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TMI Blog2000 (12) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, 1944 ("Act") at the rate of Rs. 500/- per tonne (Entry 17.03 of Tariff Act, 1985). Till 1st March, 1997, molasses produced in khandsari sugar factory were exempt from payment of excise duty. By Central Excise (Amendment) Rules, 1997 (Amendment Rules), framed by the Central Government in exercise of powers conferred under Section 37 of the Act, 1944, certain amendments were made in certain rules of the Central Excise Rules relevant for levy and collection of excise duty on molasses. The following proviso was added to Rule 7 of the Rules, which provides for recovery of duty : "Provided that nothing contained in this rule shall apply to molasses produced in a khandsari sugar factory". A new rule, namely, Rule 7A was inserted to provide for recovery of excise duty on molasses produced by khandsari sugar factories. Consequential amendments were also made in Rule 9A. By insertion of Rule 9C, provision was made for recovery of duty on molasses produced by a khandsari sugar factory from a person who procures such molasses. In other words, the procurer of molasses was made responsible for the payment of duty as against the manufacturer of molasses. 3.The appellant and three oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Indian made foreign liquor and spirit, are not manufacturers of molasses. They have nothing to do with the manufacture of molasses in the khandsari sugar factories. They have not even purchased molasses from the factories. They have purchased the same in open market from persons who are not manufacturers. It is contended that in such a situation the appellants cannot be made liable to pay excise duty on molasses manufactured by someone else. The learned Counsel submits that the levy in effect and in sum and substance is a levy of purchase tax not excise duty because the taxing event is the purchase of molasses by the appellants and not the manufacture or production thereof. He submits that in that view of the matter, Rule 7A of the Rules is clearly violative of Section 3(1) of the Act. The learned Counsel for the respondent supports the judgment of the learned Single Judge. 5.We have carefully considered the submission of learned Counsel for the appellants. We have also perused the relevant provisions of the Act and the Rules. Section 3(1) of the Central Excise Act is the charging section. It provides for the levy and collection of duties of excise on all excisable goods, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esignated under these rules, whether the payment of such duty or duties be secured by bond or otherwise". Rule 9 of the Rules deals with the time and manner of payment of duty. Prior to amendment, it read as under : "9. (1) 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 Commissioner in this behalf, whether for consumption, export or manufacture of any other commodity in or outside such place, until the ……… and on obtaining the permission of the proper officer on the form : Provided that such goods may be deposited without payment of duty in a store-room or other place of storage approved by the Commissioner under Rule 27 or Rule 47 or in a warehouse appointed or registered under Rule 140 or may be exported under bond as provided in Rule 13." Rule 9A deals with the date for determination of duty and tariff valuation. Sub-rule (1) of the said rule reads : "9A(1) The rate of duty and tariff valuation, if any, applicable to any excisable goods shall be the rate and valuation in force, - (i) In the case of goods removed from the premises of a curer on payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. The Amendment Rules of 1997 have been framed by the Central Government in exercise of the power conferred under section 37 of the Act. There is thus no infirmity in the framing of the Rules by the Central Government to prescribe for the levy and collection of excise duty. The only question that arises for consideration is whether in exercise of the rule making power, the Central Government can provide for recovery of excise duty from any person other than a manufacturer. In other words, whether excise duty can be legally levied by the Central Government on a person who has nothing to do with the manufacture or production of the excisable goods. 9.We have given our careful consideration to the above controversy. It is true that excise duty is a duty imposed on production/manufacture of articles. It is also a fact that ordinarily it is the manufacturer and the producer from whom excise duty is collected. The question that arises for consideration is whether excise duty can be collected from persons other than the manufacturer or producer. This controversy, in our opinion, is no more res integra in view of a catena of decisions of the Privy Council and the Supreme Court. More ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se duty and sales tax are pertinent : "The two taxes, the one levied on a manufacturer in respect of his goods, the other on a vendor in respect of his sales, may, as is there pointed out, in one sense overlap. But in law there is no overlapping. The taxes are separate and distinct imposts. If in fact they overlap, that may be because the taxing authority, imposing a duty of excise, finds it convenient to impose that duty at the moment when the excisable article leaves the factory or workshop for the first time on the occasion of its sale. But that method of collecting the tax is an accident of administration; it is not of the essence of the duty of excise, which is attracted by the manufacture itself." (Emphasis supplied) 12.The Judicial Committee, in Governor-General in Council v. Province of Madras (supra), observed : "… Excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country. It is an indirect duty which the manufacturer or producer passes on to the ultimate consumer, that is, its ultimate incidence will always be on the consumer. Therefore, subject always to the legislative competence of the taxing authority, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first time the coal leaves the possession of the consignor. The fact that the consignee is made to pay, in the contingency contemplated by R3(b) of the Rules cannot affect the essence of the tax, for the consignor, if he had paid the freight, would have passed it on to the consignee and instead the consignee himself pays it. The Central Government was legally competent to evolve suitable machinery for collection without disturbing the essence of the tax or ignoring the rational connection between the tax and the person on whom it is imposed. We hold that the machinery evolved under the Rules for collection of the duty satisfies the said conditions and therefore the exigibility of the tax at the destination point in the hands of the consignee cannot legitimately be questioned." 14.It may also be expedient in this connection to refer to the decision of Gujarat High Court in Brooke Bond India Ltd. v. Union of India - 1992 (60) E.L.T. 88 (Guj.) wherein it was held that excise duty can be levied even on retail sales. Speaking for the Bench, M. B. Shah, J. (as he then was) observed : "…(I)t is open to the legislature to devise proper and appropriate machinery to recover duty of exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anged. It is well settled that the method of collecting excise duty is an accident of administration; it is not of the essence of the duty of excise. Duty of excise can be levied and collected at any stage before consumption of the product. It can be levied at any convenient stage so long as the character of the impost, that is, it is a duty on the manufacture or production, is not lost. The method of collection does not affect the essence of the duty, but only relates to the machinery of collection for administrative convenience. In other words, duty of excise can be levied and collected from the time when the commodity is produced or manufactured and till it reaches the consumer. Duty of excise can be levied and collected even from the purchaser of an article if it is found to be the most convenient method of levy and collection. It is a part of the machinery of collection and does not affect the essential nature of the duty. The ultimate incidence of the duty continues to remain on the person who consumes or expends the excisable goods. The duty continues to be an excise duty, that is, a duty on excisable goods produced or manufactured in India, no matter at what stage it is col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in favour of small-scale industrial units. The learned Single Judge did not go into this contention of the appellants as, in his opinion, it was a matter to be considered by the respondents at appropriate stage at their own level. The learned Counsel for the appellants fairly stated that statutory appeals wherein similar relief has been claimed on the ground of exemption notification issued by the Central Government were pending. The learned Counsel fairly stated that in that view of the matter, the appellants would not like this Court to go into that controversy in the present appeals. The learned Counsel states that the appellants would like to challenge the decision of the authorities in appeal, if it goes against them, in appropriate proceedings before this Court. He seeks liberty to do so. We do not think that any observation in that regard is required from this Court at this stage. Appellants are free to avail of any legal remedy available to them against the orders passed in appeal and for that purpose they do not require leave of this Court because this Court at no stage has gone into that controversy nor has it been raised by the appellants before this Court. 19.In the ..... 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