JUDGMENT
1. This is an appeal filed by the Union of India and the Collector andAssistant Collector of Central Excise against the judgment and order ofRege J. by which he inter alia allowed the writ petition filed by therespondents in this Court and issued an order under Article 226 of theConstitution directing the appellants, their officers and agents topermit the respondents to remove without payment of excise duty underItem 22B of the First Schedule to the Central Excise and Salt Act, 1944the goods mentioned in Item 7 of Ex. D and Ex. E to the respondent’spetition and further directing the appellants to refund to therespondents a sum of Rs.44,603.73 paid by them as excise duty to theappellants.
2. The respondents, the Elphinstone Spinning & Weaving Mills Co. Ltd., towhom it will be convenient hereinafter to refer to as “the mills”, carryon inter alia the business of plasticizing amongst other articles cottonfabrics and manufacturing P.V.C. (Poly Vylyn Chloride) leather cloth.
3. Prior to the financial year 1968 the Item of cotton fabrics was liableto excise duty at the rate prescribed in Item 19 of Schedule 1 to theCentral Excise and Salt Act, 1944 (hereinafter referred to as “the saidAct”). It is unnecessary for the purposes of this appeal to reproducethe whole of the said Item No.19. Suffice it to say that under that Item”cotton fabrics” meant all varieties of fabrics manufactured eitherwholly or partly from cotton including various articles made from cottonand specified in the said Item. From this definition of cotton fabricsas given in Item 19 certain fabrics containing certain percentage or moreby weight of wool, silk, rayon or artificial silk were excluded. Therates of duty prescribed by the said Item 19 were dependent upondifferent average count of yarn in different varieties of cotton fabricsand was levied per square metre. Under sub-rule (1) of rule 8 of theCentral Excise Rules, 1944, the Central Government has the power bynotification in the Official Gazettee to exempt from time to time,subject to such conditions as may be specified in the notification anyexcisable goods from the whole or any part of duty leviable on suchgoods. In pursuance of this power the Central Government by anotification dated March 1, 1966 exempted cotton fabrics falling underItem No.19 of the First Schedule to the said Act and specified in column 2 of the First Table to the said notification from so much of the duty ofexcise leviable thereon as was in excess of the duty specified in thecorresponding entries in column (3) of the said Table. In respect of thecotton fabrics processed by them the mills were paying duty at the lowerrate provided by the said notification. On February 24, 1968 by anothernotification issued under the said rule 8(1) the Central Governmentexempted all rubberised or plasticised fabrics the cotton, contents ofwhich were less than 20% weight of the articles as so processed from somuch of the duty as was in excess of the duty leviable on the cottonfabrics before its being subjected to either of the aforesaid processes.
4. On February 29, 1968 the Finance Bill 1968 was introduced inParliament. But this Bill a new Item, namely, Item 22B was introduced inthe First Schedule to the said Act. The said Item 22B read as follows :-
“22B. Textile fabrics impregnated or coated with preparations ofcellulose derivatives or of other artifical plastic materials.”
The rate of duty prescribed in that Item was 25% ad valorem. In respectof this Item 22B a declaration was made under the Provisional collectionof Taxes Act, 1931 to the effect that it was expedient in the publicinterest that the provisions inter alia of the said Item should haveimmediate effect, that is, the rate of duty prescribed by Item 22B fortextile fabrics impregnated or coated with preparations of cellulosederivatives or of other artificial plastic meaterials came into effectfrom the midnight or the morning of February 29, 1968.
