(Per: HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. By this petition under Articles 226 and 227 of the Constitution of India, the petitioner challenges the order dated 27th February 2004 passed by the Commissioner (Appeals) whereby he has dismissed the appeal preferred by the petitioner against the order passed by the adjudicating authority rejecting its claim of refund.
2. The petitioner, a cooperative society registered under the Gujarat Cooperative Societies Act, is engaged in the manufacture of refined edible oils falling under Chapter 15 of the Schedule to the Central Excise Tariff Act, 1985 (hereinafter referred to as “the Tariff Act”). The petitioner manufactures refined edible oils in its own brand name “Anand” as well as under job work agreement for one M/s. Dhara Vegetable Oil and Food Company Ltd., under the brand name of “Dhara”. Prior to 1st March 2003, refined edible oils falling under the Central Excise Tariff heading 15.02 and 15.03 were chargeable to nil rate of duty under the Tariff Act. With effect from 1st March 2003, by the Finance Act, 2003, the Central Government imposed duty of 8% advalorem in respect of the goods falling under Chapter heading 15.02 and 15.03. In exercise of powers under subsection (1) of section 5A of the Central Excise Act, 1944 (hereinafter referred to as “the Act”) the Central Government also granted exemption to all goods (other than refined edible oils, bearing a brand name and put up in unit containers for retail sale) falling under chapter headings 15.02 or 15.03 from levy of central excise duty. Thus, as they were not included under the exemption notification, by virtue of the provisions of the Finance Act, 2003 with effect from 1st March 2003, refined edible oils bearing brand name or put up in unit containers for retail sale falling under chapter heading 15.02 or 15.03 became exigible to central excise duty at the rate of 8%,.
3. It is the case of the petitioner that prior to 1.3.2003, that is, as on the midnight of 28th February 2003, the petitioner had substantial stocks of packed refined edible oil. According to the petitioner, such packed refined edible oil was not an excisable commodity prior to 1st March 2003 and as such the petitioner was not liable to pay any duty on the packed and labelled refined oil which was manufactured prior to 1st March 2003. However, the Department of Central Excise, forcefully recovered duty on packed refined edible oils manufactured prior to 1.3.2003, which the petitioner paid under protest. The petitioner, thereafter, made an application for refund on 1st July 2003 claiming refund of Rs.15,16,084/ recovered by the Central Excise Authorities on such prebudget stocks of packed oil. Pursuant to the aforesaid refund claim, a show cause notice dated 8th September 2003 came to be issued to the petitioner calling upon it to show cause as to why its refund claim should not be rejected. In response thereto, the petitioner filed a reply dated 12th October 2003, inter alia, contending that the taxable event in respect of packed oil took place only from 1.3.03 onwards, since packing of bulk into retail activity was deemed to be that of manufacture only with effect from 1.3.03 by way of the amendment made through the Finance Act, 2003. The Assistant Commissioner by order in original dated 24th November, 2003, rejected the refund claim of the petitioner. The petitioner carried the matter in appeal before the Commissioner of Central Excise (Appeals), Vadodara, who, by the impugned order dated 27.02.2004, dismissed the appeal and confirmed the order passed by the adjudicating authority.
