ORDER S. Venkatesan, Sr. Vice-President
1. This appeal of M/s. Vazir Sultan Tobacco Company Limited (hereafter referred to as the Appellants) is being heard by the present Larger Special Bench constituted under the orders of the President. The Bench had also received an application from M/s. Jay Engineering Works Limited the appellants in Appeal No. ED (SB) (T) 331/79-B (hereafter referred to as the Intervener), to be joined as an Intervener at the hearing of the appeal of M/s. Vazir Sultan Tobacco Company Limited. The Bench agreed to the request of M/s. Jay Engineering Works Limited. We have accordingly heard the representatives of the aforesaid two parties. We have also heard Shri N. V. Raghavan Iyer for the respondent Collector (hereafter referred to as the Respondent).
2. On behalf of the appellants, their learned Advocate, Shri T.M. Ansari, referred briefly to the facts of their case, which are not in dispute. The goods in this case were cigarettes, which were cleared between 1-3-1978 and 12-3-1978 The question is whether these cigarettes were liable to the Special Excise Duty (SED) which was imposed under Section 37 of the Finance Act, 1978. The provisions of this Section took effect from 1-3-1978 by virtue of a declaration under the Provisional Collection of Taxes Act inserted in the Finance Bill, 1978. It is common ground that these goods were liable to the duty under Item 4.11(2) of the First Schedule to the Central Excises and Salt Act (hereafter referred to as "the basic duty"), both before and after 1-3-1978. It is also common ground that prior to 1-3-1978 such goods were not liable to the SED. It was the contention of the appellants that they were not required to pay the SED on goods which had beeen manufactured prior to 1-3-1978 and removed between 1-3-1978 and 12-3-1978. As this contention was not accepted by the Central Excise authorities, they cleared the goods on payment of SED amounting to Rs. 86,357.93, and claimed refund of that amount. Their claim to the Assistant Collector and their subsequent appeal to the Appellate Collector having been rejected, the matter has come up before us in the shape of this appeal.
3. Shri Ansari stated that his submissions would be under the following main heads :-
(1) SED is also an excise duty and it is leviable on manufacture and not on removal ;
(2) the liability to excise duty on any goods arises only if they have been manufactured on or after the date of imposition of the duty ; and (3) the interpretation adopted by the lower authorities amounts to giving retrospective effect to Section 37 of the Finance Act, 1978, which is not justified.
4. On his first point, namely that excise duty is a levy on manufacture, Shri Ansari cited the following authorities :-
(a) AIR 1962 S.C. 1006-M/J. Chhotabhai Jethabhai Patel and Company v. Union of India (para 25 at page 1018). It has been observed in this judgment that a duty of excise is a tax levied on goods manufactured and is unrelated to and not dependent on any commercial transaction in them ;
(b) AIR 1962 SC 1281- R.C. Jall Parsi v. Union of India (para 7 at page 1286-7), wherein it has been observed that excise duty is primarily a duty on the production or manufacture of goods, which can be levied at a convenient stage so long as its character as a duty on manufacture or production is not lost, (emphasis by Shri Ansari);
(c) AIR 1976 S.C. 182-A.B. Abdul Kadir and Ors. v. State of Kerala (para 10 at page 189). This judgment points out that an excise duty must have a nexus with the manufacture or production of an article. Shri Ansari therefore submitted that the chargeability of a duty of excise is clearly related to the manufacture of the goods and it would not be attracted in respect of goods which had already been manufactured, as in this case. 5. On his second point that a new excise duty would not be attracted on goods manufactured before the date of imposition, Shri Ansari cited the following authorities :- (a) 1977 E.L.T. 26 S.C. in Union of Inaia and Ors. v. State of Mysore. This had reference to the imposition of excise duty on certain articles of iron and steel under Item 26AA by the Finance Act, 1962. Shri Ansari referred to para 6 of the judgment at page 26 wherein according to him it was held that there could be no levy of pre-excise stock (We find that the issue in that case was somewhat different, but for reasons which will become apparent, it is not necessary to go into the differences) ;
(b) 1978 E.L.T. 127 (Del.) in the case of Modi Rubber Limited v. Union of India and Ors. Shri Ansari fairly pointed out that the issue in that case was a different one. However he relied on para 13 at page 132 wherein it had been observed that the charging section in the Central Excises and Salt Act is Section 3, which itself does not refer to the clearance of the goods from the factory. Shri Ansari submitted by analogy that in this case the charging section was Section 37 of the Finance Act, 1978 which also did not refer to the clearance of goods from the factory and did not fix that event as the point of incidence of the duty ;
(c) 1978 E.L.T. 33 Madhya Pradesh in Kirloskar Brothers v. Union of India. This case related to goods which had been exempt from duty at the time of manufacture, the exemption being subsequently withdrawn before the time of clearance. Shri Ansari relied on para 9 of the judgment wherein it had been observed that excise duty would not be leviable in respect of goods manufactured or produced during the period when goods were exempt from duty. This had been followed by an application for special leave to appeal to the Supreme Court and in its judgment reported at 1978 E.L.T. 690 Madhya Pradesh the Division Bench which heard the application had dismissed it. A subsequent Special Leave Petition had also been dismissed by the Supreme Court with the observation "dismissed on merits" ;
(d) 1978 E.L.T. 177 (Allahabad) in Union of India v. Delhi Cloth and General Mills Company Ltd. This case arose out of an exemption notification granting "rebate" of excise duty on excess production of sugar. Shri Ansari fairly agreed with the Bench that the interpretation in this case was based on the specific wording of the exemption notification, and it was otherwise also not analogous to the case before us ; (e) 1984 (17) E.L.T. 217 (Andhra Pradesh) in the case of Sirpur Paper Mills. In this case the Hon'ble High Court had observed vide paras 18 to 22 of its judgment that the Central Excises and Salt Act and Rules made different provisions as to how, when, where and at what point of time the excise duty was to be determined and paid. These should not be mixed up with, or mistaken for, the imposition of duty, which was the chief criterion for answering the question in that case. The Court had further observed that excise duty would arise the moment the manufacture or production of the commodity was complete, irrespective of the fact that the assessment and collection was postponed to a later point of time; the incidence for the impost being the manufacture or production of goods ;
(f) 1983 E.L.T. 2342 (Madras) in Sree Ayyanar Spinning and Weaving Mills Limited. In that case it had been held that the additional duty of customs leviable under Section 3 of the Customs Tariff Act was different and distinct from the basic duty leviable under Section 12 of the Customs Act (read with Section 2 of the Customs Tariff Act). Similarly in this case Section 37(3) of the Finance Act, 1978, provided that SED would be in addition to the basic excise duty, and it was thus clearly distinct and separate levy.
