J.B. Mehta, J.
1. The short question which arises in this petition is whether the stock manufactured of excisable goods was liable to pay excise duty in force at the date of the removal of those goods from the factory when the exemption was withdrawn. There is no dispute that the petitioner had manufactured the goods 'Protinules' in question before March 1, 1970, and on that stock on its removal from the factory after March 1, 1970, a sum of Rs. 29,369.36 p. had been recovered as the exemption in question was withdrawn by the notification at Annex. B, dated March 1, 1970, by reason of which under Item No. 14, admittedly, Protinules was liable to excise duty on withdrawal of the exemption. As the petitioner's prayer for refund has been rejected by the impugned orders, the present petition has been filed.
2. The question which has arisen before us is materially about the rate at which these excisable goods were liable to be charged. These goods became excisable when the relevant tariff Item 1B was introduced in the Schedule on March 1, 1969. No excise duty was however payable on these goods because of exemption notification which was issued under Rule 8(1) read with Section 37(8)(x)(vii). This exemption notification was withdrawn by the . subsequent notification at Annex. B from March 1, 1970, and so, under the relevant Rule 9 A duty then in force on the date of removal was clearly attracted to the goods in question. In Orient Paper Mills Ltd. v. Union of India, : 1978(2)ELT328(SC) their Lordships have elaborately considered the true interpretation of Rule 9A in the light of the entire scheme of the Central Excise and Salt Act, 1944, along with the Central Excise Rules, 1944. At page 1566, their lordships pointed out after referring to the definition of 'Excisable goods', and the charging sec, 3 and 4 for determination of value for the purpose of duty that the emphasis in Section 4 was on the time of removal of the article chargeable with duty from the factory and that was the only guidance which the Act furnished. Thereafter the relevant rules were considered including Rule 52 for clearance on payment of duty and Rule 52A which provided for actual removal of the goods from the factory. Rule 9A was then interpreted and it was held at page 1568 that in the case of manufactured goods the payment of duty and the clearance of goods might be synchronous or the payment might be postponed although the goods might be removed-vide provisos to Rule 9. That immediately set up two kinds of cases in respect of manufactured goods. It was held that the critical time was the removal from the factory or the warehouse but if the payment of duty was made before the removal, then the critical time was the payment of duty. Therefore, if the duty was enhanced, enhanced duty would be attracted, at the rate in force on the date of removal. The same view is taken in Assistant Collector of Central Excise, Calcutta v. National Tobacco Company of India Ltd.- : 1978(2)ELT416(SC) , where it was also held that Rule 9A specified the date with reference to which the duty payable was to be determined. If the relevant exemption was withdrawn on the date of removal, it is obvious that under Rule 9A, the duty payable on these excisable goods was the duty, which instead of 'nil' duty become full duty as mentioned in the tariff Schedule and, therefore, the goods in question clearly attracted duty at the rate then in force on the date of removal of these goods. Mr. Patel, however, vehemently argued that as the excise duty was tax on manufacture and not on removal of the goods, the petitioner's manufactured goods, whose manufacture was completed before March 1, 1970, would not be liable to any excise duty by reference to this Rule 9A because otherwise such a levy would be unconstitutional. This contention of Mr. Patel ignores the whole distinction that the method of collection docs not affect the essence of the duty. In R.C. Jall Parsi v. Union of India, A.I.R. 1972 S.C. 1287 at page 1287 their Lordships pointed out that excise duty was primarily a duty on the manufacturer or producer in respect of the commodity manufactured or goods produced within the country. It is an indirect duty which the manufacturer or producer passes on to the ultimate consumer, that is, its ultimate incidence would always be on the consumer. Therefore, subject always to the legislative competence of the taxing authority, the said tax could be levied at a convenient stage so long as the character of the impost, that it is a duty on the manufacture or production, is not lost. The method of collection does not affect the essence of the duty, but only relates to the machinery of collection for administrative convenience. In Shinde Bros. v. Deputy Commissioner, Raichur, : [1967]1SCR548b their Lordships reiterated this position by pointing out that in order to be an excise duty, the levy must be upon goods and the taxable event must be the manufacture or production of goods. Further, the levy need not be imposed at the stage of production, or manufacture but might be imposed later. Therefore, in that case it was held that if the duty was levied on an excisable article but that duty was collected from a retailer, it could not necessarily cease to be an excise duty. Even in Jullundur Rubber Goods . : [1970]75ITR603(SC) , this relevant distinction was made by their Loidships that even where a tax on land is charged on the basis of capital value, it does not become a tax on capital value of the land because the same measure was adopted. The earlier decision in Balla Ram. Province of East Punjab, was referred to where it was also pointed out that where the income was measured by the fairest standard of annual value, which was the only standard by which income was measured under the Income-tax Act for determining the income, it did not follow that if the same standard was employed as a measure for any other tax, that latter tax also became tax on income. That is why when a question of rate arises it is only the measure of the tax and once the goods were excisable goods, the measure of tax may be laid down as applicable at any convenient stage, including the stage of removal. But that would not affect the essence of this duty or the tax as an excise duty so long as it was charged on the manufacture or production of goods, which were excisable goods within the meaning of Schedule I.