4. Mr. Uday Joshi, learned advocate appearing on behalf of the petitioner assailed the impugned order submitting that in case of levy of central excise duty, the taxable event is manufacture. In the facts of the present case, the taxable event in respect of packed oil took place only from 1.3.03 onwards since packing of bulk into retail activity was deemed to be “manufacture” only with effect from 1.3.03 by way of amendment made through the Finance Act 2003. Attention was invited to Chapter Note 4 inserted in Chapter XV of the Tariff Act which provides that in relation to products of subheading Nos.1502.00, 1503.00, 1504.00 and 1508.90, labelling or relabelling of containers and repacking from bulk packs to retail packs or adoption of any other treatment to render the product marketable to the consumers shall amount to manufacture. Therefore any packing done prior to 1.3.2003 did not amount to manufacture and consequently was not subject to duty of central excise, even if the packed oil was removed after 1.3.2003. It was submitted that though edible oil was made chargeable to central excise duty at the rate of 8%, the same continued to be exempted by notification No.6/03CE if the same was in loose condition. Therefore, the edible oil in loose condition would continue to remain edible oil even if it was packed since prior to 1.3.2002, packing did not amount to manufacture. It was submitted that but for the deeming fiction which was created vide Finance Act, 2003 the packing of such oil would not be a taxable event for the purpose of duty of central excise and as such, in terms of the decision of the Supreme Court in the case of Collector of C.Ex., Hyderabad v. Vazir Sultan Tobacco Co. Ltd. 1996(83) E.L.T. 3 (S.C.) when there was no taxable event prior to 1.3.03 in respect of packed oils, duty could not have been recovered on removal of the same after 1.3.03. It was, accordingly, submitted that the impugned orders passed by the authorities below are required to be quashed and set aside and the refund claim of the petitioner is required to be allowed.
5. On the other hand, Mr. Y. N. Ravani, learned Senior Standing Counsel for the respondents supported the impugned orders. It was submitted that with effect from 1.3.03, goods falling under subheading Nos.15.02 and 15.03 were exigible to central excise duty at the rate of 8%. Insofar as edible oil bearing a brand name and put up in unit containers for retail sale are concerned, the same were not covered by any exemption notification under section 5A of the Central Excise Act and as such central excise duty at the rate of 8% was leviable thereon from the date of clearance thereof. Reliance was placed upon the decision of the Supreme Court in the case of Wallace Flour Mills Company Ltd. v. Collector of C.Ex., 1989(44) E.L.T. 598 (SC), for the proposition that under the scheme of the Central Excise Act, the taxable event is the manufacture and the payment of duty is related to the date of removal of such article from the factory. Therefore, even if the goods were unconditionally exempted from duty on the date of manufacture, but were dutiable on the date of removal, they would be liable to payment of duty because on the basis of rule 9A of the Central Excise Rules, 1944 (hereinafter referred to as “the Rules”). Therefore it is within the competence of the Central Excise Authorities to apply the rates prevalent on the date of removal. The present case would be covered by the law laid down in the said decision and as such, the authorities below were justified in rejecting the claim of the petitioner. It was further submitted that prior to 1.3.03, for goods falling under subheading Nos.15.02 and 15.03, rate of central excise duty was nil and subsequently by the Finance Act, 2003, rate of duty leviable on such goods is fixed at 8%. Under the circumstances, the adjudicating authority was justified in placing reliance upon the decision of the Supreme Court in the case of Vazir Sultan Tobacco Co. Ltd. (supra) wherein it has been held that though goods may have been produced or manufactured prior to the date of imposition of higher rate of duty, still they would attract duty at the rate prevailing on the date of their removal.
5.1 Referring to the show cause notice issued by the adjudicating authority, it was pointed that the same clearly mentions that the petitioner had cleared the product bearing brand name of 'Arcogul' and ‘Dhara’ after 1.3.03 and had also passed on the duty element to various customers. It was submitted that the petitioner in its reply to the said show cause notice has not made any averment to the effect that the duty has not been passed on to the customers. Under the circumstances, even otherwise, since the duty has already been passed on to the customers, the petitioner is not entitled to refund of the amount claimed as the same would amount to unjust enrichment.
6. In the backdrop of the aforesaid facts and contentions, the core issue that arises for consideration is as to whether in view of the provisions of the Finance Act, 2003 refined edible oils in packed form manufactured prior to 1st March 2003 are exigible to excise duty at the rate of 8%.
7. By virtue of the Tenth Schedule to the Finance Act, 2003, the following came to be inserted in the First Schedule to the Central Excise Tariff Act: “(2) in Chapter 15, -
(i) after Note 3, the following NOTE shall be inserted, namely :-
‘4. In relation to the products of sub-heading Nos. 1502.00, 1503.00, 1504.00 and 1508.90, labelling or relabelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to “manufacture”.’;
(ii) In sub-heading Nos. 1502.00, 1503.00, 1504.00 and 1508.90, for the entry in column (4) occurring against each of them, the entry “8%” shall be substituted.”