6. On the third argument that retrospective effect could not be given to a provision unless it was specifically provided, Shri Ansari submitted that this was a well-established principle, in this connection he referred to a very recent judgment of the Supreme Court in Civil Appeal No. 2277 of 1970 in the case of D.R. Kohli and others v. Atul Products Limited. Although the question in that case was slightly different, the decision was of relevance to the present case, because one of the questions which arose for consideration there turned on the contention that the goods under consideration were not liable for payment of excise duty when they were manufactured, that is, before the introduction of a new Item 14D in the Central Excise Tariff. With reference to this question the Supreme Court had observed that "payment of excise duty on dyes was possible only if they had been manufactured after the introduction of Item 14D into the First Schedule to the Act. Admittedly, in this case the dyes which were used by the respondent had been manufactured prior to that date".
7. Shri Ansari therefore submitted that in the present case SED should not have been levied on goods which had been manufactured prior to 1-3-1978, and that the appeal should be allowed.
8. Appearing for the Intervener, their learned Advocate, Shri A.C. Gulati, stated that while adopting the arguments of Shri Ansari had certain additional submissions to make. With reference to the argument that excise duty is a tax on manufacture, he referred to the Supreme Court judgment in the case of A.K. Roy and Anr. v. Vohas Limited AIR 1973 S.C. 225 : 1977 E.L.T. 177 S.C., and drew our attention to para 20 of that judgment where it had been observed that excise duty is a tax on the production and manufacture of goods. He also referred to the judgment of the Supreme Court in the case of Atic Industries (1978 E.L.T. 444 S.C.) where at para 13 the above observation in the Voltas judgment had been quoted with approval.
9. Shri Gulati then submitted that the view of the Excise authorities in this case could not be supported by relying on Central Excise Rules such as Rule 9 or Rule 9A, because if any provision in the rules was in conflict with a provision in the Central Excises and Salt Act, it would be bad in law.
10. Shri Gulati also referred to the judgment of the Supreme Court in the case of Corporation of Calcutta v. Liberty Cinema (AIR 1965 S.C. 1107). In para 22 of that judgment it had been observed that the delegation of essential legislative power would be bad, and the Hon'ble Supreme Court had cited from a previous decision to the effect that an executive authority cannot be authorised to modify a law in any essential feature, and that a change of policy would be such an essential feature. He submitted that Section 3 of the Central Excises and Salt Act, which was the charging section, confined the ambit of the levy to the production or manufacture of goods and any rule under the Act which had the effect of making the levy dependent on any other event, such as removal, would be bad.
11. Replying on behalf of the Respondent, Shri Raghavan Iyer drew our attention to Section 37 of the Finance Act, 1978, levying the SED. For convenience this section is reproduced below :-
"37. Special duties of excise.-(1) In the case of goods chargeable with a duty of excise under the Central Excises Act as amended from time to time, read with any notification for the time being in force issued by the Central Government in relation to the duty so chargeable, there shall be levied and collected a special duty of excise equal to five per cent of the amount so chargeable on such goods.
(2) Sub-section (1) shall cease to have effect after the 31st day of March, 1979, except as respects things done or omitted to be done before such cesser, and Section 6 of the Genera] Clauses Act, 1897, shall apply upon such cesser as if the said sub-section had then been repealed by a Central Act. (3) The special duties of excise referred to in Sub-section (1) shall be in addition to any duties of excise chargeable on such goods under the Central Excises Act or any other law for the time being in force. (4) The provisions of the Central Excises Act and the rules made thereunder, including those relating to refunds and exemptions from duties, shall, as far as may be, apply in relation to the levy and collection of the special duties of excise leviable under this section in respect of any goods as they apply in relation to the levy and collection of the duties of excise on such goods under that Act or those rules, as the case may be."
Shri Raghavan Iyer laid stress on Sub-section (1), which provides that the SED shall be levied and collected "in the case of goods chargeable with a duty of excise under the Central Excises Act ..." and Sub-section (3), which provides that the SED shall be in addition to any duties of excise chargeable on such goods under the Central Excises Act or any other law. Therefore, it was necessary first to enquire whether the goods under consideration were excisable goods in terms of the Central Excises and Salt Act. In the present case they were clearly so. Once this position was established, the SED clearly became leviable and had to be collected. Sub-section (4) of Section 37 prescribed the manner of collection by laying down that the provisions of the Central Excises and Salt Act and the Rules thereunder shall "as far as may be" apply in relation to the levy and collection of the SED as they apply in relation to the levy and collection of the basic excise duty.
12. Coming to the arguments of the learned Advocates on the other side, Shri Raghavan Iyer submitted that although it was customary to describe an excise duty as a tax on manufacture or production, this should not be taken as a definition. He referred to the advisory opinion of the Federal Court of India in the case of The Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938 (Central) Provinces and Berar Act No. XIV of 1938, reported in ECR C. 15 and cited para 86 of that opinion, as enunciated by the then Chief Justice, Shri Maurice Gwyer, which reads as under :
"86. I have said that it seems to me impossible without straining the language of the Act, to construe a power to impose taxes on the sale of goods as a power to impose only turnover taxes. To construe the power to impose duties of excise as I think it ought to be construed, involves no straining of language at all. The expression "duties of excise", taken by itself, conveys no suggestion with regard to the time or place of their collection. Only the context in which the expression is used can tell us whether any reference to the time or manner of collection is to be implied. It is not denied that laws are to be found which impose duties of excise at stages subsequent to manufacture or production; but, so far as I am aware, in none of the cases in which any question with regard to such a law has arisen was it necessary to consider the existence of a competing legislative pawer, such as appears in Entry No. 48."
Shri Raghavan Iyer laid particular stress on the observations of Shri Maurice Gwyer that the expression "duties of excise", taken by itself, conveys no suggestion with regard to the time or place of collection, that the context has to be referred to, and that laws are to be found which impose such duties at stages subsequent to manufacture or production. He submitted that in the present case, reading the relevant provision, namely Section 37, it would be clear that the SED was leviable on all goods on which the basic excise duty was leviable. He further submitted that, reading the Central Excises and Salt Act and the Central Excise Rules together, it would be found that they did not provide for the levy and collection of excise duty immediately on the production of the goods.
