Excise duty liability on goods cleared after exemption withdrawal depends on the rate in force at removal, not manufacture.

Goods manufactured during an exemption period remained liable to excise duty when cleared after the exemption was withdrawn, because the taxable event was manufacture but the incidence and quantification of duty were governed by the position on the date of removal. The authority accepted that Rule 9-A fixed the applicable rate at removal and followed the Gujarat High Court's reasoning that an exemption in force at manufacture did not prevent levy on later clearance. Earlier decisions cited by the assessee were distinguished as involving different factual settings or later-imposed duty. The exemption claim was therefore rejected.

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Issues: Whether excise duty was payable on goods manufactured when exempt but cleared after the exemption was withdrawn.

Analysis: The goods were admittedly excisable articles and were exempt only at the time of manufacture. The taxable event was manufacture, but the incidence and quantification of duty were governed by the position prevailing on the date of removal. The earlier decisions relied upon by the appellants were distinguished because they dealt with different situations where duty itself was imposed later or where the facts were not identical. The authority accepted the reasoning of the Gujarat High Court that exemption in force at manufacture did not prevent levy when the goods were removed after withdrawal of exemption, and that Rule 9-A governed the applicable rate.

Conclusion: The goods were liable to excise duty at the rate applicable on the date of removal, and the claim for exemption was rejected.

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