5. On March 1, 1968 the Central Government in supersession of its earliernotification dated March 1, 1966 issued another notification whereby itexempted cotton fabrics falling under the said Item 19 and specified inthe second column of the First Schedule to the said notification from somuch of the excise duty leviable thereon as was in excess of the dutyspecified in the corresponding entries in colomn (3) thereof. TheExplanation III to the said notification provided that “Impregnating orcoating of cotton fabrics with preparations of cellulose derivatives orof other artificial plastic materials, if the resultant fabrics fallunder Item No.22B of the First Schedule to the Central Excise and SaltAct, 1944, shall not be treated as processing of cotton fabrics.”(Consequent upon the introduction of the said Finance Bill in Parliamentand the issue of the aforesaid and dother notifications, the Collector ofCentral Excise issued a trade notice which is dated February 29, 1968. Inthat trade notice the Collector stated that by the new Finance Bill andthe said notifications changes had been made in the rates of duty andexemptions granted in respect of various excisable commodities and thatsix new commoddities had also been brought under excise control. Thesaid trade notice further went on to state that by the said Finance Billexcise duty had been imposed for the first time on six Items, mentionedtherein which were included in the description of goods given in Item22B. The trade notice further went on to say that “The changes effectedby the Finance Bill as well as the said notifications came into effectfrom the midnight of 29th February/1st March, 1968. It should be notedthat the stocks of excisable commodities at midnight of 29th/1st March,1968 in a fully manufactured condition even if lying within the precinctsof the producing factories will not be dutiable. The manufacturersshould immediately declare the stock of these new commodities in theprescribed form to the Central Excise Officers visiting theirfactories…The new commodities have been allotted for the purpose ofadministration to the following Assistant Collectors of Central Excise.”The textile fabrics subjected to the process mentioned in the said Item22B were allotted by the said notification to the Assistant Collector,Central Excise, Bombay Division I. By this letter dated February 29,1968 the Superintendent of Central Excise communicated to the mills thesaid trade notice dated February 29, 1968 and directed the mills to makea declaration in the for in appended to the said letter of all theirstocks of artificial leather, of PVC leather cloth including rexine as onthe midnight of February 29, 1968 and to permdit a physical verificationof such stocks. The Assistant Collector visited the factory of the millsand took inspection of the stocks of the said goods held by the mills.According to the mills this inspection was on March 1, 1968. Accordingto the appellants it was on March 2, 1968. This controversy as to dateis immaterial for the purposes of this appeal. Amongst the stocks ofthese goods held by the mills there were certain goods without wrappingon hessain or paper. The Assistant Collector insisted the mills shouldmake two declarations, one in respect of goods which were packed and theother in respect of goods which were not packed. Accordingly, the millsmade the said declarations. These declarations have been annexed as Ex.Dand Ex. E to the petition. Ex. D also include in Item 7 thereof PVCleather cloth and other artificial leather cloth wrapped on wooden rollswith marking on cloth itself without wrapping of hessain or paper. Thedeclaration Ex.E is a list of various types of goods manufactured by themills which were not packed or wrapped. The Assistant Collector allowedthe mills to remove the goods mentioned in Items 1 to 6 of Ex.D withoutpayment of any duty of excise but refused to allow them to remove thegoods mentioned in Item 7 of Ex.D or any of the goods mentioned in Ex.Eunless duty under the said Item 22B of the first Schedule to the said Actwas paid by them and he did not accept the contention of the mills thatthe said goods also had been fully manufactured before the midnight ofFebruary 29, 1968.
6. On March 14, 1968, another notice was issued by the Collector of theCentral Excise, Bombay. That notice inter alia stated that with theintroduction of the new item No. 22B textile fabrics impregnated ofcoated with preparations of cellulose derivatives or of other artificialplastic material artificial leather cloth or rexine with fextile fabricsbacking which was chargeable to processing duty as for processed fabricssubject to the percentage laid down regarding the fabrics content of thefinished product would no longer be classified under item 19 or 22 of theFirst Schedule to the said Act but would attract 25% and valorem dutyunder the said item 22B. The said trade notice further stated thatstocks of new excisable commodities at the midnight of 29th February/1stMarch, 1968 in a fully manufactured condition even if lying within thepercincts of producing factories would not be dutiable provided thatgoods would not be considered as fully manufactured unless at midnight of29th February/1st March, 1968 they were ready for delivery.
