G.P. Singh, C.J.
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 This notification remained in force till 28th February, 1973 when it was superseded by notification dated 1st March, 1973 by which the maximum duty on nylon yarn was raised to Rs. 38.50 and in case of polyester yarn to Rs. 41.90 per kilogram. The latter notification was superseded by another notification issued on 1st March, 1974 by which the maximum duty on polyester yarn was raised to Rs. 55/-per kilogram while the duty payable on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 This notification, in its turn, was superseded by notification dd 1st August 1974 by which the duty on nylon yarn was raised to Rs. 42/- per kilogram.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 Thereafter the notification dated 1st August, 1974 was superseded by another notification with effect from 1st March, 1975 and the rate of duty was increased to Rs. 58 80 in case of nylon yarn and Rs. 77/- per kilogram in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 :-
Section 3 Duties specified in the First Schedule to be levied.-(1) 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.
The next Section in Chapter II is Section 4 which deals with valuation of excisable goods for purposes of charging of duty. This Section, as it stood at the relevant time, reads as follows :-
Section 4 Determination of value for the purposes of duty-Where under this Act any article is chargeable with duty at a rate dependent on the value of the article, such value shall be deemed to be-
(a) the wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold at the time of the removal of the article chargeable with duty from the factory or any other premises of manufacture or production for delivery at the place of manufacture or production or if a whole-sale market does not exist for such article at such place at the nearest place where such market exists, or
(b) Where such price is not ascertainable, the price at which an article of the like kind and quality as sold or is capable of being sold by the manufacturer or producer, or his agent, at the time of the removal of the Se chargeable with duty from such factory or other premises for deh-very at the place of manufacture or production, or if such article is no sold or is not capable of being sold at such place, at any other place nearest thereto.
Explanation -In determining the price of any article under this Section no abatement or deduction shall be allowed except in respect of the trade discount and the amount of duty payable at the time of the removal of the article chargeable with duty from the factory or other premises aforesaid.
The power to make rules is conferred on the Central Government by Section 37 which as existing at the relevant time and in so far as relevant, reads as under :-
Section 37. Power of Central Government to make rules.- (1) The Central Government may make rules, to carry into effect the purposes of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power, such rules may-
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(i) provide for the assessment and collection of duties of excise, the authorities by whom functions under this Act are to be discharged, the issue of notices requiring payment, the manner in which the duties shall be payable, and the recovery of duty not paid ;
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(xvii) exempt any goods from the whole or any part of the duty imposed by this Act;
The rules made under the Act under Section 37 have to be published in Official Gazette. They have also to be laid before each House of Parliament. These requirements are contained in Section 38. This Section as it stood at the relevant time also provided that the rules made shall have effect as if enacted in the Act.
4. Rule 2(v) defines 'duty' to mean the duty payable under Section 3 of the Act. Chapter III of the Rules which consists of Rules 7 to 14B bears the beading 'Levy and Refund of, and Exemption from Duty.' Rule 7 provides that every person who produces, cures or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty or duties leviable on such goods, at such time and place and to such persons as may be designated, in, or under the authority of these Rules, whether the payment of such duty or duties is secured by bond or otherwise. Rule 8 empowers the Central Government to exempt by notification subject to such conditions as may be specified in the notification any excisable goods from the whole or any part of duty leviable on such goods. Rule 9-A the validity of which is in question and which provides for the date for determination of duty and tariff valuation reads as follows :-
Rule 9-A. Date for determination of duty and tariff valuation.- (1) The rate of duty and tariff valuation if any, applicable to any excisable goods shall be the rate and valuation in force-
(i) in the case of goods cleared from the premises of a curer on payment of duty, on the date on which the duty is assessed; and
(ii) in the case of goods cleared from a factory or a warehouse, subject to Sub-rules (2), (3) and (3A), on the date of the actual removal of such goods from such factory or warehouse.
