Sugar cess liability follows the rate on clearance, so later enhancement cannot reach goods already cleared from the factory.

Sugar cess under the Sugar Cess Act, 1982 is levied and collected as duty of excise at the stage of production and clearance, so the rate prevailing on the date of clearance governs the liability. A later enhancement of cess cannot be applied to sugar already cleared from the factory merely because the goods remained in the godown or were sold after the higher rate notification took effect. On that prima facie view, the assessee established a strong case for interim relief, and waiver of pre-deposit of duty and penalty was granted.

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Issues: Whether enhanced sugar cess could be demanded on sugar already cleared from the factory on payment of cess at the rate applicable on the date of clearance, merely because the goods were lying in the godown and sold after the rate was enhanced; and whether the appellants had made out a prima facie case for waiver of pre-deposit of duty and penalty.

Analysis: Sugar cess under the Sugar Cess Act, 1982 is levied and collected as duty of excise on sugar produced by the sugar factory. The statutory scheme, including section 3(4), attracts the provisions governing levy and collection of excise duty. On that basis, once sugar has been cleared from the factory on payment of cess at the rate prevailing on the date of clearance, a later increase in the rate does not alter the duty already paid on such clearances. The higher rate cannot be fastened merely because the stock remained in the godown or was sold after the notification increasing the rate came into force. On this prima facie view, the appellants showed a good case for interim protection.

Conclusion: The enhanced rate of sugar cess was not applicable to sugar already cleared from the factory at the earlier rate, and the appellants were entitled to waiver of pre-deposit of duty and penalty.

Final Conclusion: The stay applications were allowed on the basis that the dispute raised a strong prima facie case in favour of the appellants and the subsequent increase in cess could not be applied to goods already cleared.

Ratio Decidendi: For a duty or cess levied on manufacture and collection at the time of clearance, the rate applicable on the date of clearance governs the liability, and a subsequent enhancement cannot be applied retrospectively to goods already cleared.

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