7. As Excise Authorities refused to accept the Mills contention asregards the goods which were not packed but nonethless in fullymanufactured condition on the midnight of February 29/March 1, 1968, themills removed a part of the stock of such goods after payment underprotests of the excise duty in the sum of Rs. 44,234.73. In respect ofthe said goods mentioned in item 7 of Ex. D. and in Ex. E. to thepetition the mills filed the petition under Article 226 of theConstitution from which this appeal arises.
8. The two main contentions taken by the mills in their said petitionwere (1) that the goods mentioned in item No. & of Ex. D and in Ex. E.were fully manufactured on the midnight of February 29, 1968 and (2) thatunder the said Act the levy of the excise duty was at the timemanufacture of the goods and the same was to be determined in accordancewith law at the time when the goods werre manufactured and that theinsertion of an item in the First Schedule to the said Act after themanufacture of the goods did not attract the duty prescribed by the saidAct in respect of goods which were manufactured prior to the insertion ofthe new item. An affidavit in reply to the petition was filed by A.J.Butler, Assistant Collector of Central Excise, Bombay. The onlycontention taken up in the said affdavit was that the mills were liableto pay the duty under the said item 22B respect of the goods which werethe subject-matter of the petition since the said goods were not packedand ready for delivery on the midnight of February 29, 1968 and as suchcould not be regarded as having been completely manufactured. The thisaffidavit copies of correspondence exchanged between the ExciseDepartment and certain dealers and manufacturers in leather cloth and PVCcloth were annexed to show that in the trade this type of goods were soldin packed condition. The mills filed their affidavit in rejoinerannexing copies of certain other letter to show that this type of goodswere at time sold even though they may not have been wrapped or packed inpaper, matting or hessian. Subsequently with the permission of the Courta further affidavit in reply was filed on behalf of the appellants byK.R. Bhatia, Assistant Collector of Central Excice, Bombay Division IV,taking up a contention wholly contray to what had been stated by theCollector of Central Excises in the said trade notices referred to aboveas also in th eearlier affidavit in reply of A.J.Butler. It wascontended that what was done by the insertion of the said Item 22B wasnot to introduce a new excisable commodity in Schedule I to the said Actbut was no reclassify Item 19. It was contended that by the insertion ofthe said Item 22B what was altered was the rate of duty imposed on thetype of goods described in the said Item 19. Before Rege J. who heardthe petition of th mills the main argument certred round the questinonwhether the said item 22B was new head of excise duty created for thefirst time by the Finance Act of 1968 or was a reclassification of thsaid Item 19. Rege J. negatived the contention of the appellants thatthe said Item was reclassification of Item 19, and held that a new headof excise duty was created for the first time by Item 22B of the saidFinance Act. In the view that the he took the learned Judge thought itunncessary to decide the other questions which arose in the petition. Hefurther opined that even if the mills’ goods fell at the same time undertwo different items in the First Schedule the mills would be liable to becharged under that item which provided for a lesser rate of duty. Pendingthe petition by a consent order passed on July 8, 1968 the appellantswere allowed to assess the duty on the goods which were thesubject-matter of the petition and to issue demand notices againsts themills but wer prohibited from enforcing any such notice until the hearingand final disposal of the petition. In pursuance of this consesnt orderassessment orders were passed against the mills assessing the goods underth esaid Item No. 22B. By this order under appeal Rege J. vacated allthe said assessment orders.
9. The main contention urged by Mr. Dhanuka learned counsel for theappellants before us in this appeal was that the stage or point of timeat which the duty of excise is attracted by reason of the provisions ofthe said Act and the rules is not at the point of time of manufacture ofproduction of goods but at a subsequent stage. In Dhanukas submissionthat subsequent stage in the present case was at the time when the goodswere sought to be removed from the Mills’ factory. The this contention aprelilinary objection was taken by Mr. parekh learned counsel for therespondents. That preliminary objection was that the contruction nowsought to be placed upon the said Act and rules on behalf of theappellants ran counter to the two trade notices we have earlier referredto. This unboubtedly is true, but if the construction canvassed beforeus by Mr. Dhanuka is correct, the appellants cannot be precluded fromputting it forward. The trade notices have no statutory effect. It is amatter of regret that senior officers of the Government should have puitforward before that trade wrong interpretation of the Act, but thatcannot be held to estop the appellants from canvassing the trueinterpretation of the statute.
