1980 (4) TMI 116 - HC - Central Excise

Dutiability of goods not removed from the factory - Central Excise - Rate for payment of excise duty

Summary

Issues:
1. Validity of demand notices issued by the Inspector of Central Excise.
2. Applicability of excise duty rate at the time of manufacture versus at the time of removal.
3. Interpretation of the taxable event for excise duty.

Analysis:

Issue 1: Validity of demand notices
The petitioners, manufacturers of P.V.C. Leather Clothes, challenged demand notices issued by the Inspector of Central Excise before the High Court. The notices demanded payment of duty based on an old tariff item, contrary to the new tariff item introduced. The petitioners objected to the demand, citing that the goods fell under the new item. The Court found the demand notices premature and without jurisdiction as they were issued before the goods were removed from the factory, emphasizing that duty can only be demanded at the time of removal.

Issue 2: Applicability of excise duty rate
The petitioners argued that excise duty should be charged at the rate applicable at the time of removal, not manufacture. The Court referred to a previous judgment establishing that duty is levied at the time of removal, not manufacture. It clarified that the taxable event triggering duty payment is the removal of goods from the factory, not their production. Consequently, the demand notices based on the old rate were deemed invalid.

Issue 3: Interpretation of taxable event
The respondents contended that duty under the new tariff item was payable at the time of removal, not manufacture. They argued that the assessment order, initially assessing duty as nil, was provisional due to uncertainties regarding the applicable rate. However, the Court rejected this argument, deeming the assessment valid. It emphasized that duty determination as nil was not done without judicial application of mind, as claimed by the respondents. Ultimately, the Court set aside the demand notices, directing the respondents not to enforce them.

In conclusion, the High Court held the demand notices invalid, emphasizing the importance of levying excise duty at the time of removal and not manufacture. The Court also rejected the argument that the assessment order was provisional, ruling in favor of the petitioners and directing the respondents not to enforce the demand notices.