3. Mr. Patel next argued that it is settled law that the Act and the excise notification in fixing the measure have to be read as one intearatcd scheme, as laid down in J.K. Steel Limited v. Union of India : 1978(2)ELT355(SC) , by referring to the earlier decision in Kallash Nath v. State of U.P. : AIR1957SC790 . It is true that the levy and exemption are parts of the same scheme of taxation because the two together carry into effect the purpose of the legislation and, therefore, to find out the true scheme of a taxing measure, we have not merely to take into consideration the levy but also exemption granted. That ratio of their Lordships is for the purposes of interpretation of a taxing scheme where the charging section has to be interpreted alongwith the relevant exemption as one whole integrated scheme. What Mr. Patel argues is to make Rule 9A nugatory. The contention of Mr. Patel is based on the footing that when an exemption is granted, the goods ceased to be excisable goods within the meaning of the Act and that is why when the exemption was withdrawn, the measure of the rate would not be the rate as in force on the date of removal as prescribed by Rule 9A but on the assumption that for the next time these goods were made excisable. Once it is held that the goods had already become excisable but only duty was foregone because of the exemption issued under the Act, there is no foundation for Mr. Patel's argument that the levy was unconstitutional. The payment was foregone only so long as the exemption remained in force. Once the exemption was withdrawn, full excisability was attracted to the goods in question.
4. Mr. Patel had in this connection vehemently relied on the decision in Amar-Dye-Chem Ltd. v. Union of India : 1978(2)ELT427(SC) . In that case prior to March 1, 1961, 'dyes derived from coal tar and tar derivatives used in any dyeing process, all sorts' were not subject to Central Excise, and these goods were made excisable goods by insertion of the relevant Item 14D. Their Lordships in terms pointed out that the Provisional Collection of Taxes Act, 1931, was made applicable to that levy and all dyes derived from coal tar and coal tar derivatives manufactured after the mid-night of February 28,1961, became liable to the excise duty in question. Therefore, the only question which was considered by their Lordships was whether the High Court was right in the view that the completion of the chemical process did not by itself result in the manufacture or production of a new substance as known to the mercantile community and the consumers. There being no material on the question, the matter was remanded. This decision, therefore, is only on the question as to whether there was completion of the chemical process to bring out a new product which could not be decided in that case for want of relevant materials. That question had assumed importance because the relevant goods became excisable goods for the first time by the introduction of the relevant tariff Item 14D and, therefore, under the Provisional Collection of Taxes Act, 1934. which was made applicable to the levy, all dyes derived from coal tar and coal tar derivatives manufactured after the mid-night of February 28, 1961, became liable to pay this duty. That question does not arise in the present petition. The goods had already become excisable goods when item 1B was introduced in the 'Schedule'. That is why Section 2(d) defines 'excisable goods' to mean goods specified in the First Schedule as being subject to a duty of excise. The charging Section 3(1) in terms lays down that there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods which are produced and manufactured in India, as and at the rates, set forth in the First Schedule. That is why under Section 37(2)(x)(vii), the Central Government under the relevant rule has been conferred power to exempt any goods from the whole or any part of the duty imposed by the Act. The relevant Rule 8(1) then enacts that the Central Government may from time to time by notification in the official Gazette, exempt subject to such conditions as may be specified in the notification any excisable goods from the whole or any part of duty leviable on such goods. From the scheme it is clear that the goods in question became excisable on March 1, 1969 when the relevant tariff Item 1B was put in the Schedule. But that duty imposed was foregone on those excisable goods to the full extent by the relevant notification issued under Rule 8. Once, therefore, this notification is superseded, it is obvious that these excisable goods in question attracted duty to the fullest extent. It was merely substitution of the rate of full duty for the nil duty as held by the authorities. Therefore, in this context the argument of Mr. 'Patel which is sought to be founded on the aforesaid Amar Dye-Chem's case could hardly be accepted. In Amar Dye-Chem's case the goods became excisable goods only when the relevant entry 14D was introduced in the tariff Schedule. That analogy could not apply to the present case where the excisable goods were only given a concession, which concession having been withdrawn, full duty was attracted as per the relevant rules. In fact, when the concession flows from the rules, the effect of the withdrawal of that concession would have to be judged by the relevant rules themselves which provide a crucial date for this purpose in the relevant Rule 9A that the rate of duty shall be the duty in force at the time of removal of these goods. The petitioner having got concession only under the relevant rules could never contend for a moment that the tax became unconstitutional. The whole argument is really based on a complete misconception as it confuses the method of collection with the essence of the duty. In that view of the matter the contention of Mr. Patel being unfounded, this petition must fail. Rule is, therefore, discharged with no order as to costs in the circumstances of the case.