1996 (10) TMI 158 - AT - Central Excise

Summary

Issues:
Interpretation of Rule 9A of the Central Excise Rules regarding the date for determination of duty and tariff valuation in a case involving machinery items manufactured on a contract basis with an escalation clause.

Detailed Analysis:

1. The case involved the manufacture of machinery items on a contract basis with an escalation clause for price adjustment due to increased costs. The dispute arose when the department issued a notice demanding duty on the differential amount between the originally paid price and the escalated price upon receipt of the balance payment. The issue was whether the duty should be calculated based on the rate prevailing when specific items were removed from the factory or when the last item necessary for the project was cleared, considering it as a turnkey project.

2. The appellants argued that the duty should be based on the rate prevailing when specific items were removed, while the department contended that in a turnkey project, the duty should be determined based on the date when the last item necessary for the project was removed. The relevant rule in question was Rule 9A of the Central Excise Rules, which specifies the date for determining duty and tariff valuation for excisable goods.

3. Rule 9A(1)(ii) of the Central Excise Rules states that the rate of duty applicable to goods removed from a factory shall be the rate in force on the date of actual removal of such goods. The department relied on sub-rule (5) of Rule 9A, which provides for cases where duty is paid on a different date. However, the lower authorities incorrectly determined the duty based on the date of the last item's removal in the turnkey project, deviating from the rule's clear provisions.

4. The tribunal emphasized that Rule 9A(1)(ii) should apply when the date of actual removal of goods is known, as in the present case. Rule 9A(5) is a residuary clause for cases not covered by Rule 9A(1) or other sub-rules. The tribunal clarified that the relevant date for duty calculation should be the actual removal date, as specified in Rule 9A(1)(ii), rather than a different date based on the completion of a turnkey project.

5. The tribunal's decision was supported by legal precedents, including the Supreme Court's ruling in Collector of Central Excise v. Newman Press, which emphasized the relevance of the date of removal of goods for duty calculation. Other decisions from the High Court of Madras and the Tribunal further reinforced the interpretation that Rule 9A(1)(ii) should be applied when the date of actual removal is ascertainable, as in the case at hand.

6. Consequently, the tribunal set aside the lower authorities' orders and ruled that duty on the differential price should be paid based on the rate prevailing on the respective dates of the removal of the items. The appeal was allowed in favor of the appellants, emphasizing the correct application of Rule 9A in determining the duty in such cases.