2002 (9) TMI 131 - HC - Central Excise

Summary

Issues Involved:
1. Applicability of enhanced excise duty on pre-budget stock.
2. Legal interpretation of Section 3 of the Central Excise Act and Rule 9A of the Central Excise Rules, 1944.
3. Entitlement to refund of excise duty paid under protest.

Issue-wise Detailed Analysis:

1. Applicability of enhanced excise duty on pre-budget stock:
The petitioner, a company engaged in manufacturing malted milk food, contended that the pre-budget stock of goods manufactured before 1-3-1979 should not be liable to the enhanced duty imposed by the Finance Act, 1979. The company argued that the duty payable should be governed by the law as applicable on 28-2-1979. The respondents, however, rejected this claim, stating that the rate of duty applicable is the rate in force on the date of actual removal of goods from the factory, as per Rule 9A(1)(ii) of the Central Excise Rules, 1944.

2. Legal interpretation of Section 3 of the Central Excise Act and Rule 9A of the Central Excise Rules, 1944:
The petitioners argued that excise duty is payable on the date of manufacture and not on the date of clearance. Section 3(1) of the Central Excise Act states that duties of excise shall be levied and collected on all excisable goods produced or manufactured in India. Rule 9A(1) specifies that the rate of duty and tariff valuation applicable to any excisable goods shall be the rate and valuation in force on the date of actual removal of such goods from the factory. The court noted that while Rule 9A provides for the computation of duty as on the date of clearance, it must be read subject to Section 3 of the Act, which indicates that chargeability would be according to the law prevailing on the date of manufacture.

3. Entitlement to refund of excise duty paid under protest:
The petitioners made representations for a refund of the excise duty paid under protest, which were rejected by the respondents. The court referred to several precedents, including the Supreme Court's decisions in Union of India v. State of Mysore, CCE, Hyderabad v. Vazir Sultan Tobacco Co. Ltd., and Ponds India Ltd. v. Collector of Central Excise, which established that the levy of excise duty is on the manufacture or production of goods, not on their removal. The court concluded that the duty is chargeable at the point of manufacture, and the date of payment is deferred to the date of clearance. Consequently, the impugned judgment was not sustainable, and the petitioners were entitled to a refund of the excise duty paid.

Conclusion:
The court allowed the writ petition, directing the respondents to refund the amount of excise duty paid by the petitioner within six weeks from the date of receipt of the order. There was no order as to costs. The judgment underscored that the imposition of duty must align with the date of manufacture, and Rule 9A must be interpreted in conjunction with Section 3 of the Central Excise Act.