G. Sankaran, President
1. In the present batch of appeals, the issue involved is the same as in the batch of appeals heard and disposed of by this Tribunal by Order No. 363/90-C to 409/90-C dated 6-4-1990. The issue, in brief, was whether goods manufactured prior to the levy of Special Excise Duty (‘SED’) by the Finance Bill, 1988, but cleared after the date of imposition of the said levy would attract the levy. The issue was answered in the affirmative by the Tribunal mainly relying on the Supreme Court’s judgment in the case of Wallace Flour Mills Company Ltd. v. Collector of Central Excise -1989 (44) ELT 598. It was held by the Tribunal that collection of SED on goods which had been fully manufactured prior to the introduction of the Finance Bill, 1988 (29-2-1988) but cleared on or after 1-3-1988 was valid and in accordance with law.
2. We have heard Shri L. Narasimha Murthy, DR, for the appellant-Collector, Shri N.V. Raghavan Iyer, Adviser, for the Indian Oil Corporation (Appeal No. 267/90-C) and Shri S. Ignatius, Corporate Manager, for the Madras Rubber Factory (Appeal No. E. 3702/89-C and C.O. 7/90-C) . Godrej Soaps, respondents in appeal Nos. E.1902/86-C and 1903/86-C, had written to say that they would not be appearing for the hearing. The respondents to the remaining appeals were not represented in the Court in spite of notice of hearing.
3. The learned DR reiterated all the submissions for the Department in the batch of appeals decided by the Tribunal’s Order dated 6-4-1990 and submitted that, for the reasons set out in the Tribunal’s Order, the collection of SED in the instant cases was in order and that, therefore, the impugned orders should be set aside.
4. Shri Raghavan Iyer, referring to page 17 (paragraph 8) of the Tribunal’s order, stated that from the extracts of the Finance Minister’s speech (introducing the 1988 Finance Bill) it was clear that the Minister was talking about continuation of surcharges on income-tax. As regards SED the Minister stated: “In addition, it is now proposed to levy a surcharge by way of Special Excise Duty…”. Shri Iyer submitted that it was clear that the SED levied by the 1988 Finance Bill was a new impost. While a surcharge would partake the character of the charge, a special duty would not. The two terms surcharge and special excise duty were not synonymous. SED of 1988 was a new levy and was not continuation of a pre-existing levy. The goods manufactured prior to 1-3-1986 and cleared during March 1988 were exempted from the SED of 1987 by virtue of Notification No. 91/87 dated 1-3-1987 and 137/87 dated 12-5-1987. They were governed by the Special Excise Duty imposed in the 1987 Finance Bill but, in fact, they stood exempted by virtue of the said notifications. The 1988 levy of SED was not retrospective in character.
5. Shri Iyer further submitted that assuming that there was a continuity in the levy of SED, the declaration under the Provisional Collection of Taxes Act, 1931, would only serve to authorise levy on and from the midnight of the date of introduction of the Finance Bill, that is to say, with immediate effect but not with retrospective effect. It could thus be seen that, in point of fact, in the month of March 1988 there was an overlap between the SED authorised by the 1987 Finance Bill and the SED authorised by the 1988 Finance Bill. In the present case, when the goods were manufactured, they were admittedly exempted from the levy of the SED of 1987. Since the 1988 SED had effect only from 1-3-1988, the said goods could not be charged the SED of 1988 when cleared on or after 1-3-1986. In this context, he referred to the Supreme Court’s judgment in the Wallace Flour Mills case (supra) and submitted that the Court was concerned with Central Excise Rule 9A in a situation where goods manufactured when the basic excise duty leviable thereon was by statute, nil, were cleared at a time when the basic excise duty was, by statute, no longer nil. There was, according to Sferi Iyer, no quarrel with the proposition that once goods are leviable to excise duty at the time of their manufacture, they would attract a higher rate of duty if, by the time they were cleared from the factory, the rate of duty had undergone a change. In the present instance, such was not the case. The special excise duty authorised by 1988 Finance Bill did not exist at the time the goods were manufactured. Therefore, the judgment in the Wallace Flour Mills case had no application to the facts of the present case, the manufacture in the present case, having already taken place when the levy had not come into force. To illustrate his point, Shri Iyer submitted that if, after the imposition of the levy, certain goods were exempted from the levy and the exemption was later withdrawn, goods manufactured at a time when the exemption was in force but cleared when the exemption was no longer in force would, by operation of Central Excise Rule 9A, attract duty.
6. Shri Ignatius, for the Madras Rubber Factory, adopted the submissions made by Shri Raghavan Iyer. In addition, he submitted that Section 3 of the Central Excises and Salt Act and Central Excise Rule 9A must be harmoniously construed. While Section 3 authorised the levy of excise duty, Rule 9A laid down the time and manner of its collection. Similarly, clause 82(1) of the 1988 Finance Bill authorised the levy and collection of special excise duty. This showed that this levy was a new levy. Therefore, Rule 9A could not be invoked in relation to goods manufactured at a time when there was no levy. There should be some nexus between manufacture and collection. The levy must be in force at the time of manufacture if duty is to be collected at the time of clearance. In this context, he referred to the Supreme Court’s judgment in the case of Bombay Tyres International 1983 (14) ELT 1896. In that case, the learned Attorney General had spoken about pre-budget stocks and the Court had held that excise duty was on manufacture though the actual charge of duty could be deferred to the time of clearance. He then referred to Tribunal’s order No. 89/87-B dated 21-8-1987 in the MRF’s own case with referece to the special excise duty imposed by the 1980 Finance Bill. The Tribunal had held that the SEE) would not be attracted to goods manufactured before the imposition of the levy but cleared thereafter. The respondents were entitled to a similar order in the present case also.
