1982 (1) TMI 61 - HC - Central Excise

Excise Duty - Taxable event - Scope of Rule 9A - Interpretation - Levy and imposition - Precedent - Interpretation of - Dismissed the SLP on merits

Issues involved:

1. Validity of Rule 9-A of the Central Excise Rules, 1944.
2. Interpretation of Section 3 of the Central Excises and Salt Act, 1944.
3. Nature and stage of levy of excise duty.
4. Delegation of legislative power to the Central Government.
5. Applicability of excise duty rates at the time of manufacture versus the time of removal of goods.

Issue-wise Detailed Analysis:

1. Validity of Rule 9-A of the Central Excise Rules, 1944:

The petitioner challenged Rule 9-A of the Central Excise Rules, 1944, arguing that it is ultra vires and void to the extent that it permits the levy and collection of excise duty at the rate in force at the time of removal of goods. The court examined the relevant provisions of the Act and the Rules, particularly focusing on Section 3, which is the charging section of the Act, and Rule 9-A, which determines the date for the application of duty rates. The court concluded that Rule 9-A(1)(ii), which applies the rate prevailing on the date of actual removal of the goods from the factory or warehouse, is valid under Section 37(1) as it carries out the purpose of the Act by prescribing the manner of levy of duty under Section 3.

2. Interpretation of Section 3 of the Central Excises and Salt Act, 1944:

Section 3 of the Act imposes excise duty "on all excisable goods which are produced or manufactured in India" at the rates set forth in the First Schedule. The manner of levy and collection of duty is left to be prescribed by rules. The court held that the qualifying words "in such manner as may be prescribed" qualify both "levied" and "collected." The term "levy" includes imposition and all stages up to assessment but does not include collection, which is separately referred to in Section 3. The court found that Section 3 does not expressly or impliedly lay down that excise duty must be levied at the rate prevailing on the date of manufacture or production.

3. Nature and stage of levy of excise duty:

The court referred to various Supreme Court judgments to explain the nature of excise duty. It was established that although excise duty is a tax on the manufacture or production of goods, it need not necessarily be levied at the stage of manufacture or production and may be levied at a later stage, even at the stage the excisable article reaches the retailer. The court concluded that Rule 9-A(1)(ii), which applies the rate prevailing on the date of actual removal of the goods from the factory or warehouse, is consistent with the nature of excise duty as explained by the Supreme Court.

4. Delegation of legislative power to the Central Government:

The petitioner argued that if the Central Government has the power to make a rule to fix the time with reference to which the rate of duty is to be applied, Rule 9-A would suffer from excessive delegation. The court rejected this argument, stating that the nature and rate of duty are fixed by Section 3 of the Act, and what is delegated to the Central Government is the prescription of the manner of levy and collection of the duty. The court also noted that Section 38 of the Act contains the laying requirement, ensuring that the rules made under the Act are under the constant supervision and control of Parliament. Therefore, Rule 9-A does not suffer from excessive delegation.

5. Applicability of excise duty rates at the time of manufacture versus the time of removal of goods:

The court analyzed the petitioner's contention that the duty ought to have been collected at the rate prevailing on the date of manufacture and not at the rate prevailing on the date of removal of goods. The court referred to Section 4 of the Act, which deals with the determination of value for purposes of duty and makes the time of removal the crucial time with reference to which the value has to be determined. The court concluded that Rule 9-A, which applies the rate prevailing on the date of actual removal of the goods, is valid and consistent with the Act. The court distinguished the case from Kirloskar Brothers Ltd. v. Union of India, where the goods were wholly exempt from excise duty at the time of manufacture, noting that in the present case, the goods were never wholly exempt.

Conclusion:

The petition was dismissed with costs, and the court upheld the validity of Rule 9-A of the Central Excise Rules, 1944, confirming that the rate of duty applicable is the rate prevailing on the date of removal of the goods from the factory or warehouse. The court also ruled that Rule 9-A does not suffer from excessive delegation and is consistent with the provisions of the Central Excises and Salt Act, 1944.

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