AED on mineral water cannot be levied on pre-budget stock manufactured before Finance Act 2014

CESTAT Allahabad held that additional duty of excise (AED) introduced by Finance Act 2014 on waters including mineral water and aerated waters could not be levied on pre-budget stock cleared after 10.07.2014. Following SC precedent in Collector of C. Ex., Hyderabad v. Vazir Sultan Tobacco Co. Ltd., the tribunal ruled that excise duty is levied on manufacture/production, not removal. Since goods were manufactured before AED introduction, duty could not be imposed at removal stage. The impugned order was set aside and appeal allowed.

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Issues involved:
The issue in the present appeal relates to the levy of Additional duty of excise on clearance of pre-budget stock after 10.07.2014.

Details of the Judgment:

1. Background and Facts:
The Appellant, a public limited company, manufactures and sells Aerated Water, Packaged Water, and Fruit-juice based drinks. The appeal is against Order-in-Appeal No.446-CE/APPL/LKO/2017 dated 29/12/2017 passed by Commissioner (Appeals) Customs, Central Excise & Service Tax, Lucknow. The Appellant informed the department about the levy of additional duty of excise on aerated waters manufactured by them after budgetary changes. The dispute arose regarding the duty on pre-budget stock cleared after 10.07.2014.

2. Appellant's Arguments:
The Appellant argued that the impugned order violated natural justice as they were not given an opportunity to present their defense. They contended that duty should be based on the rate applicable at the time of manufacture, not removal. They cited the judgment of the Hon'ble Supreme Court in CCE, Hyderabad Vs. Vazir Sultan Tobacco Company Ltd to support their position.

3. Legal Provisions and Amendments:
Section 85 of the Finance Act, 2005, provides for the levy of additional duty of excise on specified goods. The Finance Act 2014 introduced an additional duty of Excise on aerated waters containing sugar falling under chapter heading 220210. The changes were announced on 10.7.2014, effective from midnight 10/11 July 2014.

4. Judgment and Conclusion:
The Tribunal referred to the Supreme Court judgment in CCE, Hyderabad Vs. Vazir Sultan Tobacco Company Ltd, emphasizing that the taxable event is the manufacture of goods, not the removal. The duty is levied at the manufacturing stage, and the collection at the removal stage is for convenience. As the levy was not applicable at the time of manufacture, it cannot be collected at the removal stage. The impugned order was set aside, and the appeal was allowed.

5. Operative Part of the Order:
The Order-in-Original No. 45/CEX/ADC/2016 dated 30.11.2016 was upheld, and the appeal by the Appellant was allowed.

This judgment clarifies the principles of duty levy on pre-budget stock clearance post-budgetary changes, emphasizing the importance of the manufacturing stage in determining applicable duties. The Appellant's arguments, legal provisions, and the Supreme Court precedent played crucial roles in the Tribunal's decision to set aside the impugned order.

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