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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 ..... ntitled to refund of any amount collected from them by way of special excise duty on or after March 1, 1978 in respect of goods manufactured prior to the said date. Looked at from the standpoint of avoidance of multiplicity of proceedings and of unending legal quibbling also, it is desirable to give a quietus to this controversy. To avoid any discriminatory consequences, it is further directed that if any amounts are due and are yet to be recovered in respect of such goods on account of special excise duty, the same can be recovered according to law. In favour of assessee. - 3199 of 1986 - - - Dated:- 28-2-1996 - B.P. Jeevan Reddy, Suhas C. Sen and G.T. Nanavati, JJ. [Judgment per : B.P. Jeevan Reddy, J.]. - Sub-section (1) of Section 37 of the Finance Act, 1978 levied a special duty of excise equal to five per cent of the amount of excise duty chargeable on goods. The levy came into effect on and from March 1, 1978 and was to remain in force till March 31, 1979. Sub-section (3) provided that the said levy shall be in addition to the duties of excise chargeable on such goods under the law in force. Sub-section (4) provided that the provisions of the Central Excise Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty is leviable upon the said cigarettes. The authorities rejected the contention and levied the duty. Subsequently, the respondent filed an application for refund agitating the very same issue, which too was rejected by the Assistant Collector. An appeal before the Collector (Appeals) proved fruitless. The respondent then carried the matter by way of further appeal to the Tribunal. The matter was heard by the Special Bench of the Tribunal. They allowed the appeal under the impugned order upholding the contention of the respondent. 3.Sri Joseph Vellapally, learned counsel for the Revenue, assailed the correctness of the view taken by the Tribunal on several grounds. He submitted that Section 37 evolved a simple formula, viz., wherever central excise duty is payable on certain goods, special excise duty shall also be payable at the rate of five per cent of the central excise duty. Counsel submitted that the levy and collection of the central excise duties is governed by Section 3 of the Central Excises and Salt Act, 1944 read with Rules 9, 9A and 9B of the Central Excise Rules. According to these Rules, the levy and collection is at the stage of clearance of the goods from the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there at the time when the goods are manufactured or produced in India, it cannot be levied at the stage of removal of the said goods. The idea of collection at the stage of removal is devised for the sake of convenience. It is not as if the levy is at the stage of removal; it is only the collection that is done at the stage of removal. Admittedly, the special excise duty is an independent duty of excise separate and distinct from the duties of excise levied by the Central Excises and Salt Act, 1944. This levy came into effect only on and from March 1, 1978 which means that the goods produced prior to that date were not subject to such levy. If that is so, the levy cannot attach nor can it be realised because such goods are removed on or after March 1, 1978. The provisions of the Central Excise Act and the Rules, in our opinion, do not say otherwise. Section 3(1) of the Central Excise Act says : "(1) There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in, or imported by land into, any part of India as, and at the rates, set fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehoused, and the duty is paid on such goods without their being re-warehoused, the rate and valuation, if any, applicable thereto shall be the rate and valuation, if any, in force on the date on which duty is paid or, if the duty is paid through an account-current maintained 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. Where any person who has removed excisable goods for export(3) 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. Where duty becomes chargeable on any material or component(3A) 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." According to sub-rule (1) of Rule 9A, the rate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and does not mean that wherever the Central Excise duty is payable, the special excise duty is also payable automatically. That is so as an ordinary rule. But insofar as the goods manufactured or produced prior to March 1, 1978 are concerned, the said rule cannot apply for the reason that there was no levy of special excise duty on such goods at the stage and at the time of their manufacture/production. The removal of goods is not the taxable event. Taxable event is the manufacture or production of goods. 12.In our opinion, the decision in Wallace Flour Mills does not lay down a contrary proposition - neither does it support the contention of Sri Vellapally. That was a case where the goods were excisable goods prior to March 1, 1987, though by virtue of an exemption notification, the rate of duty was nil. This does not mean that they were not excisable goods. They were excisable goods. Nil rate of duty is also a rate of duty. With effect from March 1, 1987, the said goods became excisable to duty at the rate of fifteen per cent ad valorem. It is in the above circumstances that the Court held, on the basis of Section 3 and Rule 9A, that though the goods were produced or manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gher excise duty [because of their increased value] without paying any duty at all. In those facts, the question of applicability of Rule 10 and for that matter, Rule 10A arose. It was held that while Rule 10 was not applicable, Rule 10A was attracted. 14.Sri Sorabjee also relied upon the decision of this Court in Union of India Ors. v. Modi Rubber Limited [1986 (25) E.L.T. 849 (SC) = 1986 (4) S.C.C. 66] to emphasise his submission that the central excise duties leviable under the Central Excises and Salt Act, 1944 are distinct and different from the special duty, additional duty or any other duty of excise levied under any other Parliament enactment. Since the aforesaid proposition is not in dispute, it is not necessary to refer to the facts in the said decision. 15.Before we conclude, it is necessary to notice a few facts having a bearing upon the relief to be granted in these matters. The special excise duty was being levied from 1963 upto 1971 by various Finance Acts passed from time to time. It was discontinued from 1972 until 1978 when it was revived by the Finance Act, 1978. Thereafter, it was being levied from year to year by annual Finance Acts. The provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the rate prevalent on the date of removal by virtue of Rule 9A of Central Excise Rules, 1944. However, the Revenue Department misinterpreted this decision and issued instructions to the Excise Officers that the pre-budget stock i.e. goods manufactured prior to levy and cleared subsequently are liable to Excise duty in view of Wallace Flour Mills' case (Supra). The true scope of the Wallace Flour Mills's case was explained by us in Central Excise Law Guide, Sixth Edition published in 1991 at pages 1732-33 as under :- "The net effect of the Supreme Cout decision in Wallace Flour Mills case is that as and when there is a change in the rate of duty either due to issue or withdrawal of Exemption Notification or due to modification of rates in Tariff Schedule, the rates prevalent on the date of clearance would be applicable, irrespective of date of manufacture of articles in question. The fresh imposition cannot be treated as a change in rate of duty, therefore, neither the Rule 9A of the Central Excise Rules nor the Supreme Court decision in Wallace Flour Mills case would be applicable to such a situation." In relation to the department's stand that as per Supreme Court decision i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise Duty on the goods cleared subsequent to 28th February, 1979 might have been different. The Hon'ble Supreme Court in para 15 has also directed that in view of the principle behind the presumption incorporated in Section 12B of the Central Excises and Salt Act, the assessee shall not be entitled to refund of any amount collected from them by way of Special Excise duty on or after 1st March 1978 even if goods were manufactured prior to levy. As a consequence of these directions of the Supreme Court, the assessees who were otherwise entitled to refund because they have paid Special Excise Duty subsequent to 1st March, 1978 in respect of the goods manufactured prior to that date, shall now be denied the benefit of the said refund. The said Section 12B of the Central Excises and Salt, 1944 reads as under : "Section 12B.Presumption that the incidence of duty has been passed on to the buyer. — Every person who has paid the duty of excise on aany goods under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such duty to the buyer of such goods." (Emphasis supplied) A perusal of Section 12B of the Central Excises and Salt Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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