13. Shri Raghavan Iyer also cited the judgment of the Kerala High Court in the case of Aluminium Industries Limited v. Union of India, reported in 1984 (16) E.L.T. 183 (Ker.) : 1985 (4) ECC 1. This was a case dealing with Sections 12 and 15 of the Customs Act, corresponding to Section 3 and Rule 9A of the Central Excises and Salt Act and the Central Excise Rules. In the above judgment, it had been laid down that the chargeability and the computation of the charge (i.e. Customs duty) are both centered at the time and place of presentation of the bill of entry and payment of the duties and other charges; and that any other construction of those provisions so as to separate chargeability from computation by relating chargeability to the time of entry into the territorial waters and computing the duties with reference to the rates then in force is to construe the sections artificially and contrary to the legislative intent. It had been pointed out that the legislative intent was to charge the goods with the duty payable on the relevant date and not any other date; and that this was the most convenient method of fixing duties and collecting the same, the space and time being both certain, and the enforcement of collection easiest. Shri Raghavan Iyer submitted that the same principles would apply in relation to duties of excise. If chargeability to duty were related to the time of completion of manufacture, the Excise authorities would have to determine whether the manufacture of certain goods had been completed prior to or after the midnight of the 28th February/1st March, 1978, and this would be inconvenient, uncertain and impracticable, and therefore could not be taken to represent the legislative intent.
14. At this stage it was put to Shri Raghavan Iyer by the Bench that on various occasions when new duties of excise were imposed either through a Finance Bill or through an ordinance, it had been found that the Ministry of Finance had issued instructions to the Excise authorities that the new levy would not be attracted to goods in fully manufactured condition and in stock with the manufacturers as on the midnight of the day preceding the date of its coming into force. The Central Excise authorities had also been directed to carry out stocktaking on the midnight of the relevant date. This would appear to show that the highest administrative authorities in the Government of India did not consider it impracticable to arrange a stocktaking on the basis that goods fully manufactured prior to midnight would not be subject to the new duty. On this point Shri Raghavan Iyer submitted that even if such instructions had been issued by the Government of India, they would not have any legal sanctity when it came to interpreting the provisions of law.
15. Shri Raghavan Iyer thereafter referred to the recent Order No. 36/1985-D, dated 28-1-1985 of the Tribunal in the case of Collector of Central Excise, Indore v. Parmali Wallace Limited, Bhopal (not yet reported). He reiterated some of the arguments advanced by him in that case. Firstly, the new levy was applicable to all excisable goods both before and after the introduction of the Finance Bill, 1978. Secondly, for the reasons advanced by him and set out in paras 6 and 7 of the above-mentioned order, the interpretation canvassed by the Appellants and the Intervener would have the effect of rendering Rule 9A of the Central Excise Rules redundant, and therefore such an interpretation could not be supported. Thirdly, he referred to his argument set out in para 9 of the above order, namley that the description of excise duty as a tax on manufacture was a constitutional concept, but for actual assessment of duty the statute itself, namely the Central Excises and Salt Act, would have to be taken into account.
16. As regards the argument that the levy of SED in this case would amount to giving retrospective application to Section 37, Shri Raghanan Iyer submitted that there was no question of retrospectivity. The SED was expressed as a percentage of the basic excise duty and had to be levied and collected wherever basic excise duty was levied and collected. As already stated, the goods were excisable both before and after the introduction of the Finance Bill and therefore the levy of the SED on such goods, even though manufactured earlier, would follow from a correct interpretation of the provisions of the Act and Rules, and no retrospectivity was involved. In this connection Shri Raghavan Iyer referred us to the case of Assankutty v. Assistant Collector of Central Excise, to which reference has been made at pages 63-64 of "The Law of Central Excise" by V.J. Taraporevala and S.N. Parikh (Second Edition). In that case, where the question was regarding the applicability of a tariff item which was introduced with effect from 29-2-1956, it was held that the fact of the petitioner's goods being manufactured prior to 29-2-1956 was irrelevant. In this connection it had been observed that "if the conditions mentioned in Section 3 are satisfied, namely, that the goods are excisable goods and they have been produced or manufatured in India, the levy of duty automatically attaches itself. . .when once the item is introduced in the First Schedule, automatically the levy attaches itself and the proper period or stage for collection has alone to be looked into and for that purpose the rules afford considerable guidance regarding as to when exactly the duty is to be collected". Shri Raghavan Iyer also relied on the judgment of the Bombay High Court in the case of Union of India v. Elphinstone Spinning and Weaving Mills Company Limited, reported in 1978 E.L.T. 680. That was a case where the new Item No. 22B was introduced in the tariff with effect from 1-3-1968 and the question was whether certain goods which were not packed but otherwise in fully manufactured condition on the midnight of February 29/March 1, 1968 were or were not liable to duty under the newly introduced tariff item. (In that case also there was a Trade Notice to the effect that stocks of excisable commodities at midnight of 29 February/1st March, 1968 in a fully manufactured condition even if lying within the precincts of the producing factories would not be dutiable. Acting in pursuance of the Trade Notice the Excise authorities allowed clearance without payment of duty under the new item of the goods which had been fully manufactured and packed prior to midnight. An objection was raised only in respect of goods which though otherwise fully manufactured had not been packed. In para 16 of its judgment the Hon'ble High Court held that once goods have been produced or manufactured in this country the levy of duty can be imposed in respect of these goods at any subsequent stage, subject to the qualification laid down by the Federal Court, the Privy Council and the Supreme Court that such levy does not impinge upon the exclusive legislative power of the State Government.
17. In the light of the above authorities Shri Raghavan Iyer submitted that even though excise duty might be grounded on production or manufcture, that was not conclusive as regards the manner of levy. In the present case, having regard to the provisions of Section 37 of the Finance Act, 1978, the SED was clearly leviable on goods which were removed after 1-3-1978. He therefore submitted that the appeal should be rejected.
18. Replying to Shri Raghavan Iyer, Shri Ansari controverted the proposition that because the SED was expressed as a percentage of the basic excise duty, it could be considered as on the same footing as the basic excise duty. No doubt it was an excise duty, but it was clearly a separate levy, under a separate provision of law. In this connection he referred to the decision of the Delhi High Court in the case of Khandelwal Metal and Engineering v. Union of India and Ors., reported in 1983 E.L.T. 292 (Del.). In para 37 of that judgment it had been pointed out that the additional duty in terms of Section 3 of the Customs Tariff Act would not become an excise duty merely because it was equated to the excise duty leviable on like articles manufactured in India.
