1997 (1) TMI 77 - SC - Central Excise

Whether the collection of special excise duty on clearances on or after 1st March, 1988, of goods which had been manufactured prior to that date was valid? Held that - In the instant case the said goods must be deemed to have been cleared on the last date of the levy of the special excise duty that was in force when they were manufactured; that is to say, they must be deemed to have been cleared on 28th February, 1988. On that day the said goods were, by reason of the exemption notification aforementioned, wholly exempt from the special excise duty. The appellants were, therefore, not liable to pay any special excise duty upon the said goods. It is not possible to accept the Revenue s contention that the said goods would be liable to bear special excise duty as levied after 1st March, 1988, for the reason that the special excise duty that operated subsequent to 1st March, 1988 was a new levy under a different statute and distinct from that which operated during the period 1st March, 1987 until 28th February, 1988. Rule 9A does not operate in such circumstances. In favour of assessee.

Summary

Issues:
1. Challenge to the correctness of a judgment and order of the Customs, Excise & Gold (Control) Appellate Tribunal regarding the collection of special excise duty.
2. Interpretation of provisions of the Finance Acts regarding the levy and collection of special excise duty.
3. Application of Rule 9 and Rule 9A in determining the liability for special excise duty on goods manufactured before a specific date and cleared thereafter.

Analysis:
1. The Supreme Court heard appeals challenging the Tribunal's decision on the validity of collecting special excise duty on goods manufactured before a specific date and cleared after. The Tribunal had reversed the orders of the Collectors (Appeals) and upheld the duty collection.

2. Special excise duty was levied under the Finance Acts, with a specific provision coming into effect from March 1, 1978. The Court referred to the Finance Act, 1978, and subsequent Acts to establish the legal framework for the levy of special excise duty.

3. The Court analyzed the interpretation of Rule 9 and Rule 9A in a previous judgment, emphasizing the importance of the date of actual removal of excisable goods for determining the applicable duty rate and valuation. The Court addressed concerns regarding the levy of duty on goods manufactured before specific dates but cleared later.

4. The Court noted the historical context of special excise duty levies from 1963 to 1988, highlighting changes in rates and exemptions over the years. The judgment clarified the liability for special excise duty on goods manufactured before a particular date but cleared after a subsequent date.

5. The core issue revolved around whether goods manufactured before February 28, 1988, and cleared after March 1, 1988, were subject to the special excise duty imposed by the Finance Act, 1988. The appellants argued against the levy based on the interpretation of Rule 9A, while the Revenue contended that the duty was applicable.

6. The Court elucidated that special excise duty operates on an annual basis, ceasing at the end of the financial year, and may vary each year. It emphasized the significance of the date of manufacture and clearance in determining duty liability.

7. Ultimately, the Court held that goods manufactured before February 28, 1988, and cleared after March 1, 1988, were not liable for the special excise duty under the Finance Act, 1988. It rejected the Revenue's argument for applying the duty post-March 1, 1988, as a new levy under a different statute, thereby allowing the appeals and setting aside the Tribunal's decision for the appellants.

8. The judgment concluded without imposing costs, providing clarity on the interpretation of provisions related to special excise duty and ensuring consistency in duty liabilities for goods manufactured and cleared during specific periods.