(2) If the goods have previously been removed from a warehouse under bond to be re-warehoused, and the duty is paid on such goods without their being re-warehoused, the rate and valuation, if any, applicable thereto shall be the rate and valution, if any, in force on the date on which duty is paid or if duty is paid through an account-current maintained with the Collector under Rule 9, on the date on which an application'in the proper form is delivered to the officer-in-charge of the warehouse from which the goods were removed.
(3) Where any person who has removed excisable goods for export in bond fails to export or to furnish proof of such export to the satisfaction of the Collector or diverts the goods for home consumption, the rate of duty leviable and the tariff valuation, if any, in respect of such goods shall be the rate and valuation in force on the date on which the duty is paid.
(3A) Where duty becomes chargeable on any material or component parts in respect of which credit of duty had been allowed under Rule 56 A, the rate of duty leviable and the tariff valuation, if any, in respect of such material or component parts shall be the rate and valuation in force on the date on which the duty is paid.
(4) The rate and valuation, if any, applicable to cases of losses of goods shall -
(i) where the loss occurs in a curer's premises and in a curer's private bonded store-room, be the rate and valuation, if any, in force on the date on which such loss is discovered by the proper officer or made known to him ;
(ii) where the loss occurs in transit from a curer's premises or a curer's private bonded store-room to a warehouse, from one warehouse to another or during the course of processing of the goods in warehouse, be the rate and valuation, if any, in force on the date on which the goods are warehoused in the warehouse of destination or the processing thereof is completed, as the case may be, and
(iii) where the loss occurs in storage, whether in a factory or in a warehouse, be the rate and valuation, if any, in force on the date on which such loss is discovered by the proper officer or made known to him.
(5) In all other cases, the rate of duty and tariff valuation, if any, applicable to excisable goods shall be the rate and valuation in force on the date on which duty is paid.
Explanation.-For the purposes of Clause (ii) of Sub-rule (i), goods-
(i) on which duty has been paid,
(ii) which have been loaded into railway wagon or other vehicle, and
(iii) for which the railways or the transport agency, as the case may be, has issued a receipt in favour of the purchaser of the said goods, shall be deemed to have been removed from the factory or warehouse, as the case may be, even though the wagon or other vehicle laden with the said goods may continue to be stationed within the factory or warehoused premises.
Rule 9A, as quoted above, was substituted in 1967-68. It was, however, 5rst inserted in 1945 by F.D. (CR) Not. No. 2 CAMP, dated 27th January, 1945. It then read as follows :-
'9A. Alteration of duty or tariff valuation. -The rate of duty and the tariff valuation (if any) applicable to goods cleared on payment of duty shall be the rate and valuation (if any) in force on the date on which duty is paid, or if the goods are cleared from a factory or a warehouse, on the date of the actual removal of such goods from such factory or warehouse:
Provided that if the goods have previously been removed from warehouse under bond to be rewarehoused and the duty is paid on such goods without their being rewarehoused, the rate and valuation (if any) applicable thereto shall be the rate and valuation (if any) in force on the date on which duty is paid, or if duty is paid through an account-current maintained with the Collector under Rule 9, on the date on which an application in the proper Form is delivered to the officer-in-charge of the warehouse from which the goods were removed.
5. 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.