19. Shri Ansari further submitted that Section 37(4) of the Finance Act, 1978, was an example of legislation by reference. The relevant provisions of the Central Excises and Salt Act and the Rules thereunder had been made applicable, by reference, to the levy of SED under Section 37 of the Finance Act, but that would not mean that the levy under the Finance Act became a levy under the Central Excises and Salt Act.
20. On Shri Raghavan Iyer's argument that a duty of excise was not a tax on production or manufacture, Shri Ansari submitted that the position in this regard was well-settled. In the recent judgment of the Supreme Court in the case of Union of India v. Bombay Tyres International Limited and Ors. 1983 E.L.T. 1896 it had been observed (para 12 at page 1907) that "while the levy (of excise duty) is on the manufacture or production of goods, the stage of collection need not in point of time synchronize with the completion of the manufacturing process. While the levy in our country has the status of a constitutional concept, the point of collection is located where the statute declared it will be".
21. As regards Shri Raghavan Iyer's reference to the arguments advanced by him in the case of Parmali Wallace Limited, Shri Ansari submitted that the Tribunal's decision in that matter was in his favour with reference to the present case. In para 39 of that order it had been observed that "there is the authority of the Supreme Court to the effect that in such a case, where duty is newly levied, it would not apply to goods already manufactured".
22. As regards the Assankutty case, Shri Ansari submitted that the judgment in that case had apparently not taken into account the judgment of the Supreme Court in the case of Union of India v. State of Mysore (referred to in para 5 above). 23. In the end, Shri Ansari submitted that for the reasons given by him the appeal should be allowed. 24. Shri Gulati, for the Intervener, had nothing to add. 25. As we had observed at the start, the facts of the case before us in appeal are simple and are not in dispute. The questions which have been raised before us are basically the following :- (a) whether, in the case of goods which were not excisable at the time of manufacture but were excisable at the time of removal (an excise duty having been imposed in between the two dates) such goods would be liable to the excise duty ; and (b) whether the fact that the goods were liable to basic excise duty at the time of manufacture would have a bearing on their liability to special excise duty, which was not leviable at the time of manufacture. 26. Much of the argument before us was directed to the first question. We do not think it necessary to discuss this question in great detail, as it is amply covered by decisions of the Supreme Court. In this connection it would be convenient to reproduce certain paragraphs from the order of the Tribunal in the case of Collector of Central Excise, Indore v. Parmali Wallace Limited, Bhopal(vide para 15 above) :-
"35. As seen from what has been stated above, detailed arguments were addressed by both sides, and several authorities relied upon. We observe that there can be a number of different situations, based on two variables. One is the point of time, i.e. whether the time of completion of manufacture or the time of removal. The other variable is the nature of duty liability : whether not excisable, excisable but fully exempt or excisable but not exempt (goods partially exempt are considered as "not exempt"). The various judgments which were relied upon cover one or other of the situations which would arise from combinations of the two variables. Naturally, some of these are more frequent and more important than the others. The situations which are covered by the cases cited and are relevant to the present issue appear to be the following :-
(i) Goods excisable but fully exempt at the time of manufacture, and excisable and not exempt at the time of removal;
(ii) Goods excisable and not exempt at the time of manufacture, and excisable and not exempt at the time of removal (there being only a variation in the quantum of exemption);
(iii) Goods not excisable at the time of manufacture and excisable and not exempt at the time of removal; and
(iv) Goods excisable and not exempt at the time of manufacture and excisable (under a different tariff entry) and not exempt at the time of removal.
We shall now refer briefly to the cases relating to each of these situations and also to cases relating to the parallel provisions in Section 15 of the Customs Act.
36. The first situation is covered by the judgment of the Madhya Pradesh High Court in the case of Kirloskar Brothers Ltd. v. Union of India and Ors. 1978 E.L.T. 33. This case has been referred to in para 15 above. (For convenience we are referring to this as 'the first judgment" and to the subsequent judgment rejecting the petition for a certificate of fitness for leave to appeal to the Supreme Court, and reported in 1978 E.L.T. 690 M.P. as "the second judgment"). In the first judgment a Division Bench of the Madhya Pradesh High Court held that the liability for tax, namely, the excise duty, would arise no sooner the manufacture or production is completed and it is immaterial as to what machinery may be devised by the Central Government under the rule-making powers for recovery of a tax. The point of recovery or any restriction on removal will not be the determining factor for grant of exemption in respect of goods manufactured during the duty-free period. In that view, the contention of the manufacturers was upheld. A petition was made to the same Division Bench of the Madhya Pradesh High Court for a certificate of fitness for leave to appeal to the Supreme Court. In the second judgment the said Division Bench refused a certificate of fitness for leave to appeal to the Supreme Court (1978 E.L.T. 690). Thereafter, an application for special leave was made to the Supreme Court, of which the result was that the Supreme Court "dismissed the SLP on merits".
xxx xxx xxx
39. The third situation has been covered by the judgment of the Kerala High Court in the case of Assankutty v. Assistant Collector of Central Excise, referred to in para 30 above. In that case, although the goods were not excisable at the time of manufacture, it was held that they would be liable to duty as applicable at the time of removal. However, as against this, there is the case of Amar Dye Chem Ltd. (vide para 23 above). In that case, a new tariff item was introduced. Certain goods were sought to be assessed to duty by the Central Excise authorities at the time of their removal (after the introduction of the new item). It was ultimately held by the Bombay High Court that it was incumbent on the excise authorities to establish that the goods were manufactured after the midnight of 28-2-1961 (that is, when the new item had become applicable and that they had failed to do so, and accordingly the matter was decided in favour of the manufacturers. We have seen the judgment of the Supreme Court remanding the matter to the Bombay High Court. It is a brief judgment in which the stress is on the question whether the process of manufacture of the goods could have been said to have been completed before the midnight of the 28th February, 1961. Since the material on the record was not sufficient to enable the Supreme Court to come to a conclusion one way or the other, the matter was remanded back to the Bombay High Court to enable both parties to produce evidence on the disputed questions and decide the matter accordingly. Apparently, before the Supreme Court, it was accepted or assumed by both parties that where the process of manufacture was completed before the date of imposition of the duty, that duty would not apply to the goods. However, even though this question was not argued, it could be said that there is the authority of the Supreme Court to the effect that in such a case, where duty is newly levied, it would not apply to goods already manufactured."
