1967 (3) TMI 47 - SC - Central Excise

Whether the goods are to bear the old duty or the new? Held that - In the present case the payment of duty was synchronous with the clearance of the goods because the gate pass can only be issued when the goods have actually been cleared for removal. The above construction of the Rules agree with the construction placed by the Board of Revenue in its ruling of 1957 where the effect of the sealing of the wagons by the Railway after loading and the issuance of railway receipts was considered. The Board ruled that such goods would not be considered as lying in the stock in the factory premises. When we add to it the fact in this case that duty was paid on the goods and gate pass was also issued, there remains little to argue except to say that the wagons being in the new siding must be treated as still in the factory. Here the difficulty in the way of the Union of India is that the Excise authorities themselves refused to recognise this portion as part of the factory. If the goods were put in the wagons after payment of duty, and the wagons were sealed and shunted out of the factory on a proper gate pass, not only under the ruling of the Board but also on the application of the Rules as explained here these goods became free of the enhanced duty. The recovery was accordingly erroneous. The duty collected must, therefore, be refunded and we order accordingly.

Summary

Issues Involved:

1. Legality of reassessment of excise duty after payment and clearance.
2. Determination of the time at which excise duty becomes payable.
3. Interpretation and application of Rule 9-A of the Central Excise Rules, 1944.
4. Whether the goods were removed from the factory premises before the new duty rates came into effect.

Detailed Analysis:

1. Legality of Reassessment of Excise Duty After Payment and Clearance:

The appellant company argued that the reassessment of excise duty to the higher rates effective from March 1, 1961, was illegal. The goods had already been cleared by payment of excise duty under Rule 52 of the Central Excise Rules, 1944, on February 27 and 28, 1961. The Deputy Superintendent of Central Excise, however, found the wagons inside the factory premises on March 1, 1961, and assessed the goods at the higher rates of excise duty current from that date. The appellant contended that the goods were not in the factory when the new rates came into force and that duty was payable at the rate in force on the date on which the duty was actually paid.

2. Determination of the Time at Which Excise Duty Becomes Payable:

The core issue was whether the goods should bear the old duty or the new duty effective from March 1, 1961. This depended on the time at which the duty was payable, which in turn depended on the true construction of Rule 9-A of the Central Excise Rules, 1944. The rule consists of two sub-rules, but the focus was on the first sub-rule and its first proviso. The appellant argued that the critical point of time was the payment of duty, while the respondent contended that the critical time was the removal of the goods from the factory.

3. Interpretation and Application of Rule 9-A of the Central Excise Rules, 1944:

Rule 9-A was pivotal in this case. The appellant's counsel argued that the first part of Rule 9-A applied where duty is paid and the goods cleared, making the payment of duty the critical point of time. The second part, according to the appellant, applied to the removal of goods from a factory or warehouse without payment of duty. The respondent, however, suggested that the main rule was in the first part and the second part was an exception. The court found that Rule 9-A could not be read based on the classification suggested by the respondent. The critical time in the case of manufactured goods was either the payment of duty or the removal from the factory, depending on whether payment was made before removal.

4. Whether the Goods Were Removed from the Factory Premises Before the New Duty Rates Came into Effect:

The appellant company had obtained a gate pass and the goods were loaded, sealed, and shunted out of the factory premises before the new duty rates came into effect. The court noted that the Excise authorities had refused to recognize the new siding as part of the factory. Since the goods were put in the wagons after payment of duty, and the wagons were sealed and shunted out of the factory on a proper gate pass, the goods were not considered as lying in the stock in the factory premises. Therefore, the goods became free of the enhanced duty.

Conclusion:

The court concluded that the recovery of the enhanced duty was erroneous and ordered that the duty collected must be refunded. The appellant's costs were to be paid by the respondent.