7. We have considered the submissions. In essence, the various ramifications and aspects of the issue had been discussed at great length in the Tribunal’s Order No. 363/90 to 409/90-C dated 6-4-1990 (referred to earlier). This order was passed by a 3-Member Bench of this Tribunal. In the normal course, we would follow that decision in a subsequent case involving the same issue unless there are compelling arguments warranting a different course of action. We now proceed to examine the submissions made before us.
8. The interpretation of the words used in the Finance Minister’s speech in the manner set out in the Tribunal’s order and, in the manner expounded by Shri Raghavan Iyer, stem from differing perceptions. But if we look at the substance, we are faced with the position that special excise duty was not a duty imposed for the first time by the 1988 Finance Bill. It was already in existence in 1987 having been introduced, by the 1987 Finance Bill though all goods were actually exempted from the levy by an exemption notification. The fact of exemption, however, does not, as it were, wipe out the fact that special excise duty was in force as a result of the 1987 Finance Bill. The thrust of Shri Iyer’s argument, however, is that the levy of special excise duty is not, unlike the levy of basic excise duty (this term is used to denote the levy of excise duty in accordance with the First Schedule to the Central Excises and Salt Act, 1944, or, as the case may be, the Schedule to the Central Excise Tariff Act, 1985), a continuing or permanent levy, that is, a levy of a permanent character. It had to be authorised by the annual Finance Acts. The authority for the levy flows from each separate Finance Act. Thus the special excise duty authorised by the 1987 Finance Bill is not of the same character as the special excise duty authorised by the 1988 Finance Bill. Therefore, in Shri Iyer’s submission, since the 1988 levy of special excise duty was not in force at the time the goods were manufactured, the said levy cannot be collected from the goods when they were cleared after the imposition of the levy. This line of argument, in our opinion, flies in the face of the factual position which is that special excise duty was in force in 1987 and the; levy was continued in the year 1988 though by a separate Finance Bill. The nomenclature and the character of the levy did not undergo any change from 1987 to 1988. The special excise duty authorised by the 1988 Finance Bill, in our opinion, is not a levy altogether distinct and different in character from the levy of special excise duty authorised by the 1987 Finance Bill merely for the reason that the authority for the two levies flowed from two different enactments. It is true that the goods manufactured prior to 1-3-1986 were exempt from the levy of Special Excise duty under the 1987 budget and such exemption continued during the month of March 1988. The levy authorised by the 1988 Finance Bill had come into force from the midnight of 29-2-1988/1st March 1988 by virtue of the declaration under the Provisional Collection of Taxes Act. Since the SED of 1988 was no different from the SED of 1987, as noted by us earlier, the SED of 1988 was attracted on the clearance of these goods on and from 1-3-1986 by operation of Central Excise Rule 9A In our view, there is no question here of any retrospective application of the 1988 levy of SED. In this view of the matter, we are of the opinion that there is no disharmony between the operation of clause 82(1) of the 1988 Finance Bill and Central Excise Rule 9A as urged by Shri Ignatius. Nor, in our opinion, is there any lack of nexus between manufacture and collection. This is because goods were manufactured when special excise duty was in force and were cleared when special excise duty was in force though, no doubt, in terms of two different enactments. In the Bombay Tyres International case (supra), the Supreme Court has observed that though the levy of excise duty is on manufacture of goods, the actual stage of collection could be deferred by law to a stage at which it would be convenient to collect the tax. It is not clear how this principle, referred to by Shri Ignatius helps the case of the respondents. If we are dealing with a situation when there was no levy of Central Excise at the time of manufacture of the goods but there was a levy at the time of their clearance, the situation may possibly be different. Here, however, there is a situation where there was a levy of SED (though actually exempted) at the time goods were manufactured and the levy continued to be in force (though by a separate enactment) at the time the goods were cleared. The principle, does not, advance the cause of the respondents.
9. In the Wallace Flour Mills case (supra) the goods in question did not attract excise duty because the rate of duty shown against the relevant entry in the schedule was nil. By the Finance Bill of 1987, the nil rate was substituted by 15% ad valorem on and from 1-3-1987. The contention for the Wallace Flour Mills Company was that goods manufactured prior to 1-3-1987 would not attract the 15% ad valorem levy when cleared on or after 1-3-1987. The Supreme Court upheld the Tribunal’s decision to the effect that in such a case duty at 15% ad valorem was rightly leviable. Of course, the Supreme Court considered certain judgments of the Madras and the Karnataka High Courts on the interpretation of Section 2(d) of the Central Excises and Salt Act defining “excisable goods”. But the principle of the judgment was that though the goods in question were manufactured during the period when they did not attract excise duty because of the nil duty entry in the tariff schedule, they attracted duty when they were cleared after the nil rate was substituted by 15% ad valorem rate. In the present case, it is not as though no special excise duty was in force when the goods were manufactured (although Shri Iyer and Shri Ignatius have contended that the 1988 levy of SED was not in force) but, as we have discussed earlier, there was in pith and substance no difference in character between this levy and the levy of SED by the 1987 Finance Act. Therefore, in our opinion, when the goods were cleared on or after 1-3-1988 the special excise duty authorised by the 1988 Finance Bill was correctly charged.
10. In this view of the matter, and following the previous decisions of this Tribunal, we set aside the impugned orders and allow these appeals.