P.K. Tare, C.J.
1. This is a petition under Articles 226 and 227 of the Constitution of India for writs of Mandamus and Certiorari seeking to quash the demand, dated 20.03.1972 (petitioner's Annexure-G) directing the petitioner to pay the excise duty on the pre-budget stocks declarded on dated 16.3.1972 of power driven pumps and a writ of Mandamus restraining the respondents from recovering the excise duty from the petitioner as a condition precedent to the removal of the power driven pumps, which had seen manufactured from 01.03.1969 to 16.03.1972 during which period no excise duty was leviable.
2. The facts leading to the filling or the present writ petition areis as follows:
The petitioner, a limited company, has a branch at Dewas, where a factory has been installed for manufacturing power driven pumps. But notification dated 23.04.1969 (Respondents' Annexureis-I) in exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government had exempted during the period commencing on 01-03-1969 and ending with 23.04.1969, the power driven pumps falling under item No. 30-A of the First Schedule to the Central Excises and Salt Act, 1944, from whole of duty of excise leviable thereon. It was also clarified that the benefit of the exemption of this notification would be available only to those manufacturers who produce proof to the satisfaction of the Collector of Central Excise that such benefit had been passed on by them to the person to whom they have sold the said power driven pumps. This benefit was continued by the Government upto 16.03.1972. During that period the petitioner was not even required to take a licence for the purposes of the Central Excise and Salt Act, 1944. However, by a notification dated 17.03.1972 (Respondent's Annexure-2), the earlier notification was modified and excise duty was made payable at 10% ad valorem on the price and any duty leviable under the Act in excess of 10% was continued to be exempted. Thus, with effect from this date only 10% ad valorem excise duty was payable by the petitioner. But from 01.03.1969 to 16.03.1972 no excise duty was payable by the petitioner by virtue of the specific orders passed by the Central Government. On 16.03.1972 the petitioner declared the stocks lying in the premises, which had been manufactured till 16.03.1972 as per the communication dated 17.03.1972 (Petitioner's Annexure-E). The petitioner claimed that the said stocks had been manufactured during the period no excise duty was payable, and, therefore, the petitioner should be permitted to remove the said stock without payment of excise duty. That request of the petitioner was rejected by the Inspector Central Excise, vide letter dated 20.03.1972 (Petitioner's Annexure-G) and the petitioner was intimated that he could remove the pre-budget stocks of power driven pumps on payment of excise duty as per me notification dated 17.03.1972 only. Hence this writ petition by the manufacturer.
3. It is, therefore, necessary to examine the nature and impost of excise duty on power driven pumps as per the Item No. 30-A of the First Schedule to the Central Excise and Salt Act, 1944. Section 3 of the said Act is the charging Section, which is as follows :
'There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in, or imported by land into, any part of India as, and at the rates set forth in the First Schedule . . . . . .
We are not concerned with the other Sub-sections of of the said Section. Therefore, excise duty is essentially a duty on excisable goods, which are produced or manufactured. At this stage it is pertinent to note that the duty is on production or manufacture of excisable goods. Item No. 30-A. in the first schedule read as follows :
'30-A Power driven pumps (including motor pumps, Turbo pumps and Mono Block pump sets) for Liquids, whether or not fitted with measuring devices.
Twenty per cent ad valorem.'
In this contention we might advert to the pronouncement of their Lordships of the Supreme Court in British India Corporation Ltd. v. Collector of Central Excise, Allahabad (A.I.R. 1963 S.C. 104) as to the nature of the excise duty. In that case their Lordships observed as follows :
'The contention that this duty does not amount to a duty of excise because it cannot be passed on by the petitioner to the consumer was not raised before us. It was mentioned in the petition. An Excise duty is a duty on production and though according to the economists, it is an indirect tax capable of being passed on the consumers part of the price yet the mere passing on or the duty is not its essential characteristics. Even if borne by the producer or manufacturer it does not cease to be a duty of excise. The nature of such a duty was explained in the very first case of the Federal Court, and subsequently in others of the Federal Court, the Privy Council and this Court, but this ground continues to be taken and we are surprised that it was raised again.'
Therefore, the excise duty is essential on production or manufacture of excisable goods.
4. This question had been exhaustively dealt with by their Lordships of the Supreme Court earlier in the case of Chhotabhai Jetha-bhai Patel and Co., v. Union of India and Ors. (A.I.R. 1962 S.C.1006) wherein their Lordships laid down that an excise duty could be imposed retrospectively and that it is essentially a tax or levy on production or manufacture of excisable goods.