27. We shall for the moment leave aside the point that the goods in this case were already liable to basic excise duty. The SED on which the dispute is based was no doubt an excise duty, but it was imposed through Section 37 of the Finance Act, 1978, and derived its authority from that Act and not from the Central Excises and Salt Act, although the relevant provisions of the latter Act and the Rules thereunder were made applicable by reference. As pointed out by Shri Raghavan Iyer and as observed by us, Sub-section (4) of Section 37 made those provisions applicable to the levy of SED as they applied to the levy of the basic excise duty. Therefore, considering the SED by itself, its application would be subject to the same considerations and the same rulings as are applicable to the levy and collection of the basic excise duty, and the various situations referred to in the Parmali Wallace order would apply equally to the levy of the SED. In the light of the facts of the appellants' case, this would clearly correspond to the third situation described in the above-mentioned order. Further, it will be seen that the first situation described therein is similar to the third situation, except that in the first situation the goods are excisable but exempt at the time of manufacture, whereas in the third situation the goods are not excisable at all at the time of manufacture : accordingly, the decisions cited in connection with the first situation would apply a fortiori to the third situation.
28. As seen from para 26 above, we have, in the Parmali Wallace order, cited the decisions relating to the first and the third situations. These decisions would lead to the conclusion that in such a case the goods should not be subjected to the duty which was not leviable at the time of manufacture. In the course of arguments before us in the present case, two further judgments were brought to our notice dealing with the same issue. One (vide para 6 above) was the judgment of the Supreme Court in the case of D.R. Kohli and Ors. v. Atul Products. This is in line with the earlier judgments of the Supreme Court in the case of Kirloskar Brothers and Amar Dye Chem. The other judgment, cited by Shri Raghavan Iyer (vide para 16 above) was that of the Bombay High Court in the case of Elphinstone Spinning and Weaving Mills Company Limited, wherein the contrary view had been taken by the Bombay High Court. Shri Raghavan Iyer had also laid stress on certain observations in the advisory opinion of the Federal Court in the case of The Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938 (Central) Provinces and Berar Act No. XIV of 1938 (vide para 12 above).
29. Most of the authorities cited above had been taken into account in our order in the case of Parmali Wallace. The judgment of the Bombay High Court in the case of Elphinstone Spinning and Weaving Mills Company Limited is, no doubt, contrary to the view we had taken and which in the present case is being urged by the appellants; but with great respect to the Hon'ble High Court, we observe that the very relevant judgments of the Supreme Court in the case of Kirloskar Brothers and Amar Dye Chem were not placed before it and have not been referred to in its judgment. As regards the observations of the Federal Court in its advisory opinion, these have to be read in conjunction with its observations in the immediately preceding paragraph, which reads as under :-
"85. In my opinion the power to make laws with respect to duties of excise given by the Constitution Act to the Federal Legislature is to be construed as a power to impose duties of excise upon the manufacturer or producer of the excisable articles, or at least at the stage of, or in connection with, manufacture or production, and extends no further. I think that this is an interpretation reasonable in itself, more consonant than any other with the context and general scheme of the Act, and supported by other considerations to which I shall refer."
The "other considerations" contained in para 86 of the advisory opinion, on which Shri Raghavan Iyer had relied, are in support of the proposition in the above paragraph, which is in consonance with the view taken by the Supreme Court in the Kirloskar Brothers case and other cases. In the circumstances, we do not think that it would be correct to rely on certain observations of the Federal Court in a case which did not turn directly on the point now before us, when we have been made aware of at least three subsequent decisions of the Supreme Court where the view has been taken that if goods were not excisable (or were excisable but exempt) at the time of manufacture, they could not be subjected at the time of removal to excise duty which became chargeable in between. We therefore hold that, considering the Special Excise Duty by itself as a duty of excise, then, in a case where it was not leviable at the time of manufacture but was imposed between the time of manufacture and the time of removal, it could not be levied and collected at the time of removal.
30. We now come to the second question, namely, whether the fact that the goods were already subject to the basic excise duty would make any difference. At this stage it would be appropriate to refer to two earlier orders of the Tribunal on this very issue, although they were not cited by either of the parties before us. One of these is the order in the case of Sirpur Paper Mills Ltd. v. Collector of Central Excise, Madras, reported in 1984 (16) E.L.T. 546, where an identical question, with reference to Section 37 of the Finance Act, 1978, was involved. In that case the Tribunal, by a majority, held that the SED was leviable, whereas the contrary view was taken by one learned Member in a dissenting order. Subsequently, in the Tribunal's Order No. C. 488/1984, dated 21-7-1984, 1984 (18) E.L.T. 409 in the case of Hindustan Petroleum Corporation Ltd. v. Collector of Central Excise, Hyderabad, which also arose out of the provisions of Section 37 of the Finance Act, 1978, the Bench followed the majority order in the case of Sirpur Paper Mills Ltd.
31. In the Tribunal's above two orders (for convenience the majority order in the first case is included in this expression) the view was taken that the SED was leviable on all "excisable goods", that is to say goods figuring in the Central Excise Tariff Schedule and bearing effectively some basic excise duty, and not wholly exempt from basic excise duty on the date of removal. It was further held that it was the date of removal which would be relevant for determining the levy of SED and not the date of manufacture or production of the goods. A distinction was drawn between this situation and the situation in the Kirloskar Brothers case (referred to in para 26 above as the first situation), on the ground that the goods attracted (basic) excise duty even prior to 1-3-1978, though SED was not in force. Reference was also made to various High Court judgments, as well as to the judgment of the Supreme Court in Shinde Brothers etc. v. Deputy Commissioner, Raichur (AIR 1967 S.C. 1512).
32. We have given our earnest consideration to the grounds which led our predecessor Benches to the view which they took. So far as the first question is concerned, we have already observed that the position is settled by the three Supreme Court judgments which we have cited. We shall now briefly discuss the decision of the Supreme Court judgment in the case of Shinde Brothers, which was referred to in the Tribunal's order in the case of Sirpur Paper Mills Ltd., and its relevance to the present issue.
