TMI Blog1986 (4) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... er the amended item flax fabrics, in which flax predominated in weight, 15% ad valorem duty was included. By another Notification No. 138/77 dated the 18th June, 1977 the earlier exemption Notification No. 63/73 dated the 1st March, 1973 was rescinded. 6. On the 17th June, 1977 quantities of flax fabrics manufactured by the appellant in its said factory at Rishra were lying in a fully finished condition in the factory godown. By a letter dated the 8th July, 1977 the appellant enquired from the Collector of Central Excise and Customs, West Bengal whether such manufactured sotck of flax fabrics would also to be exempted from excise duty at par with earlier manufactures and requested the Collector to allow the appellant to treat the same as part of the pre-excise stock not subject to levy of excise duty. 7. By a letter dated 3rd October, 1972 the Superintendent of Central Excise of the Jayshree Textiles Industries Range, Rishra informed the appellant that the latter was eligible to exemption of the reimposed excise duty on flax fabrics which had been manufactured and were in a fully finished condition before the 17th June, 1977. 8. On the basis of the aforesaid the appellant f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterials excisable goods though exempted from payment of excise duty before the Notification of 1977 and with the withdrawal of the exemption Notification the item became dutiable. 13. From the said order dated the 21st September, 1978 the appellant preferred an appeal before the Appellate Collector of Customs and Central Excise, Calcutta. By an order dated the 3rd April, 1980, the Appellate Collector rejected the appeal. The Appellate Collector held that though the fabric had been manufactured at a time when they were exempted under the earlier notification from payment of any excise duty, the rate being zero, the manufactured goods were however cleared when the duty had been re-imposed in the sense that the rate had been raised from zero. The date for determination of duty was governed by Rule 9A of the Central Excise Rules under which the rate of duty as on the date of removal would be applicable. 14. Being aggrieved by the aforesaid the appellant moved this Court under Article 226 of the Constitution on or about the 2nd July, 1980 when a Rule nisi was issued as prayed for. The proceedings were marked as Matter No. 1326 of 1980. 15. In spite of the representation contained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valent at the time of clearance in terms of Rules 9 and 9A of the Central Excise Rules. 21. Being aggrieved by the aforesaid the appellant moved another writ application before this Court on the 12th June, 1981 challenging the said decision. The said proceedings were marked as Matter No. 1192 of 1981. 22. The said two writ applications being Matter No. 1326 of 1980 and 1192 of 1981 were opposed by the Excise Authorities. Nikhilesh Chandra Lahiri, the Assistant Collector of Central Excise, Calcutta IV Division affirmed an affidavit on the 17th November, 1980 which was filed in opposition to the petition in matter No. 1326 of 1980. Balbir Singh, the Assistant Collector of Central Excise, Serampore Textile Division affirmed an affidavit on the 7th March, 1982 which was filed in opposition to the petition in Matter No. 1192 of 1981. The case of the Excise Authorities as made out in the above affidavits was, inter alia, as follows:- (a) Under the Finance Bill of 1972 a new item being No. 22AA was inserted in the Tariff Schedule to the Central Excises Salt Act which included different types of textile fabrics not otherwise specified. (b) The said Item 22AA was substituted in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on was withdrawn, the rate was enhanced from zero to the prescribed rate. The provisions of Rule 9A of the Central Excise Rules were attracted in the facts and therefore, the Appellate Collector rejected the appeal. (k) It was contended that the character of a product as excisable goods did not depend on the actual levy of duty but depended upon the inclusion of the goods in the Tariff Schedule of the Act as excisable goods by description under the Central Excise Act and the Rules framed thereunder. The manufacture or production of goods is not the only stage which attracted excise duty. The exemption notification only conferred to privilege on the appellants to contend that liability during the relevant period was at nil rate. It was contended that the Superintendent of Central Excise concerned acted on a mistaken belief of law or misreading the law in issuing the said letter dated the 3rd October, 1977 which could not bind the Central Government and prevent levy and collection of excise duty payable on flax fabrics. (l) For the same reason the doctrine of estoppel could not come into play by virtue of a wrong decision given by an authority. The Central Government could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n if the goods are exempted from excise duty the goods did not cease to be excisable goods thereby. What was material was whether the goods remained described as excisable goods in the Tariff Schedule to the Central Excise Act. 25. The respondent No. 5 also considered a decision of the Gujarat High Court in Alembic Chemical Works Co. Ltd. v. Union of India where it was held that on similar facts the withdrawal of exemption resulted in substitution of a rate of full duty for a nil rate. The respondent No. 5 also considered a decision of the Bombay High Court in the case of Elphinstone Spinning Weaving Mills Co. Ltd. where it was held that duty was attracted on the goods on the date of actual removal at the rate which was in force at the date. 26. The respondent No. 5 held that the date when goods in dispute were sought to be removed from the factory or warehouse of the appellant were excisable goods liable to pay duty at the rate in force on that date and the goods could not be removed unless such duty was paid. The respondent No. 5 held that the orders passed by the Assistant Collector were correct in law and facts and upheld the same. The two appeals of the appellants were r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the advocate on record of the appellants dated the 15th December 1982 which was addressed to the respondent No. 5. The said letter remains unanswered. It has contended further that no affidavit has been affirmed by the respondent