2011 (9) TMI 426 - SC - Central Excise

Change in rate of duty after manufacture but before removal - Held That - In view of Wallace flour mill (1989 - TMI - 42586 - SUPREME COURT OF INDIA) and Excise act read with Rule 9A, taxable event is the manufacture and the payment of duty is related to the date of removal of such article from the factory. Thus duty will be paid at the enhanced rate in force at the time of removal.

Summary

Issues:
Interpretation of Section 9A(1) of the Central Excise Act, 1944 regarding the liability of excisable goods to enhanced rates of duty after manufacture but before clearance.

Analysis:
The Supreme Court heard an appeal against a judgment of the High Court of Delhi in Civil Writ No. 443 of 1986. The main question of law raised was whether excisable goods manufactured before an increase in excise duty rates but cleared after the enhancement are liable to pay the enhanced rate of duty as per Section 9A(1) of the Central Excise Act, 1944. The Court noted that this issue had been settled in previous cases such as Wallace Flour Mills Company Ltd. v. Collector of C. Ex, Collector of Central Excise, Madras v. M/s. Newman Press and Ors., and Collector of Central Excise, Bombay v. Polyset Corporation. These cases established that duty can be levied and collected at the time of removal of goods for administrative convenience, even if the goods were manufactured when the duty rates were lower.

The Court referred to the decision in Wallace Flour Mills Company Ltd., emphasizing that the taxable event for excise duty is the removal of goods from the factory, not just their manufacture. Therefore, goods exempted from duty at the time of manufacture but made dutiable at the time of removal are liable to duty based on the prevailing rates at the time of removal. Similarly, in Collector of Central Excise, Bombay v. Polyset Corporation, the Court reiterated that the relevant date for determining excisability is the date of manufacture, while the rate of duty applicable is determined by the date of clearance. The Court agreed with the principles established in these cases and allowed the appeal, setting aside the orders of the High Court.

In conclusion, the Supreme Court clarified the interpretation of Section 9A(1) of the Central Excise Act, 1944, regarding the liability of excisable goods to enhanced rates of duty after manufacture but before clearance. The Court relied on previous decisions to establish that duty is linked to the date of removal of goods from the factory, and goods can be liable to pay the prevailing rates at the time of removal, even if they were manufactured when duty rates were lower. The appeal was allowed, and the High Court's orders were set aside based on these principles.