Excise levy on pre-existing stock cannot apply where manufacture occurred before the new duty took effect.

A newly introduced Additional Excise Duty on aerated waters could not be levied on finished goods manufactured and already lying in stock before the levy came into force. The applicable principle is that, in excise law, the taxable event is manufacture or production, while removal is only the stage of collection. Because the goods had come into existence before the new duty took effect, the demand on pre-levy stock was unsustainable. Internal departmental instructions and board clarifications were consistent with that position, and the demand was set aside in favour of the assessee.

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Issues: Whether Additional Excise Duty newly introduced by the Finance (No.2) Act, 2014 could be demanded on finished goods manufactured and lying in stock before the levy came into force.

Analysis: The levy was introduced as a new duty on aerated waters and became effective from the midnight of 10/11 July 2014 under the Provisional Collection of Taxes Act, 1931. The dispute concerned goods already manufactured before the levy was imposed. The settled principle applied is that the taxable event in excise is manufacture or production, while collection at removal is only a matter of convenience. A new levy cannot be fastened on goods that had already come into existence before the levy was introduced, and internal departmental instructions and board clarifications also supported that position.

Conclusion: The demand of Additional Excise Duty on pre-budget stock was unsustainable and was set aside, in favour of the assessee.

Ratio Decidendi: A freshly introduced excise levy cannot be applied to finished goods manufactured before the levy came into force, because the taxable event is manufacture or production and removal is only the stage of collection.

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