2011 (9) TMI 781 - AT - Central Excise

Waiver of pre-deposit - whether the enhanced rate of cess would apply to sugar already cleared from the factory after payment of applicable rate of cess on the date of clearance lying in their godown - the appellants are engaged in the manufacture of sugar - sugar was cleared from their factory after 1-1-2008, by paying cess at the rate of Rs. 15/- per quintal. However, the rate of cess was increased with effect from 1-3-2008 from Rs. 15/- per quintal to Rs. 24/- per quintal - Section 3(4) of Sugar Cess Act, 1982 makes it clear that all the provisions of the Central Excise Act and the rules made thereunder shall apply in relation to the levy and collection of said cess - Held that the appellant has been able to make out a good case in their favour so as to dispense with the condition of pre-deposit of duty and penalty - Stay petition are allowed

Issues:
Prayer to dispense with pre-deposit of duty and penalty based on the application of enhanced rate of cess to sugar already cleared from the factory.

Analysis:

1. Prayer to dispense with pre-deposit of duty and penalty:
The appellants sought relief from the condition of pre-depositing duty and penalty amounting to Rs. 18,72,734 and Rs. 3 lakhs, respectively. The dispute revolved around whether the enhanced rate of cess would be applicable to sugar already cleared from the factory after payment of the applicable rate of cess on the date of clearance.

2. Application of enhanced rate of cess:
The appellants, engaged in sugar manufacturing, had cleared sugar from their factory before and after the rate of cess was increased. The lower authorities held that the higher rate of cess would apply to sugar sold from the godown when the higher rate was in effect. However, the appellants argued that the provisions of the Sugar Cess Act, 1982, specifically Section 3, mandated that the rate of cess applicable on the date of clearance should govern. They contended that subsequent increases in the cess rate should not impact the duty already paid at the time of clearance.

3. Interpretation of Sugar Cess Act, 1982:
The learned Advocate highlighted Section 3(4) of the Sugar Cess Act, 1982, which states that the provisions of the Central Excise Act, 1944, and its rules apply to the levy and collection of cess on sugar. The Tribunal, after considering arguments from both sides, agreed with the appellants' contentions. They emphasized that once sugar is cleared from the factory at the prevailing rate of duty and cess, any subsequent changes in rates should not affect the duty already paid. The Tribunal cited precedents, including the case of Shri Vighnahar SSK Limited and Peninsula Polymers Ltd., to support their decision.

4. Decision and Precedents:
The Tribunal, referring to the decisions in the aforementioned cases, concluded that subsequent changes in duty rates do not impact goods already cleared and in stock. They noted that the appellant had presented a strong case to dispense with the pre-deposit condition of duty and penalty. Citing the principles laid down in previous judgments, the Tribunal allowed the stay petitions in favor of the appellants, emphasizing that the duty and penalty should be based on the rates applicable at the time of clearance.

In summary, the judgment centered on the interpretation of the Sugar Cess Act, 1982, and the application of cess rates to sugar already cleared from the factory. The Tribunal ruled in favor of the appellants, emphasizing that the duty and cess rates in effect at the time of clearance should govern, and subsequent rate changes should not impact previously cleared goods.

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