Excise duty arises on manufacture, and exemption survives rescission for goods produced during the operative period.

Excise duty under the Central Excises and Salt Act attaches on manufacture or production of excisable goods, while removal and assessment are only machinery for collection. Rule 9A does not shift the taxable event from manufacture to clearance. Goods manufactured during the currency of an exemption notification retain the concessional rate even if the notification is rescinded before removal, because the exemption benefit is earned when production occurs. The later withdrawal of the notification does not defeat that accrued benefit, and excess duty collected on such goods is refundable.

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Issues: (i) Whether excise duty on the goods in question was attracted on manufacture or production, or only on removal from the factory; (ii) Whether goods manufactured during the currency of the exemption notification but removed after its rescission remained entitled to the concessional rate.

Issue (i): Whether excise duty on the goods in question was attracted on manufacture or production, or only on removal from the factory.

Analysis: Section 3(1) of the Central Excises and Salt Act, 1944 fixes the levy on excisable goods produced or manufactured in India. Section 4 and Rules 8, 9 and 9A regulate valuation, exemption, payment and the date for determination of duty, but they do not alter the point at which the impost arises. Rule 9A governs the timing of assessment and collection at removal, yet it is only machinery for collection and does not shift the incidence of duty away from manufacture or production.

Conclusion: The duty arises on manufacture or production, not on removal; this issue is decided in favour of the assessee.

Issue (ii): Whether goods manufactured during the currency of the exemption notification but removed after its rescission remained entitled to the concessional rate.

Analysis: The exemption under Rule 8 operated with reference to the enlarged production capacity and attached to goods produced under the notification. Since the taxable incidence was complete upon manufacture, rescission of the notification before removal could not extinguish the benefit already earned. Reading the charging provision with the exemption scheme, the Court treated the later withdrawal of the notification as irrelevant to goods already manufactured during the exemption period.

Conclusion: The goods remained entitled to the exemption and concessional rate; this issue is decided in favour of the assessee.

Final Conclusion: The exemption benefit could not be denied merely because the goods were cleared after the notification had been withdrawn, and the excess duty collected was refundable.

Ratio Decidendi: In excise law, the taxable incidence is the manufacture or production of goods, while removal and assessment are matters of machinery; accordingly, goods manufactured during an operative exemption period retain that benefit even if the exemption is rescinded before clearance.

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