Excise duty follows the law at manufacture, so pre-exemption molasses stayed non-dutiable despite later internal use.

Molasses manufactured before 19 June 1980 and used in the same factory after that date remained covered by the exemption then in force, because excise liability is fixed at the time of manufacture. The later introduction of Item 15-CC of the Central Excise Tariff did not change the character of goods already produced during the exempt period. On that basis, the pre-19 June 1980 stock was not liable to central excise duty merely because it was consumed internally after the exemption had ended, and the demand could not be sustained.

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Issues: Whether molasses manufactured before 19-6-1980 and used in the same factory after 18-6-1980 was liable to Central Excise duty under Item 15-CC of the Central Excise Tariff.

Analysis: The molasses had been produced during the period when the relevant exemption under Notification No. 118/75-C.E. applied to goods manufactured in a factory and intended for use in the same factory. The subsequent introduction of Item 15-CC with effect from 19-6-1980 did not alter the character of goods already manufactured during the exempt period. Applying the principle that excise liability depends on the position at the time of manufacture and not on the later date of removal or internal use, the earlier exemption was held to govern the stock in question.

Conclusion: The molasses manufactured before 19-6-1980 but used in the same factory after 18-6-1980 was not liable to duty; the issue was decided in favour of the assessee.

Final Conclusion: The appeal succeeded and the demand based on post-19-6-1980 use of pre-19-6-1980 molasses could not be sustained.

Ratio Decidendi: Excise duty is determined by the tax position existing at the time of manufacture, and goods manufactured during a period of exemption do not become dutiable merely because they are removed or used after the exemption has ended.

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