33. In that case the Supreme Court was concerned with the "health cess" imposed under Section 3 of the Mysore Health Cess Act, 1962. That cess was leviable at the rate of nine paise in the rupee on various specified items of revenue or taxes. One of these taxes was the "shop rent" or "kist" payable by excise contractors or licensees for the exclusive privilege of vending toddy in a group of toddy shops. The question considered was whether the health cess was a duty of excise in terms of Entry 51, List II in the Seventh Schedule to the Constitution. The Supreme Court held by a majority of four to one that the health cess did not fall within the said entry and that the State of Mysore had no authority to levy and collect the health cess on shop rent. In the course of the judgment the Supreme Court referred to the nature of duties of excise. The observations made by the Hon'ble Court in paras 20 and 21 of the majority judgment of three Hon'ble Judges (one Hon'ble Judge wrote a separate but concurring judgment), as reproduced in a headnote in the report in AIR 1967 S.C. 1512, were as follows :-
"In order to be an excise duty (a) the levy must be upon 'goods' and (b) 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 may be imposed later. The question whether the particular levy is a levy in respect of manufacture or production of goods has to be decided on the fact of each case, but in deciding the question certain principles must be borne in mind. First, one of the essential characteristics of an excise duty is uniformity of incidence. Secondly, the duty must be closely related to production or manufacture of goods. It does not matter if the levy is made not at the moment of production or manufacture but at a later stage. If a duty has been levied on an excisable article but this duty is collected from a retailer, it would not necessarily cease to be an excise duty."
The Tribunal Bench which decided the Sirpur Paper Mills case relied on the above observations to hold that SED was a duty closely related to the manufacture or production of goods and was a duty of excise. This proposition is in no way contrary to the reasoning we have adopted, and could in fact be said to be self-evident. If the reliance on the Shinde Brothers judgment is only with reference to this proposition, it is difficult to see how the judgment can be set against the other judgments of the Supreme Court to which we have referred.
34. We have considered whether the earlier Bench, even implicitly, had placed reliance on the observation of the Supreme Court that "it does not matter if the levy is made not at the moment of production or manufacture but at a later stage". But even this observation would not seem to affect the position, for a number of reasons. Firstly (as seen from the next sentence in the head-note) this observation seems to refer to a situation where a duty, although levied (that is, chargeable) at one stage, is collected at a subsequent stage. Secondly, it has not been argued that the SED is different in nature, or is to be collected at a different stage, from the basic excise duty : on the contrary, the argument is that in all material respects it is the same as the basic excise duty, being in the nature of a surcharge. (We have already referred to Sub-section (3) of Section 37 of the Finance Act, 1978, which made the provisions of the Central Excises and Salt Act and the Rules thereunder applicable to the SED). Thirdly, these observations led to the finding that the health cess was not an excise duty, and they should therefore be understood as general observations and certainly not as supporting a broader view of the scope of duties of excise. Fourthly, as seen from what has been said above, the context in which these observations were made was quite different from the context of the matter before us. Of the three other judgments of the Supreme Court which we have cited, namely, those in the case of Kirioskar Brothers, Amar Dye Chem and Atul Products, the last two had reference to the "third situation", which was the situation in the present case, and the first had reference to the first situation, which is similar though not identical to that in the present case; and all three judgments are subsequent to the Supreme Court judgment in the Shinde Brothers case. For these reasons we do not find that the observations of the Hon'ble Supreme Court in the Shinde Brothers case would justify us in taking a decision different from the conclusion which we have reached based on the three subsequent judgments of the Supreme Court.
35. In his arguments as regards the second question, Shri Raghavan Iyer had advanced two arguments. These are :-
(1) On a plain reading of the provisions of Section 37, the SED is attracted to all goods which on the date of removal were liable to the basic excise duty ; and (2) even if the levy of duty were dependent on the goods having been liable to excise duty at the time of manufacture, they should be deemed as so liable, since the basic excise duty was leviable on them.
36. As regards the first argument, it is no doubt true that if only the wording of Sub-sections (1) and (3) of Section 37 is taken into account, the conclusion suggested might appear to follow. However, as was pointed out to Shri Raghavan Iyer, Sub-section (4) also has to be taken into account. In other words, whatever is the manner of application of the Central Excises and Salt Act and the Rules thereunder with reference to basic excise duty would also be applicable with reference to the SED (as pointed out in paras 11 and 27 above), and the law as laid down in regard to the basic excise duty would equally apply. The wording of Sub-section (1) cannot, we think, be taken to mean that the taxable event for the purpose of levy of SED is the fact of the goods being chargeable with basic excise duty at the time of removal. This would be to overlook the repeated pronouncements of the Supreme Court that the taxable event in the case of duties of excise is the fact of manufacture or production, although the actual assessment would depend on other factors, including the relevant legislation. Considered in this light, it will be seen that the pronouncements of the Supreme Court in the Kirloskar Brothers and other judgments would equally apply to the levy of Special Excise Duty, notwithstanding the wording of Sub-sections (1) and (3) of Section 37.
37. Since reference has been made to the Tribunal's order in the Parmali Wallace case, it may be necessary to mention that an argument based on apparent retrospective application was raised in that case and was negatived (vide para 51 of that order) after referring to the effect of the Provisional Collection of Taxes Act and the declaration thereunder. However, that discussion was in the context of a case where the liability of the goods to excise duty even at the time of manufacture was clearly established, and therefore would not be applicable to the present case, where the situation is materially different.
38. We now come to the second argument, based on the fact that the goods were liable to basic excise duty at the time of manufacture. It appears to us that the mere fact that the SED was expressed as a percentage of the basic excise duty should not be allowed to blur the distinction between the two duties, which were levied under two different enactments and were, as we understand, separately accounted for. As pointed out by Shri Ansari (vide para 18 above), it has been held that, although the additional duty of customs levied under Section 3 of the Customs Tariff Act (commonly referred to as "countervailing duty") is equated to the excise duty on the like indigenous goods, that does not make it an excise duty. So also the fact that the SED is expressed as a percentage of the basic excise duty would not make it lose its identity as a separate and distinct levy.
39. It is in the light of this position, namely that the SED is a separate levy, that we have to consider the application of the judgments of the Supreme Court in the case of Kirloskar Brothers, Amar Dye Chem and Atul Products. It appears to us that for the purpose of applying those decisions, and considering whether the goods in question were liable to the duty of excise at the time of manufacture, we have to look solely at the duty which is sought to be applied, namely the SED, and not at some other duty, even though it may also be a duty of excise. Seen in this light, the conclusion has to be that the goods were not liable to the relevant excise duty at the time of manufacture and therefore they could not be charged to that duty at the time of removal. We must therefore, with the greatest respect to our learned Brothers who passed the majority order/order in the case of Sirpur Paper Mills Ltd. and Hindustan Petroleum Corporation Ltd. differ from the conclusion arrived at by them.