No. 5 denying the allegations in the petition against him. 32. The said application was disposed of on the 22nd March 1983 in the first Court by the following order : "I set aside the order dated 13th December, 1982 and remand the matter to the Collector (Appeals) who will hear the matters afresh in accordance with law, after giving the parties an opportunity of being heard and after taking into consideration the decisions etc. referred to him. The points urged in the writ petition are left open and may be taken before the officer concerned. The parties would also be at liberty to file written arguments. If possible, the appeals should be disposed of within a period of six weeks from date. Any amount which has been paid to the petitioner in excess, which I am given to understand is Rs. 1,00,000/- should be refunded to the Excise Authorities and the Bank Guarantee furnished by the petitioner would be reduced." The present appeal is from the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1944 exempted power driven pumps which fell under Item 30A of the First Schedule to the Central Excises Salt Act, 1944 from the whole of excise duty leviable during the period from 1st March 1969 till 20th April, 1969. The benefit was thereafter continued upto the 16th March, 1972. By a Notification dated the 17th March, 1972 the earlier Notification dated the 23rd April, 1969 was modified and excise duty at the rate of 10% ad valorem was levied on the price of power driven pumps. On the 16th March 1972 the manufacturer declared its stocks in its factory which had been manufactured till the 16th March, 1972 and claimed that in respect of such stocks no excise duty was payable and that the manufacturer be permitted to remove the said stock without the payment of excise duty. Such request was rejected by the excise authorities and the manufacturer was intimated that he could remove its such stocks of pumps only on payment of excise duty as levied under the Notification dated the 17th March 1972. The manufacturer challenged the said decision of the excise authorities in an appliction under Articles 226 and 227 of the Constitution before the Madhya Pradesh High Court. The Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union of India reported in 1978 Excise Law Times 328 was cited. A Division Bench of the Madhya Pradesh High Court distinguished the said decision and held that the said decision would be relevant in cases for determination of rates of excise duty leviable. The question would be different where it had to be ascertained at what point of time excise duty would be payable when the impost was made or exemption revoked for the first time. On such cases the different considerations would prevail and excise duty being a tax on manufacture or production, the material time would be the date of manufacture or production. The petition of the Union of India was dismissed. (c) Union of India Ors. v. Delhi Cloth General Mills Co. Ltd. reported in 1978 Excise Law Times 177. To provide an incentive for increase of production of sugar during the year 1959-60 the Central Government issued a Notification dated the 25th June 1960 under Rule 8(1) of the Central Excise Rules providing that a sugar factory would be exempt for payment of excise duty leviable on sugar beyond Rs. 5.63 per cwt. on the quantity of sugar produced by it during the 1959-60 season i.e. between 1st November 1959 and the 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacturer in this case sought to clear such sugar which had been manufactured during the exemption period but after exemption was withdrawn. The Collector imposed the excise duty as also a penalty. In an appeal the Central Board of Excise and Customs following its earlier decision as also the decision of the Madhya Pradesh High Court in the case of Kirloskar Bros. Ltd. held that the said sugar could be cleared even after the exemption was withdrawn without any payment of excise duty. (e) In re: J.K. Steel Alloys, Bunder Road reported in 1982 E.L.T. 665. This is an order in revision of the Government of India from the order of Assistant Collector. In this case the manufacturer produced iron and steel products. By a Notification No. 206 of 1963 as amended by another Notification No. 123 of 1963 iron and steel products were exempted from excise duty. Such exemption was claimed in respect of goods manufactured during the period of exemption but cleared after the exemption were withdrawn. The Assistant Collector of Excise rejected the claim of the manufacturer on the ground that duty as leviable on the date of clearance would be payable. The revision application was allowed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as there cannot be any quarrel, that the provisions postulated by the said rule lays down the mode and manner of assessment. It does not answer the question posed herein. The question is, what is that attracts the tax and not when, how and to what extent it attracts. In our undoubted view, as we observed earlier, the attraction of tax is at the very threshold when excisable commodity is manufactured or produced, notwithstanding the point of its removal, consumption or being caused the disappearance of. When a notification is issued extending exemption, partial or total, with reference to, say, expansive production as in the case, and the assessee on that count produces or manufactures goods in compliance of the said notification and if the authority rescinds the same after the goods are manufactured and before the goods are cleared or removed for one reason or the other, then the very scheme and object behind such exemption clause is rendered abortive, stultifying the very incentive accorded to the authority concerned. We unhesitatingly hold that the excise duty would arise the moment the manufacture or production of the commodity is complete irrespective of the fact that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s after the withdrawal of exemption the excise authorities held that duty was payable. The manufacturer paid duty under protest and applied for refund. This application was rejected by the Assistant Collector whose decision was affirmed by the Appellate Collector. The manufacturer filed a revision petition to the Government of India which was transferred to the Customs and Excise Appellate Tribunal. The majority of the members of the Tribunal following the decision of the Madhya Pradesh High Court in the case of Kirloskar Bros. Ltd. (Supra) held that the manufacturer was entitled to the refund claimed. The appeal was allowed. (i) Tata Export Ltd. v. Union of India Ors. reported in 1985 (22) E.L.T. 732. In this case a Division Bench of the Madhya Pradesh High Court reiterated the principle laid down by the Supreme Court in State of Tamil Nadu v. Kandaswami reported in AIR 1975 SC 1871 to the effect that after total exemption of tax the goods ceased to be taxable goods. 