggesting that a dismissal on merits must be taken as a decision on merits.

4. Determination of the correct rate of duty applicable at the time of removal of goods:

The Tribunal considered the principle that the rate of duty applicable is the one in force at the time of removal of goods from the factory or warehouse. This principle was supported by the Supreme Court's decision in Prakash Cotton Mills v. B. Sen, which clarified that the rate of duty applicable to imported goods is the rate in force on the date of actual removal from the warehouse. Rule 9A of the Central Excise Rules, 1944, mirrors Section 15 of the Customs Act, 1962, reinforcing that the rate of duty is determined at the time of removal.

Conclusion:

The Tribunal, bound by the Supreme Court's order dismissing the SLP on merits and the latest High Court judgment, held that goods manufactured during an exemption period should not attract duty even if cleared post-exemption withdrawal. Consequently, the appeal was allowed, and the orders of the lower authorities were set aside, granting the appellants the refund claimed.

Separate Judgment:

One member of the Tribunal, however, dissented, emphasizing that the rate of duty at the time of removal should apply, supported by subsequent Supreme Court decisions and consistent with the principle that duty is assessed at the point of removal. This member rejected the appeal, upholding the lower authorities' actions.