6. 'The nature of excise duty has been considered by the Supreme Court in a number of cases. In R.C. Jall v. Union of India-AIR 1962 SC 1281, the Supreme Court after referring to the decisions in, In re : Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938-AIR 1939 FC.I., Province of Madras v. Boddu Paidanna and Sons AIR. 1942 FC 33 and Governor-General in Council v. Province of Madras-AIR 1945 PC 98 observed : 'Excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country. It is an indirect duty which the manufacturer or producer passes on to the ultimate consumer, that is, its ultimate incidence will always be on the consumer. Therefore, subject always to the legislative competence of the taxing authority, the said tax can be levied at a convenient stage so long as the character of the impost, that is, it is a duty on the manufacture or production, is not lost.' In a passage which was quoted with approval by the Supreme Court in Jail's case, Gwyer, C.J., in Boddu Paidanna's case said that although in theory there is nothing to prevent the Central Legislature from imposing a duty of excise on a commodity as soon as it comes into existence, but 'a taxing authority will not ordinarily impose such a duty because it is much more convenient administratively to collect the duty (as in the case of most of the Indian Excise Acts) when the commodity leaves the factory for the first time.' In Jail's case, the Supreme Court was dealing with Section 2 of the Coal Production Fund Ordinance, 1944 which imposes a cess as a duty of excise on all coal and coke despatched from collieries in India. By the rules framed under the Ordinance in case of consignments where the freight charges are not prepaid, the duty is recovered from the consignee along with the freight by the railway administration. It was held by the Supreme Court that the duty was in the nature of excise tax and that the machinery evolved under the rules for collection of the duty did not disturb the essence of the tax and, therefore, exigibility of the tax at the destination point in the hands of the consignee could not be legitimately questioned. In Shinde Brothers v. Dy. Commr, Raichur- AIR 1967 SC 1512, the Supreme Court reiterated the characteristics of excise duty. It was pointed out that duty of excise is clearly related to production or manufacture of goods but it does not matter if the levy is made not at the moment of production or manufacture but at a later stage and that if the duty is collected from a retailer it would not necessarily cease to be an excise duty. These authorities clearly establish that although a duty of excise is a tax on manufacture or production of goods, it need not necessarily be levied at the stage of manufacture or production and may be levied at a later stage and may even be collected from a retailer. It is in the light of these principles that Section 3 of the Act has to be construed. This Section imposes excise duty 'on all excisable goods-which are produced or manufactured in India.' The Section further imposes this duty 'at the rates set forth in the First Schedule.' The manner or levy and collection of the duty is, however, left to be prescribed by rules. This is the effect of the words-'there shall be levied and collected in such manner as may be prescribed'-as they occur in Section 3. We are unable to agree that the qualifying words 'in such manner as may be prescribed' qualify only 'collected' and not 'levied'. 'Levy' is a word of very wide import. The term 'imposition' is narrower and is generally used for the levy of a tax or duty by legislative provisions indicating the subject matter of the tax and the rate at which it has to be taxed. The term 'levy' is, however, wider and includes imposition and all stages upto assessment. It, however, does not include collection which is separately referred to in Section 3 of the Act [see Assistant Collector of Central Excise, Calcutta v. National Tobacco Co. of India Ltd.-MR 1972 S.C.2563 at p.2571]. Section 3 of the Act imposes the duty at the rates set forth in the Schedule,on all excisable goods produced or manufactured in India. It does not lay down the stage at which the duty is to attach or the date with reference to which the rate has to be applied. It is not possible to accept the argument that Section 3 impliedly applies the rates of duty as in force on the date of manufacture or production for the reason that though excise duty is a tax on manufacture or production it need not necessarily be levied at the stage of manufacture or production and it may even be levied at the stage the excisable article reaches the retailer. This inference is further supported from Section 4 of the Act which deals with determination of value for purposes of duty. The material point of time with reference to which the value is determined under that Section is the time of removal of the article chargeable with duty from the factory and not the time when it is manufactured or produced. As Section 3 or any other provision of the Act does not expressly or impliedly lay down that excise duty must be levied at the rate prevailing on the date of manufacture or production, it was open to the Central Government to make rules for fixing the time with reference to which the rate of duty must be applied. Rule 9-A(l)(ii) which applies the rate prevailing on the date of actual removal of the goods from the factory or warehouse is valid under Section 37(1) as it carries out the purpose of the Act by prescribing the manner of levy of duty under Section 3.
