2018 (12) TMI 1109 - AT - Central Excise

Tribunal rules on duty for pre-2008 goods, citing Wallace Flour Mills case.

M/s. Dhariwal Industries Limited Versus Commissioner of Central Excise & ST, Vadodara

The Tribunal allowed the appeal, ruling in favor of M/s. Dhariwal Industries Limited regarding the leviability of duty on goods manufactured before ... Valuation - Compounded levy scheme - goods manufactured but not cleared from the factory and lying as opening stock at the time of introduction of compounded levy scheme - whether chargeable to tax on the basis of rates prevalent prior to introduction of compounded levy scheme or the said clearances would be adjusted against the duty paid on the capacity determined under the compounded levy scheme? Held that:- The manner of collection was changed from ad-valorem duty on each clearance under Section 3 of Central Excise Act, 1944 to compounded levy under Section 3A of Central Excise Act. The charges were enforced by issue of Notification No. 29/2008-CE (NT) dated 01.07.2008. Thus there was no new levy introduced but there were only changes in the manner of collection. The issue decided in the case of WALLACE FLOUR MILLS COMPANY LTD. VERSUS COLLECTOR OF C. EX. [1989 (9) TMI 106 - SUPREME COURT OF INDIA], where it was held that Even though the taxable event is the manufacture or the production of an excisable article, the duty can be levied and collected at a later date for administrative convenience - appeal allowed - decided in favor of appellant. Issues: Leviability of duty on goods manufactured prior to 01.07.2008 and lying un-cleared in stock as opening stock.Analysis:The appeal pertains to the confirmation of demand of Central Excise duty, interest, and penalty under Rule 25(1)(a) of Central Excise Rules, 2002 by M/s. Dhariwal Industries Limited. The issue revolves around the leviability of duty on goods manufactured before 01.07.2008, remaining un-cleared in stock as opening stock. The appellant argued that duty paid based on the number of packing machines operating during July 2008 covered clearances of goods manufactured earlier. The Revenue contended that duty payment for July 2008 covered only goods produced in that month, demanding duty for stock on hand on 30.06.2008 and opening balance on 01.07.2008. The appellant relied on the duty liability being paid per machine installed and working on 01.07.2008, citing the principle that duty rate applicable at clearance time governs, as per the Supreme Court's decision in Wallace Flour Mills case.The appellant further referenced the Apex Court's judgments in Hans Steel Rolling Mill and Shree Bhagwati Steel Rolling Mills cases to argue that under the Compounded Levy Scheme, no interest could be levied. They also highlighted discrepancies in the publication date of relevant notifications, asserting lack of awareness of Section 3 to 3A liability at clearance time. The appellant contended that the duty paid under the compounded levy scheme for 01.07.2008 exceeded the Revenue's demand, seeking adjustment of the excess amount.The Revenue, however, supported the impugned order, citing precedents like CCE, Mumbai vs. Dhanesh Textile Indus. Pvt. Ltd. and Shriganesh Texfab Ltd. vs. UOI to emphasize duty liability on stock at the scheme's introduction date. The Tribunal analyzed the dispute concerning goods manufactured pre-scheme but uncleared, determining whether duty should apply based on pre-scheme rates or adjusted against duty paid under the scheme. Referencing the Wallace Flour Mills case, the Tribunal noted the change in duty collection manner under the scheme but no new levy introduction, aligning with the principle that duty applies based on clearance time rates. Upholding the appellant's arguments, the Tribunal allowed the appeal, emphasizing the taxable event as manufacture and the duty collection for administrative convenience at clearance time.In conclusion, the Tribunal allowed the appeal based on the principle that duty is levied as per rates prevalent at clearance time, following the Supreme Court's decision in the Wallace Flour Mills case, where duty realization can be postponed for administrative convenience to the removal date despite manufacture being the taxable event. The Tribunal's decision was pronounced on 20.12.2018.