1985 (1) TMI 59 - HC - Central Excise

Summary

Issues:
Interpretation of excise duty rates for goods removed prior to rate enhancement.

Analysis:

The judgment in the High Court of Kerala at Ernakulam dealt with a case involving the petitioner, a manufacturer of beedies chargeable to excise duty under the Central Excises and Salt Act, 1944. The petitioner's premises were inspected, revealing a deficiency in biri tobacco stock compared to the book balance. Adjudication proceedings were initiated, resulting in a direction for the petitioner to pay a fine and excise duty for goods removed without payment of duty. This decision was upheld in appeal and revision, leading to a notice for further payment during the pendency of statutory revision.

The central issue revolved around the applicability of excise duty rates to goods removed prior to rate enhancement. The respondents argued that duty is payable at the rate applicable when payment is made, justifying the demand for payment based on the current rate. However, the Court analyzed the relevant sections of the Act, emphasizing that excise duty is levied on goods produced or manufactured at the rates specified in the First Schedule. The duty is imposed at the time of production or manufacture, not at the time of payment.

Referring to Section 33 of the Act and Rule 9-A of the Rules, the Court highlighted that the duty and valuation applicable to excisable goods are determined at the time of assessment. The petitioner's liability for goods removed without payment of duty was fixed by the adjudication order, including a specific fine amount. The Court concluded that subsequent increases in excise duty rates do not apply to goods already removed and assessed under Section 33.

Therefore, the demand for recovery of the balance amount was deemed unsustainable. The Court ruled that the petitioner's liability was limited to the duty and penalty adjudged in the initial order, for which a partial payment had already been made. The Department was granted the option to issue a fresh demand for any remaining balance, but the current demand was quashed, and the Original Petition was allowed with no costs awarded.

In summary, the judgment clarified the application of excise duty rates to goods removed prior to rate enhancement, emphasizing that the duty is fixed at the time of assessment under Section 33 and is not subject to subsequent rate changes.