1982 (9) TMI 60 - HC - Central Excise

Summary

Issues:
1. Applicability of excise duty on molasses produced prior to the introduction of Tariff Item No. 15CC.
2. Interpretation of Notification No. 86/80-CE exempting molasses from excise duty.
3. Claim of exemption based on previous notification dated 30th April, 1975.
4. Retrospective application of excise duty on molasses stock.

Analysis:
The petitions before the High Court of Allahabad raised a common question regarding the imposition of excise duty on molasses produced by public limited companies manufacturing sugar through the vacuum pan process. The companies also operated distilleries producing alcohol, with molasses being a by-product used in alcohol manufacturing. The State of Uttar Pradesh controlled molasses production under the U.P. Sheera Niyantran Adhiniyam, 1964. The Central Government imposed excise duty on molasses under various notifications, including Notification No. 86/80-CE, which exempted molasses not used in sugar production. The petitioners contested demands for excise duty on molasses stock at the introduction of Tariff Item No. 15CC, arguing against retrospective application of duty.

The Court rejected the petitioners' argument that excise duty could not be levied on goods produced before the duty imposition. Referring to the Supreme Court's decision in M/s. McDowell & Co. Ltd. v. Commercial Tax Officer, the Court clarified that excise duty could be collected at a stage after production without losing its essence as a duty on manufacture. The duty's collection was linked to the removal date, not the production date, as per Central Excise rules.

Regarding the claim of exemption based on the 1975 notification, the Court held that the exemption no longer applied to molasses after it was specifically listed under Tariff Item No. 15CC by the Finance Act, 1980. The Court emphasized that the exemption ceased to cover molasses under the new classification.

Furthermore, the Court addressed the argument of retrospective application of excise duty on molasses stock produced during the duty exemption period. The Court found no provision requiring duty calculation based on production date, citing precedents that duty imposition could occur post-production. As a result, the Court dismissed the petitions, ruling against the petitioners and upholding the excise duty demands on molasses stock, with costs awarded against the petitioners.