Continuing excise levy at removal stage upheld for goods cleared after exemption ceased

Special Excise Duty was treated as a continuing impost, not a wholly new levy, so the rate applicable at the stage of removal governed collection. Goods fully manufactured before 1-3-1988 but cleared on or after that date were therefore subject to duty because Rule 9-A of the Central Excise Rules applied through the Finance Bill provisions and the exemption had ceased by the time of clearance. The reasoning relied on continuity in the surcharge structure and the collection mechanism, while the contrary view treating the levy as revived from a new starting point was distinguished.

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Issues: Whether Special Excise Duty introduced by Clause 82(1) of the Finance Bill, 1988 could be levied on goods fully manufactured before 1-3-1988 but cleared on or after that date.

Analysis: The levy of Special Excise Duty was treated as a continuing impost rather than a wholly new levy. The earlier Finance Bills and the Finance Minister's speech showed continuity in the surcharge structure, rate basis, and mode of collection. The goods in question were exempt at the time of manufacture under the earlier regime, but were not exempt at the time of clearance. Rule 9-A of the Central Excise Rules applied to Special Excise Duty by the relevant Finance Bill provisions, so the rate prevailing on the date of removal governed collection. The reasoning in the later Supreme Court decision on levy at the stage of removal was held applicable, while the earlier Tribunal decision on a revived levy from a new starting point was distinguished.

Conclusion: Special Excise Duty was validly leviable on clearances made on or after 1-3-1988 even though the goods had been fully manufactured earlier; the answer is in favour of the Revenue.

Final Conclusion: The duty collected on post-1-3-1988 clearances of pre-1-3-1988 manufactured goods was upheld as lawful under the applicable excise collection scheme.

Ratio Decidendi: Where an excise levy is shown to be a continuing impost and the governing rules apply the duty rate at the stage of removal, goods manufactured during an exemption period may be subjected to duty when cleared after the exemption has ceased.

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