10. In order to appreciate the rival submission on this part of thecasse, it is necessary to refer briefly to the relevant provisions of thesaid Act and the rules as they stood at the material time. Section 2 isthe definition section. Clause (d) of that section ddfines the term”excisable goods” as meaning goods specified in the First Schedule asbeing subject to a duty of excise and as including salt. Clause (f)defines the term “manufacture” as including any process incidental orancillary to the completion of a manufactured product. In foursub-clauses that clause then sets out certain processes which in relationto different categories of goods would be included within the staturorydefinition of the term “manufacture”. We are not concerned with thesesub-clauses. Chapter II of the said Act deals with levy and collectionof duty and section 3 in that chapter is headed “Duties specified in theFirst Schedule to be levied”. Sub- section 3 provides as follows :-
“Thesse shall be levied and collected in such manner as may be prescribedduties of ecise on all excisable goods other than salt which are producedor manufactured in India, and a duty on salt manufactured in, or importedby land into, any part of India as, and at the rates, set forth in theFirst Schedule.”
11. Section 4 provides for determination of value for the prupose ofduty. Under that section where any article is chargeable with duty at arate dependent on the value of the article, such value is to be deemed tobe the wholesale cash price for which an article of the like kind andquality is sold or is capable of being sold at the time of the removal ofthe article chargeable with duty from the factory or any other premisesof manufacture or production for delivery at the place of manufacture ofproduction and in a case where a wholesale market does not exist for sucharticle at such place, at the nearest place where such market exists; orin a case where such price is not ascertainable, the price at which anarticle of the like kind and quality is sold or is capable of being soldby th emanufacturer or producer, or his agents, at the time of removal ofthe article chargeable with duty from such factory or other premises fordelivery at the place of manufacturer or production or if such article isnot sold or is not capable of being sold at such place, at any otherplace nearest thereto. Section 37 confers upon the Central Governmentpower to make the rules to carry into effect prupose of the said Act. Section 38 provides as follows :-
“38. Publication of rules and notification – All rules made andnotifications issued under this Act shall be made and issued bypublication in the Official Gazette. All such rules and notificationsshall thereupon have effect as if enacted in this Act.”
12. There is a proviso to this section with which we are not concerned.”In pursuance of the power canferred by section 37 th eCentral Governmenthas made the Central Excise Rules, 1944. Clause (v) of rule 2 defines`duty’ as meaning the duty payable under section 3 of the Act. ChapterIII of the Rules is headed `Levy and Refund of,. and manufactures anyexcisable goods, or who stores such goods in a warehouse, shall pay theduty or duties leviable on such goods, “at such time and place and tosuch person as may be designated, in, or under the authority of theseRules, whether the payment of such duty or duties is secured by bond orotherwise”. Rule 9 prescribes the time and manner of payment of duty.Sub-rule (1) of rule 9 provides as follows :-
“9 (1) No. excisable goods shall be removed from any place where they areproduced, curred or manufactured or any premises appurtenant thereto,which may be specified by the Collector in this behalf, whether forconsumption, export or manufacture of any other commodity in or outsidesuch place, until the excise duty leviable thereon has been paid at suchplace and in such manner as is prescribed in these Rules or as theCollector may require, and except on presentation of an application inthe proper form an on obtaining the premission of the proper officer onthe form…”
Rule 9-A (1) provides as follows:-
“9-A. Date for determination of duty and tariff valuation –
(1) The rate of duty and tariff valuation, if any, applicable to anyexcisable goods shall be the rate and valuation in force.
(i) in the case of goods cleared from the premises of a curer on paymentof duty, on th date on which the duty is assessed; and
(ii) in the case of goods cleared from a factory or a warehouse, subjectto sub-rule (2) and (3), on the date of the actual removal of such goodsfrom such factory or warehouse.”