40. We would like to make it clear that the conclusion we have arrived at in this case is applicable where the duty in question had not been imposed (or had been exempted) at the time of manufacture. Our conclusions would not apply to a case where the duty was leviable at the time of manufacture, and where Rule 9A would come into play (as in the Parmali Wallace case). 41. In the result, we allow the appeal of M/s. Vazir Sultan Tobacco Campany Limited and direct that consequential relief be granted. M. Gouri Shankar Murthy, Member (J) 42. I agree, generally, with the opinion recorded in this Reference to a Larger Bench, which had, if I may say so, afforded an opportunity for a consensus, in accord with my views in the dissent dated 9-1-1984 in 1984 (16) E.L.T. 546 (Sirpur Paper Mills Ltd., Sirpur-Kaghaznagar v. Collector of Central Excise, Madras).
43. The facts of this reference are, truly, identical with the aforesaid case rather than those of the subsequent and as yet unreported case of Parmali Wallace, wherein, although an identical situation, amongst others that can possibly be concieved of, had been discussed, it was more in the nature of an obiter. It was the conflict in the opinions recorded in the Sirpur Paper Mills case that had occasioned this Reference and, accordingly, it was that case that was, specifically, adverted to in the order of Reference. It is, therefore, a matter of regret that the Sirpur Paper Mills case was not even cited by either side at the Bar, notwithstanding that there was little that could be said or, in fact, urged in addition to either the majority view or the dissent in that case. The instant Reference was argued almost if the question that arises is res integra in the Tribunal, although the pro and contra had been comprehensively dealt with in the decision of the Tribunal in the aforesaid case. Indeed, if I may, with respect, observe, the obiter in the Parmali Wallace case, relied upon largely by the learned Senior Vice-President, could not have been reached, contrary as it was to the majority view in the Sirpur Paper Mills case, without a reference to a Larger Bench, unless the report thereof in 1984 (16) E.L.T. 546 was not brought to the notice of the Bench. The decision in the Sirpur Paper Mills case, in the circumstances, deserved greater attention than it did.
44. Needless to say, I adhere to my views in the aforesaid decision and have to reiterate, in agreement with my learned Brothers in this Reference, that-
(a) while excise, indisputably, is a levy upon manufacture, [as decided in a long catena of cases right from the Province of Madras v. Boddu Paidanna and Sons-E.C.R. C84 (Federal Court) and Governor General in Council v. Province of Madras-E.C.R. C94 (Privy Council) and ending with the case of the Union of India v. Bombay Tyres International Ltd. and Ors.-1983 E.L.T. 1896 and D.R. Kohli v. Atul Products-appeal No. 2277 of 1970 (Supreme Court)], it has to be remembered, all the time, that in the method devised for the assessment of the quantum of duty, once it is leviable, and the manner of its collection, the rate in force on the date of removal assumed primacy [AIR 1967 S.C. 1564-1978 E.L.T. 328-Orient Paper Mills Ltd. v. Union of India], since R9A specified the date of removal as the date with reference to which the duty payable is to be determined (AIR 1972 S.C. 2563 : 1978 E.L.T. 416-Asstt. Collector of Central Excise, Calcutta v. National Tobacco Co. of India Ltd.). Manufacture is the point of incidence for the charge to duty, while removal is relevant for its assessment computation and recovery, in the scheme of the various provisions of the Central Excises and Salt Act, 1944 and the Central Excise Rules, 1944 ;
(b) to a similar effect are the provisions in the law relating to the levy of duties of Customs. While import into or export from India, per se, is the exigible event for the levy of Customs (S. 12 of the Customs Act, 1962==S. 20 of the Sea Customs Act, 1878), the assessment or the quantification of the duty payable is in terms of the rate of duty and tariff valuation in force on the date when a bill of entry or a bill of export, as the case may be, is, amongst other specified events, filed. Such an event is wholly unrelatable in point of time with the actual import or export (Ss. 15 and 16 of the Customs Act, 1962=Ss. 37 and 38 of the Sea Customs Act, 1878) (reference-AIR 1979 S.C. 675 Prakash Cotton Mills v. B. Sen.) ;
(c) determination of the applicable rate of duty should not be confused with the charge to the duty itself or its incidence ;
(d) this being so, the concievable situations enumerated in para 26 of the learned Senior Vice-President's judgment do not appear to be intractably defying a solution ;
(i) in the first two cases, once the goods were excisable, it is the rate of duty applicable on removal that governs the assessment and quantification of the duty leviable, since an exemption from duty has a relation to the applicable rate of duty rathert than the charge to duty itself;
(ii) the third case, relates to the charge to duty and its incidence rather than the assessment on the basis of the determination of the applicable rate. Once the goods were manufactured prior to the imposition of the levy itself, there is no question of subjecting them to the duty on the basis of the rate applicable on the date of their removal. Manufacture and not removal is the taxable event ;
(iii) the fourth is a variation of the first two-a variation or modification in the tariff entry with or without consequential variation in the applicable rate of duty. Once the goods were, admittedly, excisable having been manufactured prior to the modification, it is the rate of duty applicable on their removal that governs the assessment. A variation in the tariff description or classification has a relation to the rate of duty rather than the charge, to duty, once manufactured was all along subject to a levy under one or the other of the entries in the tariff. It is not a case of manufacture prior to the levy itself ;
(e) the various decisions of the Courts except the decision of the Bombay High Court in 1978 E.L.T. 680 (Union of India v. The Elphinstone Spinning and Weaving Mills Co. Ltd.) and that of the Kerala High Court in Assankutty's case can be explained on the basis of the aforesaid ratio rather than on any other. However, as observed by the learned Senior Vice-President and pointed out in the dissent in the Sirpur Paper Mills case, it does not appear that their Lordship's attention in the Bombay and Kerala cases aforesaid had been drawn to the appropriate passages in the relevant decisions of the Federal Court, the Privy Council and the Supreme Court;
(f) there is no question of giving a retrospective effect to the rate of duty applicable when, it is axiomatic that although excise is a duty upon manufacture, the method of assessment and computation of the duty payable is an accident of administration. [The Privy Council in E.C.R. C94 aforesaid].
