1990 (4) TMI 165 - AT - Central Excise

Issues Involved:
Levy of Special Excise Duty (SED) on goods manufactured before 1-3-1988 but cleared on or after that date.

Issue-wise Detailed Analysis:

1. Nature and Continuity of Special Excise Duty (SED):
The primary issue was whether the SED imposed under Clause 82(1) of the Finance Bill, 1988, could be levied on goods manufactured before 1-3-1988 but cleared after that date. The Department argued that the SED was a continuation of the existing duty, not a new imposition. They referred to the Finance Bill of 1987, which also levied SED but exempted goods through notifications. The Finance Bill of 1988 imposed a 5% SED, and the Department contended that the goods were excisable at the time of manufacture but exempted, and became dutiable at the time of clearance.

2. Taxable Event and Levy of Duty:
The Department's view was supported by the Supreme Court judgment in Wallace Flour Mills Company Ltd. v. Collector of Central Excise, Bombay, which held that the duty could be levied and collected at a later stage, with the payment of duty related to the date of removal of the article from the factory. The Tribunal had previously held in the Godrej Soaps Limited case that the rate of duty as on the date of clearance was applicable, even if the duty was not leviable at the time of manufacture.

3. Arguments by the Respondents:
The respondents argued that the SED imposed by the Finance Bill, 1988, was a new impost, as indicated by the declaration under Section 3 of the Provisional Collection of Taxes Act, 1931. They contended that the authority to levy SED was distinct from the Basic Excise Duty, which is a continuing enactment under the Central Excises & Salt Act, 1944. The respondents emphasized that the SED was levied annually under specific clauses of the Finance Bill, and its introduction in 1988 was a fresh imposition of duty.

4. Legal Precedents and Propositions:
The respondents cited several Supreme Court judgments to argue that excise duty is a levy on goods, with the taxable event being the manufacture or production of goods, not their removal. They argued that the liability to excise duty arises only if the goods were manufactured on or after the date of imposition of duty. The respondents relied on the Vazir Sultan Tobacco Co. case, where it was held that SED could not be charged on pre-budget stock when the duty became chargeable only from 1-3-1988.

5. Tribunal's Analysis and Conclusion:
The Tribunal examined the continuity of SED as reflected in the Finance Minister's speeches and the provisions of the Finance Bills of 1987 and 1988. It was noted that the nature, quantification, and modality of collection of SED remained identical throughout. The Tribunal found that the legislative intention was to maintain SED as a continuing levy, despite exemptions in certain years. The Tribunal concluded that the collection of SED on goods cleared on or after 1-3-1988, which were manufactured before that date, was valid and in accordance with law. The ratio of the Supreme Court decision in Wallace Flour Mills was found applicable, and the Tribunal's earlier decision in Sri Ram Refrigeration was deemed no longer good law.

Summary:
The Tribunal held that the Special Excise Duty (SED) levied by Clause 82(1) of the Finance Bill, 1988, could be applied to goods manufactured before 1-3-1988 but cleared after that date. The decision was based on the continuity of the levy, the legislative intention, and the applicability of Rule 9-A of the Central Excise Rules. The Tribunal's decision was influenced by the Supreme Court's judgment in Wallace Flour Mills, which allowed for the collection of duty based on the date of removal. The appeals were disposed of accordingly.

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