Clearance Date Governs Duty Rate Where Payment Was Relaxed for Indeterminate Central Excise Liability

Where duty payment is permitted under Rule 173PP(5) for goods whose duty could not be determined at removal, the applicable rate is the rate prevailing at the time of clearance, not the rate on the date of invoice. The rule and the contemporaneous Board circular contemplated provisional debit entries followed by later adjustment, showing that the relevant event for duty incidence remained clearance of the goods. A demand founded on the invoice date had no supporting rule or provision and was therefore unsustainable.

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Issues: Whether, where relaxation for payment of duty was granted under Rule 173PP(5) of the Central Excise Rules, the applicable rate of duty was the rate prevailing at the time of clearance of the goods or the rate prevalent on the date of invoice.

Analysis: Rule 173PP enabled adjustment of duty where the quantum could not be determined at the time of removal of goods. The Board circular issued under that regime contemplated provisional debit entries and subsequent adjustment. On the facts, the assessee had acted under the permitted relaxation. No rule or provision was shown to support the demand based on the date of issuance of invoice. The governing point was the stage of clearance, not the later preparation of invoice.

Conclusion: The applicable rate of duty was the rate prevalent at the time of clearance of the goods, not the rate on the date of invoice, and the demand was unsustainable.

Ratio Decidendi: Where duty payment is regulated under a relaxation granted for indeterminate duty liability at removal, the incidence and rate of duty are to be determined with reference to the time of clearance of the goods.

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