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TMI Blog1974 (4) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Government had exempted during the period commencing on 1-3-1969 and ending with 23-4-1969, the power driven pumps falling under item No. 30A of the First Schedule to the Central Excises and Salt Act, 1944, from whole of duty of excise leviable thereon. It was also clarified that the benefit of the exemption of this notification would be available only to those manufacturers who produce proof to the satisfaction of the Collector of Central Excise that such benefit had been passed on by them to the person to whom they have sold the said power driven pumps. This benefit was continued by the Government up to 16-3-1972. During that period the petitioner was not even required to take a licence for the purposes of the Central Excises and Salt Act, 1944. However, by a notification dated 17-3-1972 (Respondent s Annexure - 2), the earlier notification was modified and excise duty was made payable at 10% ad valorem on the price and any duty leviable under the Act in excess of 10% was continued to be exempted. Thus, with effect from this date only 10% ad valorem excise duty was payable by the petitioner. But from 1-3-1969 to 16-3-1972 no excise duty was payable by the petitioner by vir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty is a duty on production and though according to the economists, it is an indirect tax capable of being passed on the consumers part of the price yet the mere passing on of the duty is not its essential characteristics. Even if borne by the producer or manufacturer it does not cease to be a duty of excise. The nature of such a duty was explained in the very first case of the Federal Court, and subsequently in others of the Federal Court, the Privy Council and this Court, but this ground continues to be taken and we are surprised that it was raised again. Therefore, the excise duty is essential on production or manufacture of excisable goods. 4. This question had been exhaustively dealt with by their Lordships of the Supreme Court earlier in the case of M/s. Chhotabhai Jethabhai Patel and Co. v. Union of India and Others (A.I.R. 1962 S.C. 1006) wherein their Lordships laid down that an excise duty could be imposed retrospectively and that it is essentially a tax or levy on production or manufacture of excisable goods. 5. The question, therefore, arise whether the petitioner was liable to pay excise duty in respect of the power driven pumps manufactured during the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... removal or disposal will be wholly immaterial. For instance, we may take the example of other taxes, such as, purchase tax under the Central Sales Tax Act, 1956, or the sales tax under the same or sales tax under the M.P. General Sales Tax Act, 1958. The liability for tax arises on a purchase or a sale. It is that point of time which is material for creating a liability in respect of purchase tax or sales tax. As such, a person may be in possession of goods which may be liable for purchase tax or sales tax. But the liability for payment will arise on a purchase or a sale being completed and not at any other point of time. The Excise duty essentially differs in this respect which creates a liability for payment of tax on production or manufacture being completed. 7. In Chhotabhai Jethabhai Patel and Co. v. The Union of India and Others (AIR 1952 NAG 139) and argument was advanced before the Division Bench of the Nagpur High Court that the Tax levied under Sub-section (2) of S. 7 could only be levied and collected on tobacco produced and manufactured before first March, 1951. As the tobacco in that case was all produced before the 1st March, 1951, the petitioner contended that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the period of exemption. In this connection we advert to the observations of a Division Bench of the Patna High Court in Messrs. Tata Iron and Steel Co. v. State of Bihar (AIR 1956 of PAT 92) wherein the learned Judges rejecting the argument of the Attorney General observed that it was not right to say that the sales tax imposed upon the assessee was of the nature of an excise tax. In the case of sales tax, the liability of pay tax arises on the transaction of a sale, but in the case of an excise tax the liability arises in respect of the manufacture or production of the commodity taxes. As such, the two taxes are in the eye of law two separate and distinct entities. Thus, the nature of sales tax is altogether different from the nature of an excise duty. 8. In Mewar Textiles Ltd., Bhilwara v. Union of India (A.l.R. 1955 R.A.J. 114). The Division Bench of the Rajasthan High Court was required to consider the real character of the duty imposed by the Dhoties (Additional Excise Duty) Act, 1953. Their Lordship observed that the duty imposed by the Act and the Ordinance preceding it was an impost in the nature of an excise duty and the question whether it would operate retrosp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of the tax and it will be payable according to the provisions enacted in the charging section of the relevant statutes. Therefore, interpreting Section of the Central Excises and Salt Act, 1944, we are of the opinion that the liability for tax, namely, the excise duty would arise no sooner the manufacturer or the production is completed and it is immaterial as to what machinery may be devised by the Central Government under the rule making powers for recovery of a tax. The point of recovery or any restriction on removal will not be the determining factory for grant of exemption in respect of goods manufactured during the duty free period. 10. As a result of the decision aforesaid we are of the opinion that the action of the respondents in demanding the excise duty on the excisable goods manufactured by the petitioner during the duty free period i.e., from 1-3-1969 to 16-3-1972, was illegal. The petitioner was entitled to remove the goods declared in its communication dated 17-3-1972 (Petitioner s Annexure E) without payment of excise duty as the goods had been manufactured during the duty free period and as such, not liable for payment of excise duty at all. 11. Conse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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