1989 (6) TMI 142 - AT - Central Excise

Summary

Issues:
- Whether goods exempt from duty at the time of manufacture are liable to duty if the exemption is withdrawn at the time of removal.

Detailed Analysis:

1. The appeal raised the question of whether goods exempt from duty at the time of manufacture become liable to duty if the exemption is withdrawn at the time of removal. The appellants manufactured plastic articles cleared without duty until a new notification imposed an 8% duty. They claimed a refund for duty paid on goods manufactured before the exemption withdrawal but cleared later. The Asst. Collector and the Collector of Central Excise (Appeals) rejected their claim based on the clearance date determining dutiability.

2. The appellants argued that duty liability arises at the time of manufacture, contending that goods produced when exempt remain duty-free upon removal. Citing precedents like Vazir Sultan Tobacco Co. Ltd. and Andhra Fertilizers Ltd., the appellants emphasized that goods under initial exemption should clear without duty, as per these judgments' interpretations.

3. In contrast, the respondent contended that exempted goods are still excisable, making them dutiable upon exemption withdrawal. Relying on cases like Collector of Central Excise v. Peico Electronics & Electricals Ltd., the respondent argued that withdrawal of exemption renders goods liable for duty, governed by Rule 9-A of the Central Excise Rules.

4. The appellants distinguished their case from Mihir Textiles Ltd. v. Union of India, emphasizing total exemption at manufacture, unlike the partial exemption in Mihir Textiles. They referenced Shree Synthetics Ltd. v. Union of India to challenge the applicability of the Gujarat High Court judgment, asserting that Kirloskar Brothers judgment aligns with their circumstances.

5. The Tribunal analyzed precedents like Vazir Sultan Tobacco Co. Ltd. and Andhra Fertilizers Ltd., finding them inapplicable as they involved different duty imposition contexts. The Supreme Court's judgment in J.K. Cotton Spinning and Weaving Mills Ltd. was deemed irrelevant to the current case's duty liability determination.

6. Regarding Shree Synthetics Ltd., the Tribunal noted the distinction between total and partial exemptions, ultimately rejecting the appellants' argument. The Tribunal found the Mihir Textiles judgment directly relevant, emphasizing that duty liability is tied to the removal date, aligning with Rule 9-A's provisions.

7. Considering various High Court decisions, the Tribunal concluded that the Mihir Textiles judgment applied to the present case. Goods manufactured under exemption but cleared post-exemption withdrawal are liable for duty based on the removal date, as per Rule 9-A and the Gujarat High Court's detailed analysis.

8. Consequently, the Tribunal dismissed the appeal, affirming the Central Excise authorities' application of Rule 9-A to charge duty based on the removal date when the exemption was no longer in effect.