1989 (9) TMI 106 - SC - Central Excise

Rule 9A allows deferral of excise duty payment until removal; pre-budget stocks are not entitled to duty-free clearance.

The SC upheld the Tribunal's dismissal of the appeal, holding that while the taxable event under the Act is the manufacture or production of excisable ... Taxable event is the manufacture or production of an excisable article - liability to pay excise duty may be postponed to the date of removal for administrative convenience - application of Rule 9A of the Central Excise Rules, 1944 postponing payment to removal - an exemption notification does not convert excisable goods into non-excisable goodsTaxable event is the manufacture or production of an excisable article - liability to pay excise duty may be postponed to the date of removal for administrative convenience - application of Rule 9A of the Central Excise Rules, 1944 postponing payment to removal - Whether pre-budget stocks manufactured before 1st March, 1987 but removed after that date escaped duty introduced by the Finance Bill effective 1st March, 1987 - HELD THAT: - The Court accepted the Tribunal's conclusion that, under the scheme of the Central Excises and Salt Act, 1944 read with the rules, the taxable event remains the manufacture or production of an excisable article while the realisation of duty may be postponed until removal from the factory for administrative convenience. Rule 9A expressly relates payment to the date of removal without converting removal into the taxable event. Reliance on earlier decisions that treated the date of manufacture as the relevant date was considered but rejected in the facts of this case because an exemption by notification does not change the character of goods as excisable; they remain 'excisable goods' even when exempted. Applying these principles, goods manufactured before the Finance Bill but removed after 1st March, 1987 remained subject to the duty rate applicable on removal, and the Tribunal was right to dismiss the appellant's claim to duty-free clearance of those stocks. [Paras 3, 4, 5]Appeal dismissed; Tribunal correctly applied Rule 9A and the scheme of the Act, holding that duty is payable as per rate on date of removal and pre-budget manufacture did not entitle appellant to duty-free clearance.Final Conclusion: The Tribunal's order was affirmed: although manufacture is the taxable event, liability to pay excise may be postponed to the date of removal under Rule 9A, and stocks manufactured before but removed after 1st March, 1987 were liable to duty at the rate in force on removal; appeal dismissed with no order as to costs. Issues:Classification of pre-budget stocks for duty-free clearance under the Central Excises and Salt Act, 1944.Analysis:The appellant, a manufacturer of food products, filed a classification list claiming duty-free clearance for pre-budget stocks. The Assistant Collector held the products excisable but exempt from duty. The Collector of Central Excise (Appeals) and the Tribunal upheld this decision. The appellant argued the goods were not leviable until 28th February, 1987, when they were made dutiable by the Finance Bill, 1987-88. The revenue contended the goods were excisable at the time of manufacture, and duty payment was postponed to removal date under Rule 9A of the Central Excise Rules, 1944. The Tribunal agreed with the revenue, emphasizing duty collection for administrative convenience.The Tribunal's decision was based on the Act's scheme, where duty payment is related to the date of removal, not manufacture. The appellant argued the goods were exempt until 28th February, 1987, but the Court disagreed, stating excise duty is on manufacture or production, with payment postponed for administrative convenience. Citing Rule 9A, the Court clarified that removal, not manufacture, triggers duty liability. Referring to precedents, the Court affirmed that goods do not become non-excisable due to exemptions. The Court emphasized that duty collection can be postponed to removal date for administrative ease, despite manufacture being the taxable event.Considering the excise law's scheme and the case's circumstances, the Court upheld the Tribunal's decision, finding no grounds to challenge it. The appeal was dismissed, with no order as to costs.