C. Ex. - Rule 9A - Durability of goods; produced when exempt from the payment of duty but were liable to pay duty at the time of clearance - Supreme Court decision - Regarding - Central Excise - 5/90-CX.1

C. Ex. - Rule 9A - Durability of goods; produced when exempt from the payment of duty but were liable to pay duty at the time of clearance - Supreme Court decision - Regarding Circular No. 5/90-CX.1. Dated 20-2-1990 [From F. No. 6/50/87-CX.1] Government of India Central Board of Excise Customs New Delhi Subject : C. Ex. - Rule 9A - Durability of goods; produced when exempt from the payment of duty but were liable to pay duty at the time of clearance - Supreme Court decision - Regarding. Reference Board's letters F. No. 334/1/79-TRU, dated 28-2-1979 and F. No. 1/21/80-CX.1, dated 17-3-1983, under which clarification were issued regarding rate of duty applicable to pre-budget stocks of excisable goods and to state that the matter has been re-examined in the light of Supreme Court's latest decision on the above subject. 2. The said issue was considered by the Tribunal in the case of M/s. Beardsell Ltd. v. Collector of Central Excise, Madras reported in 1989 (24) ECR - 49 and the Supreme Court in the case of M/s. Wallace Flour Mills Co. Ltd. v. Collector of Central Excise reported in 1989 (44) E.L.T. 598 (S.C.) (Judgment delivered on 28-9-1989). In view of the Supreme Court's, decision it has been decided to withdraw Ministry's earlier instructions vide D.O. F. No. 334/1/79-TRU, dated 28-2-1979 wherein it was clarified that in cases where duty has been imposed afresh, either by way of withdrawal of exemptions or by amendment to the tariff, stocks of such goods which were duty free either under the Central Excise tariff itself or under Rule 8(1) of the Central Excise Rules should not be subjected to duty, if they were in a fully manufactured condition, ready for delivery as on the mid night of 28-2-79/1-3-1979. These instructions were reiterated in Board's F. No. 1/21/80. CX.1, dated 17-3-1983. In the case of M/s. Beardsell Ltd. v. Collector of Central Excise, Madras the Tribunal held that the goods removed from the factory, after withdrawal of duty exemption, are chargeable to duty even though manufactured prior to such date and the Central Excise authority were correct in applying Rule 9A and charging duty as applicable on the date of removal 3. The Supreme Court in its judgment dated 29-9-1989 in the case of M/s. Wallace Flour Mills Co. Ltd. v. The Collector of Central Excise has held that "Excise is a duty on manufacture or production. But the realisation of the duty may be postponed for administrative convenience to the date of removal of goods from the factory. Rule 9A of the said rules merely does that. That is the scheme of the Act. It does not, in our opinion, make removal be the taxable event The taxable event is the manufacture. But the liability to pay the duty is postponed till the time of removal under Rule 9A of the said Rules. In this connection, reference may be made to the decision of the Karnataka High Courtin Karnataka Cement Pipe Pactory v. Supdt. of Central Excise - 1986 (23) E.L.T. 313, where it was decided that the words as being subject to a duty of excise appearing in Section 2(d) of the Act are only descriptive of the goods and not to the actual levy. "Excisable goods", it was held, do not become non-excisable goods merely by the reason of the exemption given under a notification. This view was also taken by the Madras High Court in Tamil Nadu (Madras State) Handloom Weavers Co-operative Society Ltd. v. Assistant Collector of Central Excise, 1978 (2) E.L.T. (J 57). On the basis of Rule 9A of the said rules, the Central Excise authorities were within the competence to apply the rate prevailing on the date of removal. We are of the opinion that though the taxable even is the manufacture of the production of an excisable article, the duty can be levied and collected at a later date for administrative conveinience. 4. The above decision of the Supreme Court finally sets at rest the legal position regarding the dutiability of pre-budget stocks. Accordingly, the rate of duty applicable is as per the provisions of Rule 9A. 5. This may be brought to the notice of the field formations and trade interests for their guidance.