Goods made under full excise exemption still treated as excisable; duty rate fixed on clearance date at 8%

Goods manufactured during the currency of a full excise exemption remained "excisable" because excisability is determined with reference to the tariff position on the date of manufacture, not by the exemption's existence; consequently, the Tribunal erred in treating the goods as non-excisable, and this finding was set aside. However, the applicable rate of duty is determined by the law in force on the date of clearance; since the exemption notification stood amended by clearance to levy duty at 8%, the goods were dutiable at 8% on clearance. Appeals were allowed and the impugned order was set aside.

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Issues involved: Determination of excise duty liability on goods manufactured under an exemption notification but cleared under a modified notification.

In the judgment, the Supreme Court addressed the issue of excise duty liability on goods that were manufactured under an exemption notification but cleared under a modified notification. The goods in question were articles of plastic that were excisable goods but were wholly exempt from excise duty at the time of manufacture due to Notification 68/71. However, when they were cleared, another Notification (52/82) had been amended to levy excise duty at the rate of eight per cent. The Tribunal had concluded that the goods, having been fully exempt from excise duty at the time of manufacture, should not attract the eight per cent duty at the time of clearance.

The Court referred to previous judgments to clarify the issue. It cited the case of Wallace Flour Mills Co. Ltd. v. Collector of Central Excise, Bombay, where it was held that excise duty, although on manufacture, can be collected at a later date for administrative convenience. The Court also referred to Collector of Central Excise, Hyderabad v. Vazir Sultan Tobacco Co. Ltd., Hyderabad, where it was emphasized that goods, even if exempt from duty initially, remain excisable goods, and the duty is levied based on the rate prevailing at the time of clearance.

The Court disagreed with the Tribunal's view and held that the goods were excisable to duty under the prevailing tariff at the time of manufacture, despite being fully exempt. The relevant factor for determining excisability was the manufacturing date, while the duty rate was based on the clearance date under the amended exemption notification.

Ultimately, the Court allowed the appeals by the Revenue, setting aside the Tribunal's order without any specific direction on costs.

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