Duty of excise may apply at an intermediate manufacturing stage if the levy remains tied to production, not purchase.

Copra cess under the Copra Cess Act, 1979 was treated as a valid duty of excise within Parliament's competence because the levy was linked to manufacture or production, not to the mere purchase or consumption of copra. The Court noted that copra consumed in a mill served only as the measure of the impost, while the taxable event was the transformation of copra into a new commercial commodity. It further held that excise under Entry 84 of List I may be imposed at an intermediate stage if it retains its character as a duty on manufacture or production, and the statutory refund and assessment machinery reinforced that character.

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Issues: Whether the cess imposed on copra consumed in a mill under the Copra Cess Act, 1979 is a valid duty of excise falling within the legislative competence of Parliament, or an impermissible tax on consumption or purchase of raw material.

Analysis: The levy was upheld as being connected with manufacture or production and not as a tax on the purchase or mere consumption of copra. The statutory scheme treated copra consumed in a mill as the measure of the levy, but the taxable event was the transformation of copra into a new commercial commodity. The Court held that, for the purposes of Entry 84 of List I of the Seventh Schedule to the Constitution of India, duty of excise is not confined to levy at the final stage of finished goods; it may be imposed at an intermediate stage so long as the impost retains its character as a duty on manufacture or production. The provisions for assessment, refund on export, and application of central excise machinery confirmed that the cess was attached to the manufacturing process and not to a purchase transaction.

Conclusion: The cess is a valid duty of excise within Parliament's competence and is not a tax on purchase or consumption as such.

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