Special excise duty on exempt goods turned on manufacture date, not later clearance, defeating liability under the fresh levy.

Special excise duty under an annual levy attaches at the stage of manufacture, while collection may be deferred until clearance. Goods manufactured before 28 February 1988 but cleared later were treated as removed on the last day of the levy in force during manufacture. Because the goods were wholly exempt on 28 February 1988 under the then-operative exemption notification, the later levy under the Finance Act, 1988 was a fresh and distinct levy and could not be fastened through Rule 9A. The goods were therefore not liable to special excise duty, and the assessee succeeded.

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Issues: Whether special excise duty was payable on goods manufactured before 28 February 1988 but cleared after 1 March 1988.

Analysis: Special excise duty under the Finance Act operated as an annual levy. The governing principle drawn from the earlier decision was that the levy attaches when the goods are manufactured, while collection is deferred to clearance. Where goods remain uncleared until the last day of the levy in force during manufacture, they are to be treated as removed on that last day. In the relevant period, the goods stood wholly exempt on 28 February 1988 under the exemption notification then in force. The later levy under the Finance Act, 1988 was treated as a fresh and distinct levy, and Rule 9A did not apply to fasten liability to that later levy.

Conclusion: The goods were not liable to special excise duty, and the assessee succeeded.

Ratio Decidendi: Where goods are manufactured during the currency of an annual excise levy and remain wholly exempt on the last day of that levy, they are not made liable by a later, distinct levy imposed after the exemption period has ended.

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