5. The question, therefore, arise whether the petitioner was liable to pay excise duty in respect of the power driven pumps manufactured during the period no excise duty was payable by virtue of the specific exemption granted by the Central Government and in the instant case whether the petitioner was liable to pay excise duty in respect of the pre-budget stocks that it had declared on 16.03.1972, vide communication, dated 17.03.1972 (Petitioner's Annexure E). The practice followed by the Central Excise authorities was that stocks of excisable goods produced or manufactured would be allowed to be kept by the producer or the manufacturer in some godown or premises, which would be under the supervision and control of the excise authorities and the producer or the manufacturer would be permitted to remove the goods from such premises or godowns on payment of the requisite excise duty. The Inspector, Central Excise, in effect prohibited removal of the goods declared on: 16.03.1972 unless the requisite excise duty had been paid by the petitioner. The argument of the learned counsel for the petitioner mainly has been that excise duty is a duty on production or manufacture of excisable goods and if the excisable goods had already been manufactured during the, duty-free period, the demand of the respondents for payment of excise duty for removal of the goods would be illegal. However, it is conceded on behalf of the petitioner that excise duty would be leviable with effect from 17.3.72 at the rates mentioned in the notification. But, as regards the stocks that the petitioner had declared on 16.03.72, no excise duty could have been demanded under the law.
6. As against this the learned counsel for the respondents urged that according to the practice, the goods are kept in the premises or godown under the control and supervision of the excise authorities and the producer or the manufacture is allowed to remove the goods on payment of excise duty. Therefore, the suggestion is that according to the practice followed, there could be no removal of the goods before payment of excise duty and as the petitioner had not removed the goods till 17.03.72, the petitioner's liability to pay the excise duty would be there. We may observe that the charging Section, namely, Section-3 of the Central Excises and Salt Act, 1944, imposes excise duty on the manufacture or production of goods. As such, no sooner the process of manufacture or production is completed, the liability for excise duty arises at that point of time. In our opinion, its removal or disposal will be wholly immaterial. For instance, we may take the example of other taxes, such as, purchase tax under the Central Sales Tax Act, 1956, or the sales tax under the same or sales-tax under the M.P. General Sales Tax Act, 1958. The liability for tax arises on a purchase or a sale. It is that point of time which is material for creating a liability in respect of purchase tax or sales tax. As such, a person may be in possession of goods which may be liable for purchase tax or sales-tax. But the liability for payment will arise on a purchase or a sale being completed and not at any other point of time. The Excise duty essentially differs in this respect which creates a laibility for payment of tax on production or manufacture being completed.
7. In Chhotabahi Jethabhai Patel And Co. v. The Union Of India And Ors. (A.I.R. 1952 NAG 139) and argument was advanced before the Division Bench of the Nagpur High Court that the Tax levied under Sub-section (2) of Section. 7 could only be levied and collected on tobacco produced and manufactured before first March 1951. As the tobacco in that case was all produced before the 1st March 1951, the petitioner contended that the provision would not apply to the case. The argument proceeded on the assumption that the excise duty was a tax on the process of production or manufacture. According to the Division Bench, the tax would operate on goods in existence. It would not be concerned with the process but with the product. It was, therefore, not answer stay for a demand of excise duty that the excisable goods were produced prior to the enactment, levying an excise duty. According to their Lordships, the Income Tax Act was a well known example of a charge being made in respect of income earned the previous year. In that case the excise duty had been imposed by the Parliament retrospectively. The Division Bench held that the Parliament had the powers to impose excise duty retrospectively and such retrospective import was not unconstitutional. This case in an appeal went before their Lordships of the Supreme Court in Chhotabhai Jetha-bhai Patel and Co. v. Union of India (A.I.R. 1962 S.C. 1006) wherein their Lordships affirmed the view of the High Court. Therefore the sum and substance of their Lordships decision is that excise.duty could be imposed retrospectively. Where it is so imposed, it will not be invalid. The learned counsel for the respondents tried to draw support from the reasoning of their Lordships of the Supreme. Court in the said case. We may observe that this case might have been helpful to the respondents if the notification dated 17.03.1972 (Respondent's Annexure 2) had imposed or levied the excise duty retrospectively. But the new rates came into force with effect from 17.03.1972 and the notification did not give any retrospective operation, but only prospectively cancelled the exemption granted by the earlier notification dated 29.04.1969 (Vide Respondent's Annexure 1). Therefore, the effect of the notification, dated 17.03.1972 was that there was exemption from excise duty for the period from 01.08.69 to 16.03.1972 and as excise duty is a tax on manufacture or production of goods, any goods manufactured or produced, during the period would be exempt from payment of excise duty. Of course, a case of purchase tax or a sales tax would altogether stand on a different footing. We are unable to accept the contention of the learned counsel for the respondents that the petitioner would be liable for excise duty on goods declared on 17.03.72 which had already been manufactured during the period of exemption. In this connection we advert to the observations of a Division Bench of the Patna High Court in Messrs. Tata Iron and Steel Co. v. State of Bihar (AIR 1956 of PAT 92) wherein the learned Judges rejecting the argument of the Attorney General observed that it was not right to say that the Sales tax imposed upon the assessee was of the nature of an excise tax. In the case of sales tax, the liability of pay tax arises on the transaction of a sale, but in the case of an excise tax the liability arises in respect of the manufacture or production of the commodity taxes As such, the two taxes are in the eye of law two separate and distinct entities. Thus, the nature of sales-tax is altoghether different from the nature of an excise duty.
