1989 (12) TMI 164 - SC - Central Excise

Supreme Court Upholds Excise Duty Decision

The Supreme Court affirmed the Tribunal's decision in favor of the respondent in a case concerning the payment of Central Excise duty on base yarn used ... Why Central Excise duty amounting to ₹ 4,300 at ₹ 24 per Kg. leviable on 180 Kgs. [as applicable to base yarn under Tariff Item 18(i) of the Central Excise Tariff] should not be demanded under Rule 9(2) of the Central Excise Rules, 1944? Held that:- In view of the facts and the circumstances of the case, the Tribunal was right in the view it took. In this connection, it is instructive to refer to Rule 49 of the Central Excise Rules, 1944, which deals with duty chargeable only on the removal of the goods from the factory premises or from an approved place of storage. Duty of excise is primarily a duty levied on a manufacturer or a producer in respect of the commodity manufactured or produced. Appeal dismissed. Issues:1. Interpretation of Notification No. 125/75-C.E. and liability of payment of excise duty on base yarn.2. Burden of proof regarding payment of duty on base yarn.3. Application of Rule 49 of the Central Excise Rules, 1944 in the context of duty payment.Detailed Analysis:1. The appeal involved a dispute regarding the payment of Central Excise duty on base yarn used for texturising by a respondent. The Tribunal upheld the contention of the respondent, stating that the duty payable on the textured yarn produced from the base yarn is the duty leviable on the base yarn plus an additional amount, as specified in Notification No. 125/75. The Tribunal found that the respondent was not the manufacturer of the base yarn and, therefore, the duty was correctly paid at the prescribed rate. The notification exempted the textured yarn from excess duty, and the Tribunal ruled in favor of the respondent based on the interpretation of the notification and the nature of the manufacturing process involved.2. The issue of burden of proof regarding the payment of duty on base yarn was also addressed in the appeal. The appellant contended that it was the respondent's responsibility to prove the payment of duty on the base yarn, while the revenue argued that the burden of proof lay with the respondent. The Tribunal held that in the absence of concrete proof of non-payment of duty on the base yarn, the presumption should be that the duty had been paid by the manufacturer. The Tribunal criticized the revenue for not verifying the facts provided by the respondent and upheld the respondent's position, emphasizing that the duty liability primarily rests with the manufacturer under the excise system.3. The judgment further delved into the application of Rule 49 of the Central Excise Rules, 1944, which stipulates that excise duty is chargeable upon the removal of goods from the factory premises. Reference was made to a previous decision by the Delhi High Court, which highlighted that under the excise system, purchasers can presume that goods are duty paid as it is the responsibility of the manufacturer to pay the duty. The judgment emphasized that excise duty is primarily a duty on the manufacturer or producer, and in cases involving processors, they are in a similar position as purchasers in terms of duty payment presumption. The Tribunal's decision was supported by this legal framework and interpretation.In conclusion, the Supreme Court dismissed the appeal, affirming the Tribunal's decision in favor of the respondent. The judgment highlighted the legal principles governing excise duty payment, burden of proof, and the application of relevant rules and notifications in determining duty liability in the manufacturing process.