Excise duty collection mechanism upheld where duty on molasses could be recovered from the procurer without changing its character.

Rule 7A of the Central Excise Rules, 1944 was upheld as valid because Section 3(1) of the Central Excise Act, 1944 permits excise duty on goods produced or manufactured in India to be levied and collected in the prescribed manner. The rules, including Rules 7A, 9A and 9C, merely adjusted the stage of collection and the person from whom duty was recovered; they did not alter the nature of the levy. Since the duty remained referable to manufacture of molasses, recovery from the procurer of molasses in a khandsari sugar factory did not convert it into a purchase tax or exceed the rule-making power.

---

---

Issues: Whether Rule 7A of the Central Excise Rules, 1944, which made the procurer of molasses liable to pay duty on molasses produced in a khandsari sugar factory, was ultra vires Section 3(1) of the Central Excise Act, 1944.

Analysis: Section 3(1) authorises levy and collection of excise duty on excisable goods produced or manufactured in India in such manner as may be prescribed. The rules framed under Section 37 of the Act, including Rules 7A, 9A and 9C, only altered the stage and person from whom the duty was to be collected. The duty remained attributable to manufacture of molasses and retained its essential character as excise duty. The collection mechanism could validly be adapted to administrative convenience, and the fact that the duty was recovered from a procurer rather than the manufacturer did not convert it into a purchase tax or otherwise defeat the charging provision.

Conclusion: Rule 7A was held to be within the rule-making power under Section 3(1) of the Central Excise Act, 1944, and the challenge to its validity failed.

---