2008 (11) TMI 206 - AT - Central Excise

Duty liability goods manufactured before imposition of duty - The dispute in the present appeal relates to the duty liability of retail pack, which were manufactured prior to 1-3-2003 but cleared after said date - Held that - the pre-budget stock of the goods, which were not excisable at the time of manufacture, cannot be levied to duty at the time of clearance of the same, when they had became excisable on account of deeming provision. - The appellate authority has considered the issue by treating packed goods and loose and bulk oil on the same platform, which is not correct. - clearance of the goods manufactured prior to levying of duty not being excisable goods, cannot be called upon to pay the duty at the time of clearance of the goods after the levy of duty - order confirmed the duty set aside

Summary

Issues: Duty liability on retail packs manufactured prior to 1-3-2003 but cleared after the said date.

1. The appeals concern the duty liability of retail packs manufactured before 1-3-2003 but cleared post that date. The appellants, engaged in repacking loose oil into retail packs for a company, faced a dispute on duty payment for such clearances. The introduction of Chapter Note 4 to Chapter 15 via the Finance Bill 2003 deemed repacking for retail sale as manufacturing. The appellants contended that this legal fiction applied only from 1-3-2003, and they should not pay duty for goods fully manufactured before that date. They relied on the Supreme Court's decision in CCE v. Vazir Sultan Tobacco Co. Ltd. to support their claim.

2. The lower authorities rejected the refund claim, citing that the duty rate changed from nil to 8% on 1-3-2003, making all oil stocks, loose or packed, liable for duty. However, the appellate authority failed to distinguish between bulk/loose oil and retail packs. The dispute centered on the duty liability of retail packs, not bulk oil. The activity of repacking into retail packs was not considered manufacturing before 1-3-2003, and thus, no duty was applicable to goods fully manufactured before that date.

3. Referring to the Supreme Court's decision in Collector Central Excise, Hyderabad v. Vazir Sultan Tobacco Ltd., it was established that goods manufactured before becoming excisable are not subject to duty upon clearance post the levy. The appellate authority's failure to differentiate between packed goods and bulk oil was deemed incorrect. Consequently, the impugned order was set aside, and the appeal was allowed, with the directive to assess unjust enrichment before granting consequential relief.

4. The judgment emphasized that the duty liability did not apply to retail packs manufactured before 1-3-2003 but cleared after that date. The legal fiction of deeming repacking as manufacturing only took effect from 1-3-2003, absolving the appellants from duty payment for goods fully manufactured before this date. The decision aligned with established legal principles and the Supreme Court's precedents, ensuring a fair and just outcome for the appellants.