45. I agree that the Appeal is to be allowed.
H.R. Syiam, Member (T)
46. The issue here is whether the special excise duty imposed by Section 37 of the Finance Act, 1978 would be recoverable on goods which had been manufactured before 1-3-1978 the day on which this provision came into operation. Several arguments were advanced by the two sides and have been discussed thoroughly and exhaustively in the learned, Sr. Vice-President's order. The majority has taken the view that the special duty has to be looked as a separate duty even though it is a duty of excise. Since the goods in dispute were manufactured before the special duty became effective on 1-3-1978, the majority has concluded that they were not liable to special duty. With very great respect to my learned Brothers, I wish to express a different opinion and to arrive at a different conclusion.
47. It is necessary to differentiate between excise duty leviable under the Central Excises and Salt Act, 1944 and the special duty leviable under Section 37 of the Finance Act, 1978. It has been held by all the Courts as well as by the learned majority of this decision that duty of excise is a duty on manufacture and therefore the duty is attracted at the time of manufacture of those goods which are excisable. The basis for this is to be found in Section 3 of Central Excises and Salt Act, 1944 which has been called the charging section. This same principle, that the duty of excise under Section 3 of Central Excises and Salt Act, 1944 is a duty on manufacture of goods has been upheld by the Supreme Court in its latest judgment in Union of India v. Bombay Tyre International Limited-1983 E.L.T. 1986.
48. In contrast to this, Section 37 of the Finance Act, 1978 does not make the special duty leviable on goods manufactured or produced in India. It makes this special excise duty leviable on "goods chargeable with a duty of excise under the Central Excise Act". It is very important to carry in one's mind this sharp distinction in the bases of the two excise duties. The special excise duty does not concern itself with the manufacture of goods. It concerns itself with whether a good is chargeable to a duty of excise under the Central Excise Act. As I see it, Section 37 of the Finance Act, 1978 acts as a mathematical table designed to increase the duty on commodities manufactured and produced in India and chargeable with excise duty under the Central Excise Act. Even the statement of the duty is only as a percentage of the duty leviable under the Central Excise Act. It has no personality of its own. It rises or falls with the rise and fall of the basic excise duty, and when that basic excise duty becomes 0, this special duty also disappears as an entity.
49. I do not think we can import the philosophy of the Central Excise Act levy or collection of duty for the purposes of determining to what goods this special duty would apply. This special duty has a rationale of its own distinct and different from Section 3 of the Central Excises and Salt Act, 1944. It may be tempting to say that Sub-section (4) of Section 37 of the Finance Act imports all the mechanisms of the Central Excise Act into the levy and collection of special duty since this sub-section says that the provisions "of the Central Excise Act and the Rules made thereunder ... shall ... apply in relation to the levy and collection of the special duties ...". If this is interpreted as that Section 3a itself will literally apply to the levy of special central excise duty, then there ' would be no meaning in Section 37 of the Finance Act having a process of its own to provide a scale for the application of the (special) duty. The two do not accord because one duty fastens itself on goods manufactured in India, when the other is trained on goods on which the basic duty is chargeable. These two principles would conflict too violently : and in a conflict of this kind, the native must prevail over the outsider. It has not been easy for me to see why manufacture (of the goods) should be a base for the application of special duty. Section 3 is designed for that particular purpose and it cannot be flogged into services it was not meant to render and for a duty it is not responsible. It may be a charging section for the basic excise, but is not so for special excise because special excise has its own charging section. This charging does not specify manufacture of goods as the event that attracts it. I am of the opinion that we would be employing a chargeable event for special excise that was not proper when we say that special excise can apply only to goods manufactured after it came into operation.
50. A number of rulings have been quoted and discussed in these proceedings. But there has not been any ruling by any Court to the affect that the special duty leviable under the Finance Act, 1978 must have the same extent and scope and application as the excise duty leviable under Central Excise Act. I would like to refer here to the ruling of the Hon'ble Supreme Court in the Union of India v. Bombay Tyre International 1983 E.L.T. 1986. Though the Court endorsed in this judgment the proposition that excise duty was a duty on the manufacture of goods, it rejected the proposition that manufacture should govern even the levy of duty. The dispute before the Supreme Court was that the Central Excise Department held certain charges were liable to be added to the assessable value under Section 4 of the Central Excises and Salt Act. Several manufacturers had claimed that only the manufacturing cost and manufacturing profit could form part of the assessable value because, they said, excise duty being a duty on manufacturing, only costs of that activity and other charges arising from that activity can enter into the assessable value. The Supreme Court dismissed these arguments and said that even though central excise duty was leviable on manufacture of goods, every cost incurred on the production and manufacture of the article must enter into the value and that the price of the article on the date of its clearance should be the price at which it is assessed to duty, except for certain deductions under the law. A more categorical rejection of the doctrine of linkage between manufacture and central excise assessment cannot be found and I am in complete respectful agreement with this ruling. It seems to me that if this judgment is understood in its fulness and true spirit, we will also have to hold that though manufacture creates assessable goods, the levy of duty on those goods is not tied to their manufacture or production, but to the system of levy and collection embodied and specified by the law, and thus to levy of the duty on the last date on which the goods remain in central excise cognizance. In this principle, it would make no difference when the good was manufactured : if, at the time of removal for the purpose of its entry into the market, it has become dutiable, then it must pay that duty. A very close parallel is the judgment of the Supreme Court in Prakash Cotton-AIR 1979 S.C. 675. Though a decision under the Customs Act, it lays down the same principle. Here also the Supreme Court showed itself in favour of saying that the last date of the tax receiver's cognition of the goods would determine whether the goods would pay duty or not. If on this day, the day of clearance, the duty is leviable, then irrespective of fact that the goods under clearance were assessable free of duty when they were in the warehouse, they would have to pay duty.
51. The special duty is a mathematical principle that increases the duty on goods leviable to basic excise duty under the Central Excise Act, from the date it (special duty) becomes operative. This special duty seeks out any goods chargeable with a duty of excise under the Central Excise Act and fastens itself to them. I do not think it is correct to go beyond this stage to enquire whether the goods had been manufactured before the special excise duty started to be operative because that is not relevant for its purposes. What might be said to be so relevant to the basic central excise duty cannot be said to be so relevant to the special excise duty : the date of the manufacture of the goods is not relevant to the purpose of the special duty; the only relevant thing is the liability of the goods to the basic central excise duty. If they are, then the principle conies into operation and the duty is increased, by the formula provided under Section 37 of the Finance Act, namely 5 % of that duty.
52. In view of the above, I consider that this appeal deserves to be rejected and I reject it.
53. In accordance with the judgment of the majority of the Members who have heard the matter, the appeal is allowed with consequential relief to the appellants.