1979 (9) TMI 70 - SC - Central Excise

Whetehr the goods in question were not liable to duty under the head No. 1902.10 until February 28, 1987, and the said goods had been made dutiable only by the Finance Bill, 1987-88, with effect from March 1, 1987? Held that - As the time of manufacture of the goods in question, the goods were excisable goods and, in view of rule 9A of the Central Excise Rules, 1944, though the taxable event is the manufacture and production, the payment of duty is related to and postponed to the date of removal of the articles from the manufactory. It is well-settled by the scheme of the Act as clarified by several decisions that even though the taxable event is the manufacture or production of an excisable article, the duty can be levied and collected at a later stage for administrative convenience. The scheme of the said Act read with the relevant rules framed under the Act, particularly rule 9A of the said rules, reveals that the taxable event is the fact of manufacture or production of an excisable article and the payment of duty is related to the date of removal of such article from the factory - against assessee.

Summary

Issues:
- Classification of pre-budget stocks of food products under Central Excise Tariff Act
- Liability of duty on pre-budget stocks
- Interpretation of taxable event under Central Excises and Salt Act, 1944
- Application of rule 9A of the Central Excise Rules, 1944

Classification of Pre-Budget Stocks:
The appellant, a manufacturer of food products, claimed duty-free clearance for pre-budget stocks under heading No. 1902.10 of the Central Excise Tariff Act. The dispute arose as the Revenue argued that the goods were excisable but exempt from duty. The appellant contended that the goods became dutiable only after the Finance Bill, 1987-88. Various High Court decisions were cited by both parties to support their arguments.

Liability of Duty on Pre-Budget Stocks:
The main issue revolved around whether the goods, though manufactured before the budget, were liable for duty. The Revenue argued that the goods were excisable at the time of manufacture, and duty payment was postponed until removal from the factory under rule 9A of the Central Excise Rules, 1944. The Tribunal accepted this contention, emphasizing that duty collection can be postponed for administrative convenience.

Interpretation of Taxable Event:
The appellant contended that duty exemption applied until the goods were manufactured, which occurred before the budget introduction. The court clarified that excise duty is on manufacture, but payment can be deferred to removal under rule 9A. The Karnataka High Court decision was cited to support the view that goods described as excisable remain so, even if exempted.

Application of Rule 9A of the Central Excise Rules:
The court upheld the Tribunal's decision, emphasizing that the scheme of the excise law allows duty collection at a later stage for administrative ease. The judgment highlighted that while removal triggers duty payment under rule 9A, the taxable event remains the manufacture. Citing the Madras High Court decision, it reiterated that goods described as excisable do not lose that status due to exemptions.

In conclusion, the court dismissed the appeal, affirming the Tribunal's decision that duty could be levied and collected at a later stage despite the taxable event being manufacture. The judgment emphasized the importance of administrative convenience in duty collection and upheld the application of rule 9A of the Central Excise Rules, 1944.