1985 (6) TMI 189 - AT - Central Excise

Issues Involved:
1. Liability for Special Excise Duty under Section 37(1) of the Finance Act, 1978.
2. Interpretation of Rule 96-ZI and its implications on duty liability.
3. Applicability of Supreme Court judgments and other case law.

Detailed Analysis:

1. Liability for Special Excise Duty under Section 37(1) of the Finance Act, 1978:
The central issue in this appeal is whether manufacturers of embroidered cotton fabrics, who paid duty at compounded levy rates under Notification No. 85/71, dated 29-5-1971, are also liable to pay special excise duty as per Section 37(1) of the Finance Act, 1978. The Assistant Collector of Central Excise, Amritsar, held that an amount of Rs. 444.39 was due as special excise duty for the period from 1-3-1978 to 31-7-1978. The Collector of Central Excise (Appeals), New Delhi, accepted the respondents' contention that payment under Rule 96-ZI discharged their total duty liability, negating the need for additional duty.

2. Interpretation of Rule 96-ZI and its Implications on Duty Liability:
Shri Verma, representing the appellant, argued that according to Section 3(1) of the Central Excises and Salt Act, excise duty is levied on all excisable goods at rates specified in the First Schedule. Section 37(1) of the Finance Act, 1978, mandates a special duty of excise, in addition to the basic duty, equal to 5% of the duty chargeable under the Central Excises and Salt Act, 1944. Rule 96-ZI allows compounded levy rates fixed by the Central Government to discharge manufacturers' duty liability. However, Shri Verma contended that this does not include special duties under other enactments, such as the Finance Act, 1978.

Shri Mathur, representing the respondents, countered that the compounded levy under Rule 96-ZI, governed by a notification, was not listed in the First Schedule of the Central Excises and Salt Act. Therefore, special excise duty under Section 37(1) of the Finance Act, 1978, would not apply. He cited the Delhi High Court judgment in Modi Rubber Ltd. v. Union of India, which held that exemptions covered all statutory excise duties.

3. Applicability of Supreme Court Judgments and Other Case Law:
Shri Verma referred to a Supreme Court decision from 30-9-1984, asserting that exemptions from customs duty did not extend to additional duties under other enactments. However, he failed to provide the citation or particulars of this judgment, which the tribunal found problematic. The tribunal emphasized the need for appellants, especially government officials, to substantiate their claims with proper documentation.

Tribunal's Findings:
The tribunal found merit in Shri Verma's argument that Rule 96-ZI and the associated notification pertain to the duty under Section 3 of the Central Excises and Salt Act. The compounded levy under Rule 96-ZI is considered a duty of excise, modified by the notification, but still under the purview of the Central Excises and Salt Act. Therefore, the special duty of excise under Section 37(1) of the Finance Act, 1978, is in addition to this basic duty.

The tribunal highlighted the operative clause of Notification No. 85/71, which clearly states the payment as a "duty." The special duty of excise is calculated as 5% of "the amount so chargeable," which includes the compounded levy. The judgment in Modi Rubber Ltd. was deemed inapplicable as it did not address the specific distinction made in Section 37 of the Finance Act, 1978.

Conclusion:
The tribunal concluded that the order of the Collector of Central Excise (Appeals) was incorrect. The Assistant Collector's order, which demanded special excise duty in addition to the compounded levy, was reinstated. The appeal was allowed, affirming the liability for special excise duty under Section 37(1) of the Finance Act, 1978, in addition to the duty under Rule 96-ZI.

← Previous Next →