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of <h1>Court rules duty levied upon completion of processes, exempting fabrics from new ad valorem scheme</h1> The Court ruled in favor of the assessees, determining that duty under Section 3A of the Central Excise Act was levied under the Rules of 2000 upon ... Production Capacity Based Duty – Section 3A of the Central Excise Act, 1944 – Effect of withdrawn of compounded levy scheme – demand was raised on part manufactured goods completed after the date of withdrawn of scheme – held that when the entire processes of stentering was already over, and only thing remaining to be done was, decatising, folding, and packing, that being not the requirement, as a sine qua non, for amounting to “manufacture”, it cannot be said, that duty did not stand levied on the said stock under the Rules of 2000, simply because, decatising, folding, and pressing was yet to be done at the cut off date and time – duty u/s 3A levied as soon as goods manufactured – demand is not sustainable. Issues Involved:1. Levy of Duty under Section 3A of the Central Excise Act, 1944 read with Rule 96ZQ of the Central Excise Rules, 1944.2. Impact of change in law effective from 1st March 2001 on duty payable until 28th February 2001.Issue-Wise Detailed Analysis:1. Levy of Duty under Section 3A of the Central Excise Act, 1944 read with Rule 96ZQ of the Central Excise Rules, 1944:The primary issue revolves around whether the duty under Section 3A of the Central Excise Act, 1944, read with Rule 96ZQ of the Central Excise Rules, 1944, was applicable at the stage of finishing processes for man-made fabrics. The assessees, engaged in manufacturing and processing man-made fabrics, were initially paying excise duty under the 'Compounded Levy Scheme' which was withdrawn effective 1-3-2001, transitioning to an ad valorem duty basis.The Department contended that the fabrics, which were not fully processed by 28-2-2001, should be considered as manufactured in March 2001, thus liable for duty under the new ad valorem scheme. However, the assessees argued that since the fabrics had passed through the stenter machine by the cut-off date, they were deemed manufactured under the 'Compounded Levy Scheme' and hence, duty-paid.The Court examined the Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 2000, and Rule 96ZQ of the Central Excise Rules, 1944. It was observed that the liability to pay excise duty arises upon the manufacture of the commodity, and collection upon removal is merely for convenience. The Court clarified that the term 'manufacture' includes any one or more processes such as bleaching, dyeing, printing, shrink-proofing, tentering, heat-setting, or crease-resistant processing. Thus, the fabrics subjected to stentering by 28-2-2001 were deemed manufactured and duty-paid under the Rules of 2000, even if subsequent processes like decatising, folding, and packing were pending.2. Impact of change in law effective from 1st March 2001 on duty payable until 28th February 2001:This issue concerns whether the change in law effective from 1st March 2001 affected the duty payable and paid until 28th February 2001. The Court noted that this question does not arise as no party contended that the change in law altered the duty payable until 28-2-2001. The core question was whether the goods were duty-paid under the old scheme before the cut-off date. If the goods were manufactured before the cut-off time, they were deemed duty-paid under the 'Compounded Levy Scheme'. Conversely, if still in the process of manufacture post cut-off, they would attract duty under the new ad valorem scheme.The Court concluded that the fabrics, having undergone stentering by 28-2-2001, were manufactured and duty-paid under the Rules of 2000. Thus, the subsequent processes did not defer the duty liability to the new regime.Conclusion:The Court answered the first question in favor of the assessees, holding that the duty under Section 3A read with Rule 96ZQ was levied under the Rules of 2000 when one or more specified processes were completed, not deferred until finishing processes like decatising, folding, or packing. Consequently, the appeals were allowed, the impugned orders were set aside, and the notices issued by the Joint Commissioner were quashed.
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