2005 (5) TMI 115 - AT - Central Excise

Summary

Issues:
1. Interpretation of tea cess levy on black tea manufacturing process.
2. Applicability of exemption notification on cess payment.
3. Comparison of cess collection under different statutes.

Analysis:
The appellant received duty paid tea and converted it into black tea, availing Modvat credit facility for duty payment. The issue revolved around the demand for cess payment of around Rs. 2 lakhs on the black tea cleared during part of 1999. The appellant contended that tea cess is a one-time levy at the first stage of manufacture from tea leaves, citing the definition of tea under the Tea Act and a Supreme Court judgment. The emphasis was on the term "made from leaves," indicating that products like instant tea, made from tea leaves, fall within the definition of tea and are liable for cess.

The impugned order relied on an exemption notification to demand cess payment for the period before its issuance, considering it only prospective. However, the appellant argued that the notification was clarificatory and pointed out that cess under other statutes is collected at one stage of production. Reference was made to a Circular by the Central Board of Excise & Customs regarding cess on various products. The statutory definition of tea as a one-time levy at the production stage from tea leaves was crucial in determining the scope of the levy.

The judgment emphasized that the one-time levy principle was settled by a Supreme Court observation, rendering the demand based on the exemption notification unsustainable. It was clarified that when the levy is not envisaged by the statute, an exemption notification for a specific period does not alter the levy scope for the previous period. Consequently, the impugned order was set aside, and the appeal was allowed, with the pronouncement made on 27-5-2005.