Sugar cess cannot be demanded at an enhanced rate on goods already cleared and duly paid for earlier.

Sugar cess is chargeable at the time sugar is cleared from the factory, because Section 3(4) of the Sugar Cess Act, 1982 applies the Central Excise levy and collection framework. Where sugar was cleared after payment of the duty and cess then applicable, there was no legal basis to treat the goods as short-paid merely because the cess rate was enhanced later. The subsequent increase could not be applied retrospectively to goods already cleared, so a demand for differential sugar cess was not sustainable and the appeals were allowed.

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Issues: Whether differential sugar cess could be demanded on sugar already cleared from the factory on payment of the applicable duty and cess at the time of clearance, merely because the rate of sugar cess was enhanced later.

Analysis: Section 3(4) of the Sugar Cess Act, 1982 applies the Central Excise law and rules to levy and collection of sugar cess. On that basis, the relevant liability arises at the time of clearance of the goods from the factory. Once sugar had been cleared on payment of the appropriate duty and cess then applicable, there was no legal basis to treat the goods as short-paid or to recover an enhanced cess introduced after clearance. The subsequent increase in cess could not be applied retrospectively to goods already cleared.

Conclusion: The demand for differential sugar cess was not sustainable and the appeals were allowed.

Ratio Decidendi: Sugar cess, being governed by the same levy and collection framework as central excise under Section 3(4) of the Sugar Cess Act, 1982, is chargeable at the time of clearance and cannot be demanded at an enhanced rate on goods already cleared on payment of the then-applicable duty and cess.

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