Relying upon these statutory provision Mr. Dhanuka submitted that undersection 3 the duties of excise at the rates set forth in the FirstSchedule were to be livied and collected in such manner as may beprescribed by the Rules According to Mr. Dhanuka levy as well as thecollection of excises duties were to be prescribed by the Rules. Hefurther submitted that these were Rules which had to be published in theOfficial Gazette and that these Rule had been so published and,therefore, they had effect as if they were enacted in the said Act. Mr.Dhanuka further submitted that section 4 which provided for determinationof value of goods in case where ad valorem duty was attracted, indicatedthat the point of time when the duty was attracted was the removal ofgoods, from the place where they were stored. He also further stronglyrelied upon rule 9-A(1) to show that in case of goods cleared from thefactory the duty became attracted and was levied and imposed and alsocollected on the date of the actual removal of excisable goods from suchfactory or warehouse. In reply, Mr. Paresh submitted that the phrase “insuch manner as may be prescribed”, occurring in section 3 went only withthe word “collected” and did not go with the words “levied andcollected”. In Mr. Parekh’s submission section 3 was the only chargingsection and duty of excise was levid only by that section an since thatsection used the words “on all excisable goods other than slat which areproduced or manufactured in India,” the true construction of that sectionwould be that the duty of excise could only be levied on goods which aremanufactured or produced in India, provided that at the date ofmanufacture or production such goods were included in Schedule I to the said Act.
13. As mentioned earlier, Chapter II in which the said section 3 occursis headed “Levy and Collection of Duty”. On a plain and grammaticalreading of the said section we do not find it possible to read the pharse”in such manner as may be prescribed” occurring in the said section asmerely qualifying the word “collected” and not as qualifying the words”levied and collected”. According to us, under the said section the dutyof excise at the rates specifled in the said Schedle are levied on allexcisable goods other than salt wich are produced or manufactured inIndia. Levy of such duty and collection of such duty both are to be inthe manner as might be prescribed by the Rule. This constrction thatappears to be for tified by the heading of Chapter III of the Rules,namely, “Levy and Refund of, and Exemption from, duty”. Chapter III, inwhich the said rles 7,8,9 and 9-A occur, does not deal merely withcollection of duty or refund of duty but also levy of duty. We donot findany warrant in the Act or the Rules to spell out a construction that itis only scheme of the Act is that a duty of excise is levied on certaingoods which are specified in the First Schedule to the Ac t. Thequalifications so far as the classes of goods on which the duties arelevied are to, namely-(1) that they must be specified in the FirstSchedle as being subject to a duty of excise and (2) they must be prodcedor manufactured in India. Section 3 does not itself specify the point oftime at which the duty is to be levied or imposed. It reqires the lev ofthe duty and te collection of the amount of duty to be prescribed by theRles. The combined effect of section 3 and rles 7,9 and 9-A so far as thepresent case is concerned, is that in the case of the mills the duty wasattracted on the goods in qestion on the date of the actual removal ofthe goods from the mills’ factory. The point of time at which we have tosee whether the goods were liable to dut would be thus the date ofremoval of the goods from te factor or warehouse and not the date ofmanufacture or prodction, for the date when the goods were sought to beremoved from the factor or of wrehouse they weregoods of the descriptionmentioned in one of the items in the First Schedle as being subject to aduty of excise and were goods which were manufactured or produced inIndia the could not be removed unless duty at the rate se-fort in theFirt Schedle to the Act was paid. In support of his sbmissions Mr.Dhanuka relied upon on unreported judgment of the Kerala High Court in O.P. No. 728 of 1961 P. C. Assanktty, Managing Partner M/s. P. C. AssanKutt & Co., Badagara v. Assistant Collector of Cetral Excise,Ernakulamand other, decided by Vaidyalingam, J. as he then was, on June27, 1962. The facts in that case were that the petitioner was thelicensee of the Badgara Oil Mills which prodced vegetable non-essentialoil. The Finance Act of 1956 introdced a new item No. 23 in the FirstSchedule to the said Act. The Finance Bill Was introduced in prliament onFebruaty 29, 1956 and it contained a declaration under the ProvisionalCollections of Taxes Act, 1931 by reason of which inter alia the saiditem No. 23 came into force with immediate effect. By this item vegetablenon-essential oils became liable to duty of excise. According to thepetitioner in that cas he had certain quantity of coconut oil producedprior to Febrary 29, 1956 which he had sold prior to the month ofFebruary, 1956 but which had not been taken deliver of by the purchasers.According to the Department, the oil was produced not in February, 1956but in March 1956. On a consideration of the relevant provision of thesaid Act and the Rules Vaidyalingam, J. came to the conclsion that thequestion whether the goods in question were manufactured or producedprior to February 29, 1956 or later was no consequence iasmuch as when anitem was alone to be looked at and that for that purpose the rulesaforded considerable guidance regarding when exactly the duty was to becollected. He further held that if the conditions mentioned in section 3 were satisfied namely, that the goods were excisable goods and that theyhad been produced or manufactured in India, the levy of excise dutyatomatically attached itself. He rejected the contention advanced beforehim that the goods should have been manufactured or produced only afterthat levy had been imposed.
