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TMI Blog1982 (1) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... n nylon yarn was fixed at Rs. 35/- and on polyester yarn Rs. 40/- per kilogram. This notification remained in force till 28th February, 1973 when it was superseded by notification dated 1st March, 1973 by which the maximum duty on nylon yarn was raised to Rs. 38.50 and in case of polyester yarn to Rs. 41.90 per kilogram. The latter notification was superseded by another notification issued on 1st March, 1974 by which the maximum duty on polyester yarn was raised to Rs. 55/-per kilogram while the duty payable on nylon yarn remained as before. This notification, in its turn, was superseded by notification dated 1st August, 1974 by which the duty on nylon yarn was raised to Rs. 42/- per kilogram. By the Finance Act, 1975, the tariff item No. 18 was amended and the rate of duty was enhanced from Rs. 60/- to Rs. 85/- per kilogram. Thereafter, the notification dated 1st August, 1974 was superseded by another notification with effect from 1st March, 1975 and the rate of duty was increased to Rs. 58.80 in case of nylon yarn and Rs. 77/- per kilogram in case of polyester yarn. The aforesaid changes in the rates of duty were made at the time of Budgets for the years 1973, 1974, supplementary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the price at which an article of the like kind and quality as sold or is capable of being sold by the manufacturer or producer, or his agent, at the time of the removal of the article chargeable with duty from such factory or other premises for delivery at the place of manufacture or production, or if such article is not sold or is not capable of being sold at such place, at any other place nearest thereto. Explanation. - In determining the price of any article under this section no abatement or deduction shall be allowed except in respect of the trade discount and the amount of duty payable at the time of the removal of the article chargeable with duty from the factory or other premises aforesaid. The power to make rules is conferred on the Central Government by section 37 which as existing at the relevant time and into far as relevant, reads as under :- Sec. 37. Power of Central Government to make rules. - (1) The Central Government may make rules to carry into effect the purposes of this Act. (2) In particular, and without prejudice to the generality of the foregoing power, such rules may- ***** (i) provide for the assessment and collection of duties of excise, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the Collector under rule 9, on the date on which an application in the proper form is delivered to the officer-in-charge of the warehouse from which the goods were removed. (3) Where any person who has removed excisable goods for export in bond fails to export or to furnish proof of such export to the satisfaction of the Collector or diverts the goods for home consumption, the rate of duty leviable and the tariff valuation, if any, in respect of such goods shall be the rate and valuation in force on the date on which the duty is paid. (3A) Where duty becomes chargeable on any material or component parts in respect of which credit of duty had been allowed under rule 56A the rate of duty leviable and the tariff valuation, if any, in respect of such material or component parts shall be the rate and valuation in force on the date on which the duty is paid. (4) The rate and valuation, if any, applicable to cases of losses of goods shall- (i) where the loss occurs in a curer's premises and in a curer's private bonded store-room, be the rate and valuation, if any, in force on the date on which such loss is discovered by the proper officer or made known to him; (ii) where the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oved." 5. The argument of the learned Counsel for the petitioner is that excise is a tax on manufacture or production of goods and the liability to pay the tax attaches at the stage of manufacture or production and so the rate of tax in force at that stage is the gaverning rate. The learned Counsel submits that this is implicit in section 3 of the Act and that the Central Government has no power to make rules inconsistent with this principle and Rule 9-A(i), (ii) in so far as it applies, the rate of duty prevailing on the date of removal is ultra ires and void. 6. The nature of excise duty has been considered by the Supreme Court in a number of cases. In R.C. Jall v. Union of India - AIR 1962 SC 1281, the Supreme Court after referring to the decisions in, In re : Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938 - AIR 1939 FC.I = 1978 E.L T. (J 269), Province of Madras v. Boddu Paidanna and Sons AIR 1942 FC 33 = 1978 E.L.T. (J 272) and Governor General in Council v. Province of Madras - AIR 1945 PC 98 observed: "Excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country. It is an indirect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act