8. In Mewar Textiles Ltd., Bhilwara v. Union of India (A.I.R. 1955 R.A.J. 114). The Division Bench of the Rajasthan High Court was required to consider the real character of the duty imposed by the Dhoties (Additional Excise Duty) Act, 1953. Their Lordship observed that the duty imposed by the Act and the Ordinance preceding it was an impost in the nature of an excise duty and the question whether it would operate retrospectively would be another matter. In that case the duty had been levied retrospectively, but despite that fact that retrospective impost may have been made, it did not change the character as excise duty. Their Lordship observed that the term 'excise duty' is generally used in contra distinction to their term 'customs duty'. Customs duties or duties of customs are levied on goods going abroad or imported from abroad, while duties of excise on the other hand, are levied on homemade goods or goods made in the taxing country. This view would find support from the fact that these terms in the Legislative lists appended to the Constitution were placed in a just position. We are of the opinion that the mere fact that restrospective impost may be levied by the parliament will not necessarily change the character and the nature of a tax. Excise duty will remain the excise duty, the sales-tax will remain the sales tax and the customs duty will remain the customs duty and the liability for these taxes will arise as and when the happening mentioned in a particular statute takes place. For instance, customs duty will be leviable on the export or import of goods. That will be the determining point with respect to the liability of the tax. Similarly, sales-tax will be leviable at the point of sale and purchase tax at the point of purchase and similarly excise duty will be leviable at the point the manufacture or production is completed.
9. We may observe that there is no case directly on the instant point for consideration before us, but the above cases merely lay down the general principles as to the nature of the excise duty. The nature of of the duty is that it essentially a tax on production or manufacture of excisable goods. Therefore, whenever an exemption is granted by the Central Government, it is in respect of goods manufactured or produced during that period. But excise duty will certainly not be leviable in respect of goods manufactured or produced during the exemption period. Of course, the position will be certainly different with respect to other taxes, such as customs duty, purchase-tax or import duty or export duty or income-tax. A tax on income is necessarily payable in respect of income earned during the previous year. It is always open to the Legislature to make a tax operative restrospectively. But even such restrospective operation will not change the nature of the tax and it will be payable according to the provisions enacted in the charging section of the relevant statutes. Therefore, interpreting Section of the Central Excises and Salt Act, 1944, we are of the opinion that the liability for tax, namely, the excise duty would arise no sooner the manufacturer or the 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 factory for grant of exemption in respect of goods manufactured during the duty free period.
10. As a result of the decision aforesaid we are of the opinion that the action of the respondents in demanding the excise duty on the excisable goods manufactured by the petitioner during the duty-free period i.e., from 01.03.1969 to 16.03.1972, was illegal. The petitioner was entitled to remove the goods declared in its communication dated 17.03.1972 (Petitioner's Annexure-E) without payment of excise duty as the goods had been manufactured during the duty-free period and as such, not liable for payment of excise duty at all.
11. Consequently, we would quash the order of the Inspector Central Excise dated 20.03. 1972 (Petitioner's Annexure G) demanding payment of excise duty from the petitioner and by a writ of Mehdamus, we would restrain the respondents from recovering the excise duty from the petitioner on the goods declared by the petitioner vide communication dated 17.03.1972 (Petitioner's Annexure E) and by a further writ of Mandamus we direct the respondents to allow the petitioner to remove the said goods without payment of excise duty. This petition, therefore, succeeds and is accordingly allowed to the extent indicated. The petitioner shall be entitled to its costs of this writ petition, including the counsel's fee at Rs. 200/-The outstanding amount of security deposit shall be refunded to the petitioner.