1. Dispute over excise duty on plastic articles manufactured during a full exemption period but cleared after the exemption was modified to a specific rate. (Para 1 )
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1999 Supreme(SC) 1241
SUPREME COURT OF INDIA
J.Jagannadha Rao : S.P.Bharucha : V.N.Khare
Collector Of Central Excise, Bombay
Versus
Polyset Corporation
Case No. : 4574 , 4575 of 1989
Date of Decision : 10/26/99
Important Points
Excise duty is triggered by manufacture, but the applicable rate of duty is determined by the rate prevailing on the date of the goods' clearance from the factory, regardless of the exemption status at the time of manufacture.
Subject
Tax Law - Excise Duty
Act Referred
Headnote
(A) Central Excise - Determination of duty - Rate of duty - Excise is a duty on manufacture or production, but the realisation of the duty may be postponed for administrative convenience to the date of removal of goods from the factory - Even though the taxable event is the manufacture or the production of an excisable article, the duty can be levied and collected at a later date for administrative convenience. (Para 2)
(B) Rate of duty - For the purposes of determining whether goods were excisable, the date of their manufacture is relevant - As to the rate of duty that the goods must bear, the date of their clearance is relevant. (Para 3)
Facts of the case:
Articles of plastic were manufactured during a period when they were wholly exempt from excise duty by virtue of a notification. However, by the time the goods were cleared from the factory, the notification had been amended to provide for a levy of excise duty at the rate of eight per cent. The Tribunal concluded that since the goods were entitled to a full exemption at the time of manufacture, they would not attract the duty rate in force at the time of clearance.
Findings of Court:
The Tribunal was in error. The goods were exigible to excise duty under the tariff prevailing at the time of manufacture. Although an exemption notification provided full exemption at the time of manufacture, the notification was modified by the time of clearance, making the goods liable to duty at the rate of eight per cent.
Issues: Whether the rate of excise duty is determined by the notification in force at the time of manufacture or the notification in force at the time of clearance.
Ratio Decidendi: The court ruled that while the date of manufacture is the relevant factor for determining whether goods are excisable, the rate of duty applicable to those goods is determined by the rate prevailing on the date of their clearance from the factory.
Result: Appeals allowed.
(B) Rate of duty - For the purposes of determining whether goods were excisable, the date of their manufacture is relevant - As to the rate of duty that the goods must bear, the date of their clearance is relevant. (Para 3)
Facts of the case:
Articles of plastic were manufactured during a period when they were wholly exempt from excise duty by virtue of a notification. However, by the time the goods were cleared from the factory, the notification had been amended to provide for a levy of excise duty at the rate of eight per cent. The Tribunal concluded that since the goods were entitled to a full exemption at the time of manufacture, they would not attract the duty rate in force at the time of clearance.
Findings of Court:
The Tribunal was in error. The goods were exigible to excise duty under the tariff prevailing at the time of manufacture. Although an exemption notification provided full exemption at the time of manufacture, the notification was modified by the time of clearance, making the goods liable to duty at the rate of eight per cent.
Issues: Whether the rate of excise duty is determined by the notification in force at the time of manufacture or the notification in force at the time of clearance.
Ratio Decidendi: The court ruled that while the date of manufacture is the relevant factor for determining whether goods are excisable, the rate of duty applicable to those goods is determined by the rate prevailing on the date of their clearance from the factory.
Result: Appeals allowed.
Legal Category Hierarchy
Table of Contents
2. Whether goods exempt from excise duty at the time of manufacture attract duty at the rate prevailing on the date of clearance. (Para 1 )
3. Excise is a duty on manufacture, but collection is postponed to the date of removal for administrative convenience. (Para 2 , 3 )
4. Excisability is determined by the date of manufacture, whereas the applicable rate of duty is determined by the date of clearance. (Para 3 )
5. Appeals allowed and the order of the Tribunal set aside. (Para 4 )
6. What is the relevant date for determining if goods are excisable?
The date of manufacture is the relevant date for determining whether goods are exigible to excise duty. (Para 3 )
7. What is the relevant date for determining the rate of excise duty?
The rate of duty is determined by the rate prevailing on the date the goods are cleared from the factory. (Para 2 , 3 )
8. Does a nil rate of duty at manufacture preclude a levy at the time of removal?
No, a nil rate is considered a rate of duty; goods remain excisable, and the rate prevailing at the time of removal applies. (Para 2 , 3 )
(1) THESE appeals are by the Revenue against an order of the Customs, Excise and Gold (Control) Appellate Tribunal. The goods in question are articles of plastic. They were at all relevant times excisable goods, but when they were manufactured, they were wholly exempt from excise duty by virtue of a notification (No. 68/71). When cleared, however, that notification had been amended by another notification (No. 52/82) which provided for a levy of excise duty thereon at the rate of eight per cent. The Tribunal came to the conclusion that the goods having been entitled to a full exemption from the payment of excise duty when they were manufactured, they would not attract excise duty at the rate of eight per cent as in force when they were cleared.
(2) OUR attention has been drawn by learned counsel for the Revenue to the judgment of this Court in Wallace Flour Mills Co. Ltd. v. CCE where it has been held:
"EXCISE is a duty on manufacture or production. But the realisation of the duty may be postponed for administrative convenience to the date of removal of goods from the factory. ... We are of the opinion that even though the taxable event is the manufacture or the production of an excisable article, the duty can be levied and collected at a later date for administrative convenience."
The judgment in Wallace Flour Mills was referred to with approval, by a Bench of three learned Judges in CCE v. Vazir Sultan Tobacco Co. Ltd. It was said:
"THAT was a case where the goods were excisable goods prior to 1-3- 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 1-3-1987, 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 9-A, that though the goods were produced or manufactured prior to 1-3-1987, still they attracted duty at the rate prevailing on the date of their removal, i.e. fifteen per cent."
(3) WE are in no doubt that the Tribunal was in error in the view that it took. The said goods were exigible to excise duty under the tariff that then prevailed. When manufactured, an exemption notification wholly exempted the said goods from the payment of excise duty. When they were cleared from the respondents factory, the exemption notification had been modified so that they were liable to duty at the rate of eight per cent. For the purposes of determining whether the said goods were excisable, what is relevant is the date of their manufacture. On that date they were exigible to excise duty. As to the rate of duty that the said goods must bear, what is relevant is the date of their clearance. On that date they were liable to duty at the rate of eight per cent by reason of the amended exemption notification.
(4) THE appeals are allowed. The order under appeal is set aside. No order as to costs.