14. Mr. Parekh, learned counsel for the respondents, however, submittedthat grom the levy nature of excise, a duty of excise was levied only onthe manufacture of production of goods and that any other stage whichmight be provided for under a Act was merely the stage at which theamount of duty was to be collected and not th epoint of time at which theamount of duty was to be collected and not the point of time which theduty was attracted. The first time that the question of the nature of aduty of excise came up for consideration in this country was in the caseof In re: The Central Provinces and Berar Sales of Motor Spirit andLubricants Taxation Act, 1938 A.I.R. 1939 F.C.I.=1978 E.L.T. (J 269). This was a reference made by the Governor- General under sesction 213 ofthe Government of India Act, 1935 to determine the validity of theCentral Provinces and Berar Sales of Motor Spirit and LubricantsTaxation Act, 1938. Gwyer C.J. in his judgment traced the history ofexcise duty, as follows. “Its primary and fundamental meaning in Englishis stsill that of a tax on articles produced or manufactured in thetaxing country and intended for home consumption. I am satisfied taht isalso its primary and fundamental meaning in India; and no one hadsuggested that it has any other meaning in Entry (45)”. The contentionon behalf of the Government of India that an excise duty is a duty whichmay be imposed upon home- produced goods at any stage production toconsumption and that therefore the Federal legislative power extended toimposing excise duties at any stage, he observed that this was to confusetwo things, the nature of ecises duties and the extent of the Federallegislativce power to impose them. He observed, “But there can be noreason in theory why an excise duty should not be imposed even on theretail sale of an article, if th etaxing ACt so provides”. A similarquestion arose for consideration of th eFederal Court in the case ofprovince of Madras v. boddu Paidanna, 1942 R.C.R. 90=1978 E.L.T. (J 272).The court held that a tax levied on th first sale must in the nature ofthings be a tax on the sale by the manufacturer or producer but it islevied upon him qua seller and qua manufacturer or producer, and that ifa taxpayer who paid a sales tax was aslo a manufacturer or producer ofcommodities subject to a Central duty of excise he may have to pay twotaxes, but thosse two taxes were economically two sesparate and distinctimposts. This view was accepted and approved by the judicial Committeeof the privy Council in the case of Governer-General-in-Council v.Province of Madras, 72 Indian Appeal 91= 1978 E.L.T. (J 280) and inA.B.Abdulkadir and others v. The State of Kerala and another, . Their Lordships of the Supreme Court after referring to thesedecisions said :
“It may therefore be accepted that a duty of excise is a tax on goodsproduced or manufactured in the taxing country. It may also be acceptedthat generally speaking that tax is on the manufacturer or the producerthough it cannot be denied that laws are to be found which impose a dutyof excise at stages subsequent to the manufacture or production.”
