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TMI Blog1996 (2) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... are liable to pay the special duty of excise. Section 37 reads as follows : "(1) In the case of goods chargeable with duty of excise under the Central Excise Act as amended from time to time, read with any notification for the time being in force issued by the Central Government in relation to the duty so chargeable there shall be levied and collected a special duty of excise equal to five per cent of the amount so chargeable on such goods. (2) Sub-section (1) shall cease to have effect after the 31st day of March, 1979, except as respects things done or omitted to be done before such cesser and Section 6 of the General Clauses Act, 1897 (10 of 1897) shall apply upon such cesser as if the said sub-section had then been [repealed] by a Central Act. (3) The special duty of excise referred to in sub-section (1) shall be in addition to any duties of excise chargeable on such goods under the Central Excise Act or any other law for the time being in force. (4) The provisions of the Central Excise Act and the rules made thereunder, including those relating to refunds and exemptions from duties shall, as far as may be, apply in relation to the levy and collection of the special duties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Wallace Flour Mills Company v. Collector of Central Excise [1989 (44) E.L.T. 598]. The fact that duties of excise are levied upon the production or manufacture of goods, the learned counsel contended, does not detract from the clear position emerging from the provisions of the Act and the Rules. 4.Sri Soli J. Sorabjee, learned counsel appearing for respondents, supported the reasoning and conclusion of the Tribunal. He submitted that the duties of excise are leviable only upon the manufacture or production of the goods as contemplated by Entry 84 of List-I of the Seventh Schedule to the Constitution. The mere fact that, for the sake of convenience, the duty is collected at the stage of removal cannot and does not change the character of the tax. It is upon the manufacture or production of goods and not on any other basis. The special excise duty is a separate and distinct levy from the Central Excise duties. It is levied for the first time by Section 37 of the Finance Act, 1978 on and with effect from March 1, 1978. Counsel submitted that when the goods in question were manufactured, there was no levy of special excise duty. If there is no levy of special excise duty on the da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 3 itself, the collection of the duty is left to be regulated by the Rules made under the Act. 8.Rules 9 and 9A are relevant for our purpose. Rule 9(1) provides that : "No excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, which may be specified by the Collector in this behalf whether for consumption, export or manufacture of any other commodity in or outside such place, until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in these Rules or as the Collector may require and except on presentation of an application in the proper form and on obtaining the permission of the proper officer on the form." 9.Rule 9 says that "no excisable goods" should be removed from the place of their manufacture until excise duty leviable thereon has been paid "at such place and in such manner" as is prescribed in these Rules. It is relevant to notice that the Rule specifically uses the expression "excisable goods" - and not "goods" - and for good reason. The expression "excisable goods" has been defined in clause (d) of Section 2 to mean "goods specified in the Firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant for the purpose of these appeals. It is the general rule contained in sub-rule (1) - and in particular clause (ii) of sub-rule (1) - that is relevant here. In other words, the rate of duty as well as the valuation of goods shall be the rate and the valuation as on the date of actual "removal". This rule too opens with the expression "excisable goods". 10.Sri Vellapally contended that if the above interpretation is adopted, it may lead to an enigmatic situation. He explains his apprehension thus : the special excise duty is levied only for the period March 1, 1978 to February 28, 1979. Take a case, where the goods are manufactured on or before February 28, 1979 are removed on or after March 1, 1979, what would be the rate of duty [and which would be relevant date for valuation purposes]; the assessee may say that on the date of removal, neither the levy is in force nor are Rules 9 and 9A and, hence, he need not pay any special excise duty on such goods. We do not see any valid basis for this apprehension. In the situation contemplated by Sri Vellapally, the date of removal has to be taken as February 28, 1979. It cannot be otherwise. If Rules 9 and 9A are held inapplicable, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 Court in Karnataka Cement Pipe Factory v. Superintendent 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 1, 1986, there was, in effect, no special excise duty until February 28, 1988. With effect from March 1, 1988, the duty was again imposed @ 5%, while exempting certain essential commodities and other priority items from the said impost. We have held hereinabove that the goods manufactured/produced before March 1, 1978 but cleared on or after March 1, 1978 are not exigible to special excise duty. At the same time, we have also expressed the view that the goods manufactured/produced on or before February 28, 1979 but cleared thereafter would be liable to pay the said duty at the rate and valuation in force as on February 28, 1979. In the light of the fact that the duty was continued from 1978 to 1986, indeed upto February 28, 1989 and also in view of the principle behind the presumption incorporated in Section 12B of the Central Excise Act inserted by the Central Excises and Customs Law (Amendment) Act, 1991 - which is but a legislative recognition of a widely accepted presumption - we think it appropriate to direct that the assessees shall not be entitled to refund of any amount collected from them by way of special excise duty on or after March 1, 1978 in respect of goods manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f it is cleared after the Budget provided it has reached fully manufactured stage prior to the imposition of such levy, otherwise the provisions of Rule 9A would not only be ultra vires the Section 3 of the Central Excises and Salt Act but would also be unconstitutional being contrary to Entry 84 List I, Schedule VII of the Constitution of India." The present decision of the Supreme Court in Vazir Sultan's case has clearly threshed out the misconception of the Excise Department which has prevailed upon for nearly seven years. The Hon'ble Supreme Court in paras 10 and 15 of the present case has held that the goods manufactured prior to 28th February 1979 (period when the levy was in force) but cleared after 28th February 1979 would be liable to Special Excise Duty at the rate and valuation in force as on 28th February, 1979. It appears that the Notification No. 90/79-C.E., dated 1-3-1979 has not been brought to the notice of Hon'ble Supreme Court. The said notification reads as under : Notification No. 90/79-C.E., dated 1-3-1979 "In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944 read with sub-section (4) of section 37 of the Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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