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PETITIONER: WALLACE FLOUR MILLS COMPANY LTD.

       Vs.

RESPONDENT: COLLECTOR OF CENTRAL EXCISE, BOMBAY,DIVISION III.

DATE OF JUDGMENT28/09/1989

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) RAY, B.C. (J)

CITATION:  1989 SCR  Supl. (1) 311  1989 SCC  (4) 592  JT 1989 (4)   184        1989 SCALE  (2)804

ACT:     Central Excises and Salt Act 1944/Central Excise  Rules, 1944,  Sections 2(d) and 35L/Rule 9A--Excise  Duty--Realisa- tion of--May be postponed for administrative convenience  to date of removal of goods from factory.

HEADNOTE:     The appellant is a manufacturer of various types of food products  known as Sapaghetti, Macaroni,  Vermicelli,  etc., failing  under  Heading No. 1902.10 of  the  Central  Excise Tariff  Act. The said goods had been made dutiable  only  by the  Finance Bill 1987-88 with effect from Ist March,  1987. The appellant claimed that their pre-budget stocks of  fully manufactured non-excisable goods were entitled to duty  free clearance.  The Assistant Collector of Central  Excise,  the Collector  of  Central  Excise (Appeals)  and  the  Tribunal rejected the claim of the appellant.     Before  this  Court it was contended on  behalf  of  the appellant that the relevant date would be the date of  manu- facture and in this case the manufacture was complete before the introduction of the budget. Dismissing the appeal, this Court,     HELD: (1) Excise is a duty on manufacture or production. But the realisation of the duty may be postponed for  admin- istrative  convenience to the date of removal of goods  from the factory. Rule 9A of the Central Excise Rules merely does that. [314C]     (2)  The scheme of the Act read with the relevant  rules framed under the Act, particularly rule 9A, reveals that the taxable even is the fact of manufacture or production of  an excisable article, the 312 payment  of duty is related to the date of removal  of  such article from the factory. [313F]     (3) On the basis of rule 9A of the Central Excise Rules, the Central Excise authorities were within the competence to apply the rate prevailing on the date of removal. [314E]     Karnataka  Cement  Pipe  Factory v.  Supdt.  of  Central Excise,  [1986]  23 ELT 313 and Tamil  Nadu  (Madras  State) Handloom  Weavers  Co-operative Society  Ltd.  v.  Assistant Collector of Central Excise, [1978] ELT J. 57, referred to.

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JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 3544  of 1989.     From the Judgment and Order No. 131/89-D dated 9.5. 1989 of the Central Excises & Gold (Control) Appellate  Tribunal, New Delhi in Appeal No. E/1176/88-D. Rajiv  Dutta, Nimish Kothare and K.K. Patel for  the  Appel- lant. The Judgment of the Court was delivered by     SABYASACHI MUKHARJI, J. This is an appeal under  section 35L  of  the Central Excise & Salt  Act,  1944  (hereinafter referred to as ’the Act’).     The appellant is a manufacturer of various types of food products  known as Sapaghetti, Macaroni,  Vermicelli,  etc., falling  under  Heading No. 1902.10 of  the  Central  Excise Tariff  Act. The appellant filed classification list  effec- tive  from  1st March, 1987 claiming that  their  pre-budget stocks of non-excisable goods, namely, various types of food products  declared in the classification list  as  aforesaid were  entitled  to  duty  free  clearance  being  pre-budget stocks. The Assistant Collector of Central Excise,  however, held  that the question of clearing pre-budget  stocks  duty free  did  not arise because the products in  question  were excisable though exempted from the duty. There was an appeal from  the said order of the Assistant Collector  before  the Collector of Central Excise (Appeals), Bombay. He  dismissed the  appeal.  The  appellant went up in  appeal  before  the Tribunal. It was contended before the Tribunal on behalf  of the  appellant that the goods in question were not  leviable to  duty under the aforesaid head until 28th February,  1987 and the said goods had been made dutiable only by the 313 Finance  Bill, 1987-88 with effect from 1st March, 1987.  It was  submitted  further  that on 27th  February,  1987,  the appellant  had in their factory a stock of the said  product which were fully manufactured, packed and ready for sale and the  inventory of the said stock was prepared by the  Supdt. of Central Excise on 1st March, 1987. Reliance was placed on several  decisions  of the different  High  Courts,  namely, decision  of  the  Madhya Pradesh High  Court  in  Kirloskar Brothers  Ltd.  v. Union of India, [1978] ELT 33;  Union  of India  v. Kirloskar Brothers Ltd., [1978] ELT 690,  decision of  the Bombay High Court in Synthetic Chemicals  Pvt.  Ltd. v.S.C. Coutinho, [1981] ELT 414, decision of the Bombay High Court  in New Chemicals Ltd. v. Union of India,  [1981]  ELT 920  decision of the Madras High Court in Sundaram  Textiles Ltd. v. Asstt. Collector of Central Excise, [1983] ELT  909, decision  of the Allahabad High Court in Union of  India  v. Delhi  Cloth & General Mills, [1973] ELT 177. On  the  other hand, the revenue contended that the goods forming the  pre- budget  stocks were very much excisable goods and  that  for the purpose of collecting duty, date of manufacture was  not material under the scheme of the Act even though the taxable event is the manufacture. It was, therefore, contended  that at  the  time of manufacture of the goods in  question,  the goods  were  excisable goods and in view of rule 9A  of  the Central Excise Rules, 1944, though the taxable event is  the manufacture  and production, the payment of duty is  related to and postponed to the date of removal of articles from the manufactury. The Tribunal accepted the said contention.     We are of the opinion that the Tribunal was right. It is well settled by the scheme of the Act as clarified by sever- al  decisions  that  even though the taxable  event  is  the