In R.C. jall parsi and the Amalgamated Coalfields Ltd v. Union of Indiaand another- after referring to the Federal Court andthe Privy Council decisions, Subba Rao J., as he then was, speaking forthe Court said :-
“With great respects, we accept the principles laid down by the saidthree decisions in the matter of levy of an excises duty and themachinery forcollection thereof. Excise duty is primarily a duty on theproduction or manfacture of goods produced or manufactured within thecountry. It is an indirect duty which the manufacturer or producerpasses on to the ultimate consumer, that is, its ultimate incidence willalways be on the consumer. Therefore, subject always tso the legislativecompetence of the taxing authority, the said tax can be levied atconvenient stage so long as the character of the impost, that is, it isduty on the manufacture or production, is not lost. The method ofcollection does not affect the essence of the duty, but only relates tothe machinery of collection for administrative convenience. Whether inparticular case the tax ceases to be in essence is an excise duty, andthe rational connection between the duty and the person on whom it ifimposed ceased to exist, is to be decided on fail construction of theprovision of a particular Act.”
15. Mr. Parekh, however, placed considerable reliance upon certainobservations to be found in the majority judgment of the Supreme Court inIn re. Sea Customs Act (1878)-section 20(2)-A.I.R. 1963 S.C. 1760. Thiswas reference by the President of India under Artivle 143(1) of theConstitution relating to the true scope and interpretation of Article 289 of the Constitution relating to immunity of property and income of Statesfrom Union taxation. The passage on which Mr. Parekh relied is (at page1376) as follows :-
“This will show that the taxable event in the case of duties of excise isthe manufacture of goods and the duty is not directly on the goods but onthe manufacture therof. We may in this connection contrast sales-taxwhich is also imposed withreference to goods sold, where the taxableevent is the act of sale. Therefore, though both excise duty and salestax are levied with reference to goods, the two are very differentimposts; in one case the imposition is on the act of manufacture ofproduction while i the other it is on the act of sale. In neither casestherefore can it be said that the excise duty or sales-tax directly onthe goods for in that event they will really become the same tax. Itwould thus appear that duties of excise partake of the nature ofindirect taxes as known to standard works on economics and are to be distinguished from direct taxes like taxes on property and income.”
16. We are unable to see how the passege relied upon by supports his contention that duty of excise is levied and attracted onlyat the point of time of manufacture or production and not at a subsequentstage. The question in that reference before the Supreme Court waswhether excise duty could be livied on goods manufacturd or produced by aState, or whether in so levying the excise duty the provisions of Article 289 were viloated. The passage relied upon by Mr. Parekh occursimmediately after the passage quated by us above from the Supreme Courtdeciion in the case of R.C.Jall Parsi and the Amalgamated Coalfields Ltd.v. Union of India and another. . It clearly setsout what exactly the effect of the earlier decision is. Undoubtedlyunder the Act and the rules a duty of excise cannot be attracted orlevied or imposed unless in the first instance there was manufacture orproduction of goods in this country. This is the very basis of excisenamely the factum of manufacture or production in this country. Thishowever, does not mean that a duty or tax which is imposed upon articlesmanufactured or produced in this couontry must be levied at the point ofmanufacture or production. Once goods havae been produced ormanufactured in this country the levy of duty can be imposed in respectof these goods at any subsequent stage subject to the qualification laiddown by the Federal Court, the Privy Council and the Supreme Court thatsuch levy does not impinge upon the exclusive legislative power of theState Government.
