1996 (10) TMI 86 - SC - Central Excise

Supreme Court clarifies excise duty on cutting tools, upholds Tribunal decision

The Supreme Court ruled in a case involving a cutting tools manufacturer seeking excise duty exemption under a government Notification. The dispute ... Whether the question of clearance of goods could only arise if the excise duty became leviable? Whether the goods manufactured by the assessee were not dutiable before 1-3-1974 therefore, no question of clearance of the goods manufactured by the appellant could arise before that date? Held that:- Rule 9 of the Central Excise Rules provided for calculation of duty and value of the goods at the time of removal of the goods from the factory or a warehouse. The notification No. 198/76-C.E., dated 16-6-1976 deals with clearances of specified goods, not removal of excisable goods. The goods which have been specified in the Notification will qualify for the relief given in the Notification. The goods of the appellant have been specified in the Notification and as such qualified for the exemption. Therefore, clearances in the context of this Notification cannot have any special meaning. It does not signify any special sense nor can it be equated with removal of dutiable goods from a factory under the Central Excise Act. The manner of calculation cannot take away anything from what has been specifically provided in Clauses (b) and (c) of the Notification in very clear terms. The object is to give relief and encouragement to the manufacturers to produce goods in larger quantities than what were produced in the base year. There is no reason to assume that production before the levy of excise duty has to be ignored for this purpose. The base year has to be determined according to the principle laid down in clear and unambiguous words in Clauses (b) and (c) of Paragraph (2) of the Notification. The appellant's goods were cleared from his factory even before 1st April, 1973. As such his case clearly fell within Clause (c). Appeal dismissed. Issues:1. Interpretation of a Notification granting exemption on excise duty for specified goods.2. Determination of base clearances for calculating excess clearance of goods manufactured by the appellant.3. Dispute regarding the appropriate clause for determining base clearance under the Notification.4. Argument regarding the applicability of clauses (b) and (c) of the Notification to the appellant's case.5. Whether the goods manufactured by the appellant were dutiable before a certain date and the relevance of this to the clearance calculation.6. Examination of the Central Excise Act and Rules in relation to the determination of base clearances under the Notification.7. Consideration of the wording and objective of the Notification in granting relief to manufacturers.Analysis:The Supreme Court analyzed a case where the appellant, a cutting tools manufacturer, sought exemption from excise duty under a Notification issued by the Government of India. The dispute revolved around the calculation of base clearances for determining excess clearance of specified goods. Initially, the excise authority considered Clause (b) for base clearance calculation but later switched to Clause (c), leading to a challenge by the appellant. The appellant argued that Clause (c) was not applicable as their goods were manufactured before a specific date. However, the Court held that since the appellant's goods were cleared before April 1, 1973, Clause (c) was indeed applicable, rejecting the appellant's contention.Furthermore, the Court addressed the argument that goods were not dutiable before a certain date, hence no clearance could be considered. The Court clarified that excise duty became leviable on the goods from March 1, 1973, even if they were not dutiable before a later date. The Court emphasized that the Notification focused on clearances of specified goods, not just removal of dutiable goods, and the appellant's goods qualified for the exemption specified. The Court highlighted the importance of the wording in the Notification and upheld the Tribunal's decision based on the clear and unambiguous language of Clauses (b) and (c) for determining base clearances.Additionally, the Court discussed the objective of the Notification, which aimed to encourage manufacturers to increase production. The Court emphasized that production before the levy of excise duty should not be disregarded for calculating excess clearance. Ultimately, the Court dismissed the appeals, affirming the Tribunal's order and upholding the determination of base clearances under the relevant Notification.