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manufacture or production of an excisable article, the  duty can be levied and collected at a later stage for administra- tive  convenience. The Scheme of the said Act read with  the relevant rules framed under the Act particularly rule 9A  of the  said rules, reveals that 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 article  from the factory. In that view of the  matter,  the Tribunal  dismissed the appeal and rejected  the  assessee’s contention.      Appearing before us in support of the appeal, Mr. Rajiv Dutta,  learned counsel for the appellant contended that  in several  decisions it has been held, and referred us to  the said  decisions referred to hereinbefore, that the  relevant date  would be the date of manufacture and in this case  the manufacture  was  complete before the  introduction  of  the budget.  It  was submitted that until 28th  February,  1987, when, 314 according  to Shri Dutta, the goods had  been  manufactured, the  goods in question were unconditionally exempt from  the duty.  Under  the Finance Bill, 1987-88, the  said  products were made dutiable at the rate of 15% ad valorem on or  from 1st  March, 1987. But the appellant had in their factory,  a stock  of  the said products which were  duly  manufactured, according to Shri Dutta, packed and ready for sale prior  to 28th  February, 1987. In those circumstances, the  goods  in question, according to Shri Dutta, would not be subjected to duty at 15% ad valorem. Having considered the facts and  the circumstances  of  the case, we are unable  to  accept  this submission.  Excise is a duty on manufacture or  production. But the realisation of the duty may be postponed for  admin- istrative  convenience to the date of removal of goods  from the  factory.  Rule 9A of the said rules merely  does  that. That is the scheme of the Act. It does not, in our  opinion, make removal be the taxable event. The taxable event is  the manufacture. But the liability to pay the duty is  postponed till the time of removal under rule 9A of the said Rules. In this  connection, reference may be made to the  decision  of the Karnataka High Court in Karnataka Cement Pipe Factory v. Supdt.  of Central Excise, [1986] 23 ELT 3 13, where it  was decided  that the words ’as being subject to a duty  of  ex- cise’  appearing in s. 2(d) of the Act are only  descriptive of the goods and not to the actual levy. ’Excisable  goods", it was held, do not become non-excisable goods merely by the reason  of  the exemption given under a  notification.  This view  was also taken by the Madras High Court in Tamil  Nadu (Madras State) Handlook Weavers Cooperative Society Ltd.  v. Assistant  Collector of Central Excise, [1978] ELT J 57.  On the  basis of rule 9A of the said rules, the central  excise authorities  were  within the competence to apply  the  rate prevailing  on  the date of removal. We are of  the  opinion that even though the taxable event is the manufacture or the production  of an excisable article, the duty can be  levied and  collected  at a later date for  administrative  conven- ience.     Having regard to the facts and the circumstances of this case  and having regard to the scheme of the excise law,  we are of the opinion that the Tribunal was right and there are no  grounds  to  assail the order of the  Tribunal.  In  the aforesaid  view  of the matter, the appeal  must  fail  and, accordingly, is dismissed. there will, however, be no  order as to costs. R.S.S.                                         Appeal   dis- missed.

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