has to be construed. This section imposes excise duty "on all excisable goods which are produced or manufactured in India". The section further imposes this duty "at the rates set forth in the First Schedule". The manner or levy and collection of the duty is, however, left to be prescribed by rules. This is the effect of the words —"there shall be levied and collected in such manner as may be prescribed"—as they occur in section 3. We are unable to agree that the qualifying words ''in such manner as may be prescribed" qualify only "collected" and not "levied". "Levy" is a word of very wide import. The term "imposition" is narrower and is generally used for the levy of a tax or duty by legislative provisions indicating the subject matter of the tax and the rate at which it has to be taxed. The term "levy" is, however, wider and includes imposition and all stages up to assessment. It, however, does not include collection which is separately referred to in section 3 of the Act [see Assistant Collector of Central Excise, Calcutta v. National Tobacco Co. of India Ltd - AIR 1972 S.C. 2563 at p.2571 - 1978 E.L.T. (J. 416)]. Section 3 of the Act imposes the duty at the rates set fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r by notifications issued under Rule 8 to give effect to Budgets. Parliament must have known that Rule 9-A made by the Central Government applies the rate of duty prevailing on the date when the goods are removed. The inaction of Parliament during the last 37 years is not making any provision in the Act to show that the crucial date for application of the rate of duty is the date of manufacture or production and in not otherwise annulling or modifying Rule 9-A strongly supports the view that the Rule is not inconsistent with the intention of Parliament as expressed in section 3. Although rules made under an Act cannot override the Act, but they may be used as contemporance expositioe of an ambiguous provision in the Act specially when they are to have effect as if enacted in the Act [see Hanlon v. Law Society - (1980)2 All ER 199 (HL) p. 218]. There is additional reason to take the assistance of subordinate legislation in construing a taxing Act for "in the matter of fiscal legislation the initiative is in the hands of the executive" (see J.K. Steel Ltd. v. Union of India - AIR 197D SC. 1173, p. 1180 = 1978 E.L.T. (J 355). Section 38 of the Act as it stood at the relevant time befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deducting the selling cost and selling profit and that the real value can include only the manufacturing cost and manufacturing profit. These cases deal with the mode of valuation under section 4 which, as earlier noticed, makes the time of removal the crucial time with reference to which the value has to be determined. These cases cannot be read to lay down that the rate of duty to be applied must be that which is in force on the date of manufacture or production. The learned Counsel also referred to a decision of a Division Bench of this Court in Kirloskar Brothers Ltd. v. Union of India - 1978 E.L.T. (J 33) (M.P.). In that case the goods were wholly exempt from excise duty at the time of manufacture. They were, however, removed after the withdrawal of exemption. A Division Bench of this Court held that as the goods were wholly exempt at the time of manufacture, they were not exigible to excise duty. No reference whatsoever is made in the judgment to Rule 9-A. When an application for leave to appeal to the Supreme Court was made, the Division Bench rejected the leave application by a speaking order which is reported as Union of India v. Kirloskar Brothers - 1978 E.L.T. (J 690). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the rate of duty as fixed by Tariff item No. 18 of the First Schedule was reduced from time to time by notifications issued under Rule 8. As the goods were never wholly exempt, Kirloskar Brothers' case has no application here. 9. The learned Counsel for the petitioner also argues that in case we held that the Central Government has power to make a rule to fix the time with reference to which the rate of duty is to be applied, Rule 9-A will suffer from excessive delegation. We are not impressed by this argument. The nature of duty and the rate of duty are fixed by section 3 of the Act. What is delegated under that section to the Central Government is the prescription of the manner of levy and collection of the duty. The basic policy having been laid down by the Act itself, Rule 9-A cannot be challenged on the ground of excessive delegation. Apart from that, as pointed out earlier, section 38 of the Act contains the laying requirement. Thus, the rules made under the Act are under the constant supervision and control of Parliament. It has been held that by enacting a laying clause the Legislature keeps control over the delegates and the delegated legislation in such a case cannot ..... 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