Notional excise duty base can sustain additional excise levy despite exemption on captively consumed goods.

Where a levy is defined as a percentage of excise duty, the duty base may be computed notionally even if the captively consumed goods are exempt from payment of excise duty. Applying that principle, the Tribunal noted that the earlier view treating nil excise duty as defeating the levy could not survive the later High Court ruling on education cess. Because additional duties of excise under the Additional Duties of Excise (Textile and Textile Articles) Act, 1978 are linked to excise duty calculated and levied, exemption from excise on the goods did not remove the statutory base for computing the additional duty. The assessee was therefore liable to additional excise duty on a notional excise calculation, and the lower authority orders were set aside.

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Issues: Whether additional duties of excise under the Additional Duties of Excise (Textile and Textile Articles) Act, 1978 could be levied by notionally calculating excise duty where the captively consumed goods were exempt from excise duty.

Analysis: The Tribunal held that the earlier view treating nil excise duty as defeating the levy could not stand in light of the later High Court ruling on education cess. The governing principle applied was that when a levy is expressed as a percentage of excise duty, the duty component may be computed notionally even if the assessee is not actually required to pay excise duty because of exemption. Since the additional excise duty under the 1978 Act is also linked to excise duty calculated and levied, the exemption on the goods did not eliminate the statutory base for computing the additional duty.

Conclusion: The assessee was liable to the additional excise duty on a notional calculation of excise duty, and the orders of the lower authorities were set aside.

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