8. A perusal of the Central Excise Tariff Act, as prevailing prior to 1.3.03, shows that the rate of duty chargeable in relation to goods falling under subheadings Nos. 15.02 and 15.03 was nil. Subsequently, by virtue of the Finance Act 2003, excise duty at the rate of 8% came to be levied on edible oils falling under subheading Nos.15.02 and 15.03. Thus, all edible oils falling under sub heading Nos.15.02 and 15.03 of Chapter 15 of the Tariff Act were chargeable to duty at the rate of 8% with effect from 1.3.03. However, by virtue of Notification No.6/2003 Central Excise dated 1st March 2003, in exercise of powers under sub section (1) of section 5A of the Act, the Central Government exempted all goods other than refined edible oils, bearing a brand name and put up in unit containers for retail sale falling under subheading Nos. 15.02 or 15.03 of Chapter 15 of the Tariff Act from payment of central excise duty.
Thus, it is abundantly clear that even prior to 1st March 2003, edible oils were exigible to central excise duty, albeit at nil rate. Subsequently, by the Finance Act, 2003, with effect from 1st March 2003, the rate of excise duty came to be enhanced to 8% in respect of goods falling under sub heading Nos.15.02 and 15.03 of Chapter 15 of the Tariff Act. Thus, unless expressly exempted, with effect from 1st March 2003, all goods falling under subheading Nos.15.02 and 15.03 were chargeable to excise duty at the rate of 8%. The Supreme Court in the case of Wallace Flour Mills Co. Ltd. (supra) has held that under the scheme of the Central Excise Act read with the rules framed thereunder, more particularly rule 9A of the Central Excise Rules, the taxable event is the manufacture or production of an excisable goods, the payment of duty is related to the date of removal of such article from the factory. Thus, when the goods are unconditionally exempted from duty on the date of manufacture, but are dutiable on the date of their removal, they would be liable to duty because on the basis of rule 9A of the Rules, the Excise Authorities are within their competence to apply the rates prevalent on the date of removal.
9. Examining the facts of the present case in light of the principles propounded in Wallace Flour Mills Co. Ltd. (supra), on the date of manufacture of the goods in question, the same were chargeable to nil rate of duty. However, subsequently, with effect from 1st March 2003, the same came to be chargeable to excise duty at the rate of 8%. Under the circumstances, the payment of duty being relatable to the date of removal of the article from the factory, the goods in question would be chargeable to central excise duty at the rate prevalent on the date of removal.
10. The Commissioner (Appeals) in the impugned order has held thus:
“It is an admitted fact that prior to 1303, refined oil in any form (packed or loose) was specified goods under Ch.1503 of Central Excise Tariff Act, 1985 and Tariff rate was Nil. As per the provisions of Sec.2 (d) of Central Excise Tariff Act, 1985, the goods specified in the Tariff would be regarded as excisable. Merely, because the tariff rate was nil, it does not make goods as nonexcisable, since nil rate of duty is also a rate of duty. However, by virtue of an General Exemption Notification No.06/2003CE dtd. 132000, excise duty @ 8% imposed in refined edible oils bearing a brand name and put up in unit container for retail sale and loose oil remain chargeable to nil rate of duty. Thus, with effect from 132003, refined edible oil put up in unit container for retail sale became excisable to duty @ 8% adv. Simultaneously, a new Chapter Note in Ch.15 has been inserted so as to provide in relation to produce of sub reading Nos.1502.00, 1503.00, 1504.00 and 1508.90 labeling or relabeling of container and packing from bulk packs to retail packs and adoption of any other treatable to render the produce marketable to consumer shall amount to manufacture, vide clause 147 of Finance Act – 2003. From this Chapter Note, Government's intention is to levy duty only on refined edible oil bearing brand name and put up in unit container with effect from 1303. That does not mean that refined edible oil in any form (loose or packed) was nonexcisable prior to 1303. In other words, prior to 1303, refined edible oil in any form was excisable, but no exigible to duty.”
