COLLECTOR OF CENTRAL EXCISE, HYDERABAD ETC. ETC. versus M/S. VAZIR SULTAN TOBACCO CO. LTD., HYDERABAD ETC. ETC.

Citation: [1996] 2 S.C.R. 1194 · Decided: 28-02-1996 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Case Partly allowed

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Judgment (excerpt)

A 
COLLECTOR OF CENTRAL EXCISE, HYDERABAD ETC. ETC. 
v. 
B 
MIS. VAZIR SULTAN TOBACCO CO. LTD., 
HYDERABAD ETC. ETC. 
FEBRUARY 28, 1996 
[B.P. JEEVEN REDDY, SUHAS C. SEN AND G.T. NANA VITI, JJ.] 
Finance Act, 197~Section 37-Central Excise Act-Section 3-Lery 
of special duty of excise w.e.fl.3.197~Whether goods manufactured prior to 
C 1.3.1978 but removed on or after 1.3.1978 are liable to special duty of ex-
cise-Held; Ncr-Taxable event is the manufacture or production of goods, 
and not the removal of goods. 
The respondent company, engaged in the manufacture of cigarettes, 
challenged the levy of special excise duty on cigarettes removed between 
D 13.1978 and 12.3.1978, alleging that though cleared on or after 13.1978, 
they were manufactured prior to that date and in as much as the special 
duty of excise was upon the manufacture or production of excisable articles 
and not upon removal, no duty was leviable upon the cigarettes manufac-
tured by the respondent. The authorities rejected respondent's case and 
E levied the duty. The respondents filed applicatfon for refund which was 
rejected by the Assistant Collector. In appeal, the Special Bench of the 
Tribunal upheld the respondent's case and granted the relief. These ap-
peals had been filed challenging the correctness of the view taken by the 
Tribunal. 
F 
The appellants submitted that both for the purpose of rate and 
valuation, at is the date of removal which determines the levy. 
The respondents submitted that the duties of excise are Ieviable only 
upon the manufacture or production of the goods as contemplated by 
Entry 84 of List I of the Seventh Schedule to the Constitution and in the 
G present case when the goods were manufactured, there was no levy of 
special excise duty and if there was no levy of special excise duty on the 
date of their manufacture or production, it cannot attach at the stage of 
removal. .The question raised for consideration was whether the goods 
manufactured prior to 13.1978 but removed on or after 1.3.1978 are liable 
H to the special duty of excise. 
1194 
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COLLECTOROFCENTRALEXCJSEv. VAZIRSULTANTOBACCOCO.LID.[B.P.JEEVANREDDY,J.) 1195 
Allowing the appeals filed by the assessees and dismissing the State's A 
appeal, this Court 
HELD : 1.1. Entry 84 of List I of the Seventh Schedule to the 
Constitution empowers the Parliament to make a law providing for levy of 
duties of excise on tobacco and other goods manufactured or produced in B 
India. Indisputably,. the special excise duty is an excise duty and is 
relatable to Entry 84. If so, levy must be on the manufacture or production 
of goods. That is how the words "goods manufactured or produced in 
India" in Entry 84 have been understood by this Court throughout. Once 
the levy is not there at the time when the goods are manufactured or 
produced in India, it cannot be levied at the stage of removal of the said C 
goods. The idea of collection at the stage of removal is devised for the sake 
of convenience. It is not as if the levy is at the stage of removal; it is only 
the collection tliat is done at the stage of removal. Admittedly, the special 
excise duty is an independent duty of excise separate and distinct from the 
duties of excise levied by the Central Excise and Salt Act, 1944. This levy D 
came into effect only on and from March 1, 1978 which means that the 
goods produced prior to that date were not subject to such levy. If that is 
so, the levy could not attach nor could it be be realised because such goods 
were removed on or after March 1, 1978. [1199-B-F] 
1.2. Section 3 of the Central Excise Act, cannot be read as shifting E 
the levy from the stage of manufacture of production of goods to the stage 
of removal. The levy is and remains upon the manufacture or production 
alone. Only the collection part of it is shifted to the stage of removal. Once 
this is so, the fact that the provisions of the Central Excise Act are applied 
in the matter of levy and collection of special excise duty cannot and does F 
not mean that wherever the Central Excise duty is payable, the special 
excise duty is also payable automatically. That is so as an ordinary rule. 
But insofar as the goods manufactured or produced prior to March 1, 1978 
are concerned, the said rule cannot apply for the reason that there was no 
levy of special excise duty on such goods at the stage and at the time of 
their manufacture/production. The removal of goods is not the taxable 

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