SYNTHETICS LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) BY this petition under Article 226 of the Constitution, the petitioner seeks a declaration that Rule 9-A of the Central Excise Rules, 1944, in so far as it permits levy and collection of excise duty at the rate in force at the time of removal of goods, is ultra vires and void.

(2.) THE petitioner is a company incorporated under the Companies Act, 1956. The petitioner has a factory at Ujjain which manufactures nylon and polyester filament yarn from 1972. The products of the petitioner are subject to Central excise duty under tariff item No. 18 of Schedule I to the Central Excises and Salt Act, 1944. In 1972 the rate of duty as provided in tariff item No. 18 was Rs. 60/- per kilogram. By notification dated 17th March 1972, issued under Rule 8 of the Rules, partial exemption was granted and the maximum rate of duty payable on nylon yarn was fixed at Rs. 35/- and on polyester yarn Rs. 40/- per kilogram. This notification remained in force till 28th February, 1973 when it was superseded by notification dated 1st March, 1973 by which the maximum duty on nylon yarn was raised to Rs. 38. 50 and in case of polyester yarn to Rs. 41. 90 per kilogram. The latter notification was superseded by another notification issued on 1st March, 1974 by which the maximum duty on polyester yarn was raised to Rs. 55/-per kilogram while the duty payable on nylon yarn remained as before. This notification, in its turn, was superseded by notification dd 1st August 1974 by which the duty on nylon yarn was raised to Rs. 42/- per kilogram. 'by the Finance Act, 1975, the tariff item- No. 18 was amended and the rate of duty was enhanced from Rs. 60/- to Rs. 85/- per kilogram. Thereafter the notification dated 1st August, 1974 was superseded by another notification with effect from 1st March, 1975 and the rate of duty was increased to Rs. 58 80 in case of nylon yarn and Rs. 77/- per kilogram in case of oolvester yarn. The aforesaid changes in the rates of duty were made at the time of Budgets for the years 1973, 1974, supplementary Budget 1974 and Budget for 1975. Under Rule 224 the petitioner declared its Budget day stocks which were verified by the Excise authorities. The Excise authorities collected the duty on the goods manufactured by the petitioner at the rate nrevailling on the date of removal of the goods in accordance with Rule 9-A. The petitioner's contention is that the duty ought to have been collected at the rate prevailing on the date of manufacture and not at the rate prevailing on the date of removal of goods and that, to this extent, Rule 9-A (l) (u) is ultra vires. 3 Before examining the submissions of the learned counsel for the petitioner it is necessary to have a look at the relevant provisions of the Act and the Rules. Section 2 (d) of the Act defines "excisable goods" to mean goods specified in the First Schedule as being subject to a duty of excise and to include salt. Section 2 (g) defines the term "prescribed by rules made under the Act The charging Section of the Act is Section 3 which is the first Section in Chapter II bearing the heading "levy and Collection of Duty," We are here concerned with Section 3 (1) which reads as follows :

(3.) THE argument of the learned counsel for the petitioner is that excise is a tax on manufacture or production of goods and the liability to pay the tax attaches at the stage of manufacture or production and so the rate of tax in force at that stage is the governing rate. The learned counsel submits that this is implicit in Section 3 of the Act and that the Central Government has no power to make rules inconsistent with this principle and Rule 9-A (i) (ii) in so far as it applies, the rate of duty prevailing on the date of removal is ultra vires and void.