The reasoning adopted by the Commissioner (Appeals) is in consonance with the law laid down by the Supreme Court in the case of Wallace Flour Mills Co. Ltd. (supra) and as such, there is no infirmity in the finding recorded by the Commissioner (Appeals) that the goods in question are exigible to central excise duty at the rate of 8%.
11. Another aspect of the matter is that the show cause notice in question specifically states that the petitioner has passed on the duty element to its customers. In response to the show cause notice, the petitioner has filed its reply. However, the same is silent as regards the question of passing the duty element to the customers. It appears to be the case of the petitioner that since labelling or relabelling of containers and repacking from bulk packs to retail packs or adoption of any other treatment to render the product marketable to the consumers was brought within the ambit of the term 'manufacture' only with effect from 1st March 2003 by insertion of Note No.4 in Chapter 15 of the First Schedule to the Central Excise Tariff Act, what was recovered was not duty of Central Excise, but an amount collected without authority of law, and as such, the principles of unjust enrichment would not be attracted in the present case as the refund would not be governed by the provisions of section 11B of the Central Excise Act, 1944.
12. A feeble attempt had been made by the learned advocate for the petitioner to contend that since labelling or relabelling of containers and repacking from bulk packs to retail packs came to be brought within the ambit of manufacture only with effect from 1st March 2003, the goods in question could not have been subjected to levy of central excise prior to 1st March 2003. The aforesaid contention is required to be stated to be rejected inasmuch edible oil falling under subheading Nos.15.02 and 15.03 of Chapter 15 of the Tariff Act was chargeable to Central Excise duty even prior to insertion of Note No.4 in Chapter 15 of the Central Excise Tariff Act , though at nil rate. With effect from 1st March 2003, edible oil falling in subheading Nos. 15.02 and/or 15.03 was chargeable to duty at the rate of 8%. The contention that the taxing event, viz. manufacturing took place only with effect from 1st March 2003, thereby not attracting the charge of Central Excise duty at the rate of 8%, therefore, does not merit acceptance inasmuch as by virtue of Note No.4 in Chapter 15 of the Central Excise Tariff Act, all that is done is that labelling or relabelling of containers and repacking from bulk packs to retail packs or adoption of any other treatment to render the product marketable to the consumers is brought within the ambit of definition of manufacture. Thus, at best, the petitioner can contend that Central Excise duty at the rate of 8% is not leviable on the goods manufactured prior to 1.3.2003 to the extent of the value addition in respect of labelling or relabelling of containers and repacking from bulk packs to retail packs. However, in the present case, no such contention has been raised before the authorities below nor is there any segregation as regards manufacturing cost of the edible oil and cost of labelling or relabelling of containers, etc. Under the circumstances, considering the smallness of the amount involved insofar as the activity of labelling or relabelling of the containers and repacking from bulk packs to retail packs, together with the fact that the petitioner has already passed on the duty element to the consumers, this Court is not inclined to delve into such issue any further. In view of the fact that refined edible oil manufactured by the petitioner was chargeable to Central Excise duty even prior to 1st March 2003, in light of the decision of the Supreme Court in the case of Wallace Flour Mills Company Ltd. (supra) as approved by the Supreme Court in the later decision in the case of Collector of Central Ex., Hyderabad v. Vazir Sultan Tobacco Co. Ltd. (supra), rate of duty chargeable would be that prevailing on the date of removal of goods.
13. Under the circumstances, there being no infirmity in the impugned orders passed by the authorities below, there is no warrant for exercise of extraordinary jurisdiction under Article 226 of the Constitution. The petition, therefore, fails and is, accordingly, dismissed. Rule is discharged with no order as to costs.
(Akil Kureshi J.) (vjn) (Harsha Devani, J.)