17. Mr. Parekh next relied on a judgment of a Division Bench of thisCourt in M.S. Shawhncy v. Messers. Sylvania and Laxman Ltd. (1975) Bom.L.R. 380. This was a case under the Customs Act, 1962 and the questionwhich fell for Court’s consideration wa whether and when there wasnotification under section 25(1) of the said Act exemption to glasstubes used in the manufacture of fluorescent lamps, from customs duty,which was to expire on March 31, 1967, the goods imported before the dateif expiry but in respect of which the bill of entry was filed after thedate of expiry, were entitled to such exemption. On consideration of therelevant sections of the said Act the Court held that under section 12(1) of the Customs ACt, 1962, chargeability in respect of levy of custsomsduty arose when the goods were imported into India and that by thecombined effect of the difinitions of the words “import” and “India”under the Customs Act the import took plaace when the goods were broughtinto the territorial waters of India and there was nothingin the CustomsAct to indicate that the chargeability was postponed until a bill ofentry was presented. Relying upon this decision, Mr. Parekh submittedthat section 12 of the Customs Act was in pari materia with section 3 ofthe said Act and that accordingly, though under section 15 of the CustomsAct the rate of duty and tariff valuation of imported goods was to be therate and valuation in force on the date on which the bill of entry inrespect of such goods was presented, by virtue of this decision, sinceonce chargeability was fixed under section 12, it could not be postponedto a later date by reason of any other provisions of the Act or the ruleswhich did not provide for chargeability or levy of tax. We are unable toaccept this submission of Mr. Parekh. A plain reading of section 12 shows that it is not in pari materia with section 3 of the CentralExcise and Salt Act, 1944. The relevant portion of the said section 12 provides as under :-
“12(1) Except as otherwise provided in this Act or any other law for thetime being in force, duties of customs shall be levied at such rate asmay be specified under the Custsoms Tariff Act, 1975 (51 of 1975), or anyother law for the time being if force, on goods imported into, orexported from India….”
18. The levy under the Customs Act is provided for by section 12 itself, while under section 3 of the said Act, though the levy is provided for by the said section 3, it is th eduty of excise to be livied “In such manner as may be prescribed”. These material words, “In such manner as may be prescribed” are significantly absent from section 12 of the Customs Act. These are the words which make all the difference. In the Customs Act, the levying section is section 12 itself. In the said Act levying section is section 3 read with such rules as may be framed by the Central Government under section 37 of the said Act.
19. For the reasons stated above, we are of the opinion that the mills are liable to pay duty of excise under item 22B on goods of the description falling within that item when they sought to remove such goods from the factoryo on and after midnight of February 29, 1968 and the fact that these goods might have been manufactured prior to that date was irrelevant to the liability to pay the duty of excise. In this view that we take we find it unnecessary to consider or decide the other contention raised in this appeal namely, that item 22B did not introduce new head of excise duty, but provided merely for alteration in the rate of duty or the contention that the goods were not completely manufactured prior to 29, February 1968.
20. In the result, we allow this appeal and sset aside the order appealed against and dismiss the petition filed by the mills. For the sake of clarifiction and in order to leave no scope for any controversy hereafter we may add here that the orders of assessment against the mills assessing their goods under item 22B passed after th efiling of the petition and which were vacated by Rege J are hereby restored. During the pendency of this appeal by an other dated December 19, 1973 the appellants have deposited in this Court a sum of Rs. 55,000/- which haad been invested . This sum will be returned together with the accrued interest to the appellants.
21. This writ petition was necessitated by wrong interpretation communicated to the mills by the aforesaid two trade notices of the Collector of Central Excise, Bombay. According to us a fair order as to costs should therefore, be that each party should bear and pay its costs throughout. The deposit made by th eappellants as security for the respondents costs will be refunded.
22. After this judgment was concluded Mr. Parekh orally applied for leave to appeal to the Supreme Court under Article 133 of the Constitution. Mr. Parekh submitted that a substantial question of law of general importance arose for determination of this Court in this appeal, that question being whether on a correct construction of section 3 of the Central Excise and Salt Act, 1944, and in rule 9A of the Central Excise Rules, 1944 is duty of excise on excisable goods leviable at the rate applicable thereto on the date of manufacture of the said goods, though removed from the factory premises or baonded store room after a new entry applicable thereto is inserted in the First Schedule to the said ACt or at the rate applicable under the new entry when they are removed from the factory premises or bonded store room ? “Mr. Dhanuka learned counsel for the appellants agrees that this is a substantial question of law of general importance and requires to be decided by the Supreme Court. In our opinion too this question is one which needs to be decided by the Supreme Court. We accordingly grant a certificate to the respondents to appeal to the Supreme Court on the question set out by us, above under Article 133(1) of the Constitution of India.
