1978 (1) TMI 79 - HC - Central Excise

Summary

Issues Involved:
1. Whether the goods mentioned in Item 7 of Ex. D and Ex. E were fully manufactured on the midnight of February 29, 1968.
2. Whether the levy of excise duty under the Central Excises and Salt Act, 1944 is determined at the time of manufacture or at the time of removal of goods.
3. Whether Item 22B introduced a new head of excise duty or merely reclassified Item 19.
4. Whether the trade notices issued by the Collector of Central Excise had any binding effect on the interpretation of the Act.

Detailed Analysis:

1. Fully Manufactured Goods:
The mills contended that the goods mentioned in Item 7 of Ex. D and in Ex. E were fully manufactured by the midnight of February 29, 1968. The Assistant Collector of Central Excise, however, argued that since these goods were not packed and ready for delivery by that time, they could not be considered fully manufactured. The court found that the goods were indeed fully manufactured before the specified time, but this fact was deemed irrelevant to the liability to pay excise duty under the new item.

2. Time of Levy of Excise Duty:
The primary contention was whether excise duty is levied at the time of manufacture or at the time of removal of goods. The court held that under Section 3 of the Central Excises and Salt Act, 1944, and Rule 9A of the Central Excise Rules, 1944, the duty is levied and collected "in such manner as may be prescribed." This means the duty is attracted at the time of removal of the goods from the factory, not at the time of manufacture. The court emphasized that the combined effect of Section 3 and Rules 7, 9, and 9-A is that the duty is levied at the point of removal from the factory or warehouse.

3. New Head of Excise Duty or Reclassification:
The mills argued that Item 22B introduced a new head of excise duty, while the appellants contended it was merely a reclassification of Item 19. The court did not find it necessary to resolve this issue explicitly, as the duty was deemed applicable at the time of removal of goods regardless of whether Item 22B was a new head or a reclassification.

4. Effect of Trade Notices:
The mills relied on trade notices issued by the Collector of Central Excise, which stated that goods fully manufactured before the midnight of February 29, 1968, would not be dutiable. The court held that trade notices have no statutory effect and cannot override the provisions of the Act and the rules. The court expressed regret that senior officers had communicated a wrong interpretation but ruled that this did not preclude the appellants from arguing the correct statutory interpretation.

Conclusion:
The court allowed the appeal, setting aside the order of Rege J. and dismissing the mills' petition. The court restored the assessment orders under Item 22B and ordered the return of the deposited sum with accrued interest to the appellants. Each party was ordered to bear its own costs due to the wrong interpretation communicated by the trade notices. The court also granted a certificate for the mills to appeal to the Supreme Court on the substantial question of law regarding the correct construction of Section 3 of the Central Excises and Salt Act, 1944, and Rule 9A of the Central Excise Rules, 1944.