Full Judgment
The appellants contended before the Asst. Collector of Central Excise that when duty was first imposed on any article the stock already held by a manufacturer prior to the date of imposition of duty should be fully exempted. The appellants accordingly made a claim of refund of duty paid under protest on articles of plastics manufactured prior to the removal of exemption of duty on it i.e.
28-2-1982 but cleared later. The Assistant Collector negatived the claim of the appellant on the ground that the date of clearance is the criteria for determining the durability of the goods. Aggrieved by the order of the Asst. Collector of Central Excise the appellants preferred an appeal to the Collector of Central Excise (Appeals) who upheld the order of the Asstt. Collector of Central Excise." 2. The learned Advocate for the appellants submitted that the liability to Central Excise duty arises at the time of manufacture of goods and that if the goods were produced when they were exempt from duty, they are not liable to duty when they are cleared at a later date on which such exemption is no more available. In support of his arguments the learned Advocate cited the following judgments:Vazir Sultan Tobacco Co. Ltd. v. Collector of Central Excise, Hyderabad.(A.P.) Assistant Collector of Central Excise, Guntur v. Andhra Fertilizers Ltd.(S.C.) I. K. Cotton Spinning and Weaving Mills Ltd. and Anr. v. Union of India.
3. Shri Uttam Reddy submitted that in the light of these judgments the goods in question should have been allowed to be cleared without payment of duty.
4. Shri Sunder Rajan, the learned DR opposing the arguments submitted that the exempted goods were also excisable goods. Therefore, goods on which duty is exempted were dutiable goods having been included in the First Schedule. The effect of the withdrawal of a notification is to make them liable to pay duty and the rate of duty is governed by the provisions of Rule 9-A to Central Excise Rules. The learned Representative relied on the following judgments:(T) Collector of Central Excise, Pune v. Peico Electronics & Electricals Ltd. 5. The learned Advocate in his rejoinder submitted that the judgment of the Gujarat High Court was delivered in a case where partial exemption was removed whereas in the present appeal there was total exemption and, therefore, nil rate of duty at the time of manufacture. He referred to a judgment of 1982 E.L.T. 97 (M.P.) in the case of Shree Synthetics Ltd., Ujjain v. Union of India and Ors. and submitted that the judgment of the Gujarat High Court should not be followed in the light of the M.P. judgment, in Kirloskar Brothers [1978 E.L.T. (J 690)]. We have considered the arguments of both sides. In Vazir Sultan Tobacco Co. Ltd. (supra) the question that was examined was whether cigarettes manufactured before 1-3-1978 but cleared afterwards were liable to special excise duty imposed by the Finance Act, 1978 on 1-3-1978. The Tribunal held, by majority, that they were not liable, as prior to 1-3-1978 the special excise duty was not there, the ratio of the judgment is not applicable to the facts of the present case where the goods were always excisable but were under exemption at the time of manufacture. Similarly the ratio of the Andhra Pradesh High Court in Andhra Fertilizers Ltd. (supra) does not apply as in that matter also the question of liability to duty arose with reference to the date of imposition of Central Excise duty.
6. There is nothing in the Supreme Court judgment in J.K. Cotton Spinning and Weaving Mills Ltd. (supra) that is of help to the appellants. The Supreme Court were examining liability to excise duty in respect of the yarn which is obtained at an intermediate stage and thereafter further processed in an integrated process for weaving the same into fabrics. The question before us is entirely different.
7. The judgment in Shree Synthetics Ltd. (supra) is against the appellants. The learned Advocate heavily relied on the judgment of the High Court of M.P. in the case of Kirloskar Brothers. This judgment was referred to in Shree Synthetics Ltd. and the court recorded that in Shree Synthetics the goods were liable to excise duty both on the date of manufacture and on the date of removal and never wholly exempt.
Therefore, they did not follow Kirloskar Brothers. The learned Advocate pointed out that in the light of Shree Synthetics, Kirloskar Brothers judgment holds good when the goods were totally exempt at the time of manufacture and not partially exempt as in Shree Synthetics. This view cannot be accepted in view of the case law cited by the learned DR. The Tribunal's judgment in Peico Electronics and Electricals Ltd. is not directly relevant to the facts of the present appeal. However, the judgment of Gujarat High Court in Mihir Textiles Ltd. by a Division Bench, is in all fours and deals with the question in a very detailed manner. This judgment refers to the judgment of the Madhya Pradesh High Court in Kirloskar Brothers and several other judgments of High Courts as also of the Supreme Court. The Court clearly held that while the taxable event is the fact of manufacture or production of an excisable article the payment of duty is related to the date of removal of such articles from the factory. In para 16 of the judgment the Gujarat High Court specifically referred to the judgment of the M.P. High Court in Kirloskar Brothers and recorded reasons why it was not following the same. Of interest is paragraph 18 of this order wherein the Court noted that the view expressed by M.P. High Court in the case of Kirloskar Brothers has been disapproved by that very High Court in the subsequent decisions, M.P. No. 338/79 dated 16-1-1987.
8. These circumstances and the various decisions of the High Courts lead us to the conclusion that the judgment of Mihir Textiles is applicable, to the facts of the present case. The goods with which we are concerned here were manufactured when there was exemption but were cleared at a time when the exemption was no more there. Therefore, the Central Excise authorities Were correct in applying Rule 9-A and charging duty as applicable on the date of removal.