Special excise duty base must reflect input-duty exemption, computed on net duty after set-off under Notification No. 178/77.

Special excise duty under the Finance Bill, 1978 was to be computed on the net excise duty remaining after giving effect to the exemption for duty already paid on inputs under Notification No. 178/77, not on the gross basic duty on plywood. The exemption under Rule 8(1) reduced the duty otherwise leviable on the final goods, and Clause 37(4) made the refund and exemption provisions applicable to the special duty as far as may be. The later wording in the Finance Bill, 1983, expressly excluding input-credit type notifications from the special duty base, was cited as confirming this construction.

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Issues: Whether special excise duty under the Finance Bill, 1978 was to be computed on the gross basic excise duty leviable on plywood or on the net amount after giving effect to the exemption under Notification No. 178/77 for duty already paid on inputs.

Analysis: The Notification under Rule 8(1) of the Central Excise Rules, 1944 granted exemption from so much of the duty of excise leviable on excisable goods as was equivalent to duty already paid on inputs falling under Item 68. Clause 37(1) of the Finance Bill, 1978 levied special duty at five per cent of the amount so chargeable on the goods, and Clause 37(4) made the refund and exemption provisions of the Central Excises Act and Rules applicable to the special duty as far as may be. On that scheme, the duty chargeable on the final goods had first to be reduced by the exemption attributable to duty-paid inputs, and only the resultant amount could be taken for computing special excise duty. Support was also drawn from the later wording of Clause 55(1) of the Finance Bill, 1983, which expressly excluded input-credit type notifications from the special duty base, confirming the assessee's construction though without retrospective operation.

Conclusion: Special excise duty was required to be computed on the net excise duty remaining after the Notification No. 178/77 set-off, and not on the gross duty before such reduction.

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