Withdrawal of levy before clearance prevents excise demand where the nil rate applies on the date of removal.

Additional excise duty on yarn manufactured while the levy was in force could not be demanded where the levy was withdrawn before the goods were cleared. The relevant liability depended not only on the date of manufacture but also on the rate applicable on the date of removal, and once the levy had been withdrawn the applicable rate was nil. On that basis, the duty demand for clearances made after withdrawal was not sustainable, and the issue was decided in favour of the assessee.

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Issues: Whether additional excise duty was payable on yarn manufactured before the withdrawal of the levy but cleared after the levy had been withdrawn.

Analysis: The dispute turned on whether liability was fixed only by the date of manufacture or also by the rate in force on the date of clearance. The goods were manufactured when the levy subsisted, but by the time of removal the relevant additional excise duty had been withdrawn and the applicable rate had become nil. On that basis, the duty could not be sustained for clearances made after withdrawal of the levy.

Conclusion: The demand was not sustainable and the issue was decided in favour of the assessee.

Ratio Decidendi: Where a levy is withdrawn before clearance, the nil rate prevailing on the date of removal governs the demand for duty on the goods cleared thereafter.

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