2023 (11) TMI 145 - AT - Central Excise

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

M/s Varun Beverages Ltd. Versus Commissioner of Customs, Central Excise & Service Tax, Lucknow

CESTAT Allahabad held that additional duty of excise (AED) introduced by Finance Act 2014 on waters including mineral water and aerated waters could not ... Levy of Additional duty of excise - clearance of pre-budget stock after 10.07.2014 - HELD THAT:- The Finance Act 2014 introduced an additional duty of Excise (AED) on waters including mineral water and aerated waters containing sugar or other sweetening matter falling under chapter heading 220210. d) The changes in the Finance Act 2005 were announced on 10.7.2014 and it was understood by the Appellant that the same shall be effective from midnight 10/11 July 2014. It is relevant to mention that the declaration under Provisional Collection of Taxes Act, 1931 provided that clause 110 of the Bill shall have immediate effect under the Provisional Collection of Taxes Act, 1931. The issue is no longer res-integra and is settled by the judgment of Hon'ble Supreme Court in the case of COLLECTOR OF C. EX., HYDERABAD VERSUS VAZIR SULTAN TOBACCO CO. LTD. [1996 (2) TMI 138 - SUPREME COURT]. The Hon'ble Supreme Court while dealing with special duty of excise has held that 'Section 3 cannot be read as shifting the levy from the stage of manufacture or production of goods to the stage of removal. The levy is and remains upon the manufacture or production alone. Only the collection part of it is shifted to the stage of removal. Once this is so, the fact that the provisions of the Central Excise Act are applied in the matter of levy and collection of special excise duty cannot and does not mean that wherever the Central Excise duty is payable, the special excise duty is also payable automatically. That CCE, Hyderabad Vs. Vazir Sultan Tobacco Company reiterates a settled position that duty of excise is leviable on 'manufacture' or production of the goods as contemplated by Entry 84 of List-1 of the Seventh Schedule to the Constitution. The mere fact that, for the sake of convenience, the duty is collected at the stage of removal cannot and does not change the character of the tax. It is upon the manufacture or production of goods and not on any other basis. Once the levy is not there at the time when the goods are manufactured or produced, it cannot be levied at the stage of removal of the said goods. The impugned order cannot be sustained and the same is accordingly set aside - the appeal filed by the appellant is allowed. 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.