38. Learned Advocate for the respondent contended on the other hand that the controversy raised in these proceedings had not been concluded in favour of the appellants. The High Courts, it was submitted, had t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise duty current from the 1st March 1961. The manufacturer contended to the contrary and relying upon Rule 9A of the Central Excise Rules submitted that excise duty was payable at the rate in force on the date the duty was actually paid. It was further contended that the goods having cleared or removed from the factory before the midnight of the 28th February, 1961 could not be made liable for the enhanced duty. The contentions of the manufacturer were rejected by the Assistant Collector and on Appeal by the Collector of Central Excise. A revision appliction made before the Government of India from the order of the Collector was also rejected. The matter came up before the Supreme Court by Special Leave. The Supreme Court held that in case of manufactured goods the payment of duty and the clearance of goods may be synchronous or the payment may be postponed though the goods may be removed. The critical time was the removal from factory or warehouse but if duty was paid before the removal then the critical time would be the payment of duty. In the facts it was found that the goods have been removed on payment of duty on a gate pass. The wagons had left the factory premises and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court held after construing section 3 of the Act with Rules 7, 8, 9, and 9A of the Central Excise Rules that at the stage of manufacture or production of goods excise duty was not attracted. The High Court observed as follows :- "The scheme of the Act is that a duty of excise is levied on certain goods which are specified in the First Schedule to the Act. The qualifications so far as the classes of goods on which the duties are levied are two, namely - (1) that they must be specified in the First Schedule as being subject to a duty of excise and (2) they must be produced or manufactured in India. Section 3 does not itself specify the point of time at which the duty is to be levied or imposed. It requires the levy of the duty and the collection of the amount of duty to be prescribed by the Rules. The combined effect of Section 3 and Rules 7, 9 and 9A so far as the present case is concerned, is that in the case of the mills the duty was attracted on goods in question on the date of actual removal of the goods from the mills' factory. The point of time at which we have to see whether the goods were liable to duty would be thus the date of removal of the goods from the factory or war ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. -(1) The Central Government may from time to time by notification in the Official Gazette, exempt subject to such conditions as may be specified in the notification any excisable goods from the whole or any part of duty leviable on such goods. (2) The Central Board of Excise and Customs, may by special order in each case exempt from the payment of duty, under circumstances of an exceptional nature any excisable goods". Rule 9 : Time and manner of payment of duty. - (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 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 : Provided that such goods may be deposited without payment of duty in a store room or other place of storage of approved by the Collector under Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inning Weaving Mills Co. Ltd. (Supra) has taken the view that excise duty is not attracted at the stage of manufacture or production of goods but the date of the actual removal of the goods from the place of manufacture is the point of time when the duty is attracted. 45. So far as the Supreme Court is concerned the special leave petition to appeal from the decision of the Madhya Pradesh High Court in the case of Kirloskar Bros. Ltd. (Supra) was rejected. But in Orient Paper Mills Ltd. (supra) the Supreme Court observed that in the case of manufactured goods the payment of duty and the clearance of goods may be synchronous. The Supreme Court has further observed that the critical time is the removal of the goods from the factory or warehouse but if the duty is paid before removal then the critical time would be the time of payment of duty. The Madhya Pradesh High Court has considered and distinguished the decision of the Supreme Court in Orient Paper Mills in its subsequent judgment in the case of Kirloskar Brothers Ltd. reported in 1978 E.L.T. 690 (supra). It was held by the Madhya Pradesh High Court that where no excise duty had been imposed at the time of manufacture of good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the goods remain uncleared after their manufacture, in our view, cannot make the goods exigible to excise duty in the event a duty is imposed subsequent to the manufacture. We also hold that where the exemption is total the goods cannot be held to be taxable goods. We respectfully agree with the view of the Madhya Pradesh High Court on this point in Tata Exports Limited (supra). 51. We, however, make it clear that we are not expressing any opinion whether on account of subsequent change of rate of excise duty whether the old or new rate will apply at the time of clearance of the goods. In the facts before us, under the withdrawn Notification the goods were totally exempt from excise duty when they were manufactured and no duty was leviable at all. This is not a case of change of rate of duty. 52. For the reason as above, the appeal is allowed. The judgment and order dated the 22nd March, 1983 is set aside. The impugned order dated the 13th December, 1982 is directed to be quashed and the Rule Nisi is made absolute to the extent as above. 55. The order dated the 16th December, 1980 of the Assistant Collector of Central Excise, Calcutta on an appeal from which the impugned or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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