1987 (2) TMI 178 - AT - Central Excise

Issues Involved:
1. Liability to pay special excise duty.
2. Applicability of the M.P. High Court's ratio in Kirloskar Brothers' case to the present case.

Detailed Analysis:

Issue 1: Liability to Pay Special Excise Duty

The appellants manufacture Commercial Motor Vehicles covered by Central Excise Tariff Item 34. The Union Budget introduced a 5% Special Excise Duty on 19-6-1980. The appellants submitted an A.R.I. application on 18-6-1980 for the removal of 135 chassis, which were accounted for in the R.G.I. on 18-6-1980. They were informed that unless the duty was paid on all 135 chassis, the removal of 11 chassis would not be allowed. Consequently, they removed nine out of the eleven chassis on payment of special excise duty "UNDER PROTEST," amounting to Rs. 15,836.68. The Assistant Collector and the Collector of Central Excise (Appeals) upheld the duty payment, leading to the appeal.

Issue 2: Applicability of Kirloskar Brothers' Case

The appellants argued that the issue is covered by the Tribunal's decision in Vazir Sultan Tobacco Co. v. C.C.E., Hyderabad, where it was held that "Special Excise Duty was not attracted to goods manufactured prior to the date of the imposition even though they were liable to Basic Excise Duty on the date of removal." They also cited the Supreme Court's decision in Union of India v. Modi Rubber Ltd., which emphasized that exemptions under Rule 8 of the Central Excise Rules do not cover special, auxiliary, or other kinds of excise duty unless explicitly stated.

For the department, it was argued that the special leave petition against the M.P. High Court's decision in Kirloskar's case was dismissed on merits by the Supreme Court. The department cited the Supreme Court's decision in Shinde Brothers v. Deputy Commissioner, Raichur, which stated that the levy need not be imposed at the stage of production but may be imposed later. The department also referenced Amar Dyeing Chemicals Ltd. and Atul Products Ltd., where the court held that exemptions could only be claimed if the excise duty was paid at the time of manufacture.

The Tribunal examined the facts and concluded that the nine chassis were manufactured before 19-6-1980. In Vazir Sultan Tobacco Co., it was decided that "Special excise duty in a case where it was not leviable at the time of manufacture but was imposed between the time of manufacture and the time of removal, it could not be levied and collected at the time of removal." This decision was based on the Supreme Court's rulings in Kirloskar Brothers and Amar Dye-Chem.

The Tribunal found no conflict between the Supreme Court's decisions in Shinde Brothers and Kirloskar's case. In Shinde Brothers, the court discussed the nature of excise duties and concluded that the levy must be closely related to the production or manufacture of goods, even if collected later. This decision did not contradict the principle that goods manufactured during an exemption period are not liable for excise duty.

Regarding the dismissal of the special leave petition, the Tribunal noted that the Supreme Court's dismissal on merits in Kirloskar's case indicated a decision on the merits, as supported by the Andhra Pradesh High Court in Sirpur Paper Mills v. Union of India and Others.

Conclusion:

The Tribunal concluded that the special excise duty, introduced under the Finance Act, could not apply to goods manufactured before the imposition date. The imposition of special excise duty is a percentage of the excise duty, and since it was not levied under the Central Excises and Salt Act, the goods could not be charged at the time of removal. Therefore, the appeal was allowed with consequential relief.

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