7. We have already referred to the observations of Gwyer, C.J. in Boddu Paidanna's case (supra) that the taxing authority does not ordinarily levy excise duty at the stage of manufacture or production for it is more convenient administratively to levy the duty when the goods leave the factory for the first time. Rule 9-A(l)(ii) is in line with this practice. Further, a very strong circumstance which supports our conclusion is the existence of Rule 9-A from January 1945. The scheme under Rule 9-A is that the crucial time for levy of duty is the time when the goods are removed or when the duty is paid under the rules. This scheme has continued right from 1945 when the rule was first introduced. The excise tax is one of the most important sources of revenue. The Act is under continuous vigilance of Parliament and the rates of duty are changed from time to time by the annual Finance Acts or by notifications issued under Rule 8 to give effect to Budgets. Parliament must have known that Rule 9-A made by the Central Government applies the rate of duty prevailing on the date when the goods are removed. The inaction of parliament during the last 37 years is not making any provision in the Act to show that the crucial date for application of the rate of duty is the date of manufacture or production and in not otherwise annulling or modifying Rule 9-A strongly supports the view that the Rule is not inconsistent with the intention of Parliament as expressed in Section 3. Although rules made under an Act cannot override the Act, but they may be used as contemporance expositie of an ambiguous provision in the Act specially when they are to have effect as if enacted in the Act [see Hanlon v. Law Society- (1980)2 All ER199 (HL) p. 218]. There is additional reason to take the assistance of subordinate legislation in construing a taxing Act for 'in the matter of fiscal legislation the initiative is in the hands of the executive' (see J.K. Steel Ltd. v. Union of India-AIR 1970 SC. 1173, p. 1180. Section 38 of the Act as it stood at the relevant time before its amendment by Act No. 22 of 1973 provided that the rules shall have affect as if enacted in the Act. The Section also contains the requirement of laying before both Houses of Parliament. Even assuming, therefore, that there is some ambiguity is Section 3, the continuance of Rule 9-A from 1945 making the date of removal as the crucial date for application of the rate of duty is a very strong factor for holding that the rule is not contrary to the provision made by Parliament in Section 3. The conclusion that Section 3 does not provide as to the time with reference to which the rate of duty is to be applied is also supported by the decision of the Supreme Court in Orient Paper Mills v. Union of India-AIR 1967 SC. 1564. In that case the Supreme Court observed : 'The emphasis in Section 4 is on the time of removal of the article chargeable with duty from the factory. This is the only guidance which the Act furnishes.' These observations impliedly mean that except Section 4 there is no provision in the Act regarding the time with reference to which the rate of duty is to be applied. In face of Rule 9A when Parliament alters the rate of duty by amending the schedule or when the Central Government alters the extent of exemption by issuing notifications under Rule 8, it must be inferred that the intention is to apply the new rate in accordance with the provision of Rule 9-A. In our opinion, the said Rule is 'valid and the Excise authorities were right in applying the rates prevailing on the date of removal. The conclusion reached by us is in line with the decisions of the Bombay and Gujarat High Courts although the vires of Rule 9A was not specifically challenged in them [see Union of India v. Elphinstone Spinning & Weaving Mills Co. Ltd.-1978 ELT (J 680) (Bom.), Radhakrishna Ramnarain Limited v. R. Parthasarathy and Ors.-1980 ELT (J 709) (Bom.) and Alembic Chemical Works Co. Ltd., Baroda v. Union of India and Ors.-1979 ELT (J 258).
8. The learned counsel for the petitioner relied upon the cases of A.K. Roy v. Voltas Ltd. -AIR 1973 SC, 225 and Atic Industries v. Asst. Collector Central Excise- AIR 1975 SC 960. In these cases the Supreme Court laid down that excise is a tax on production and manufacture of goods and that Section 4 of the Act provides that the real value should be found after deducting the selling cost and selling profit and that the real value can include only the manufacturing cost and manufacturing profit. These cases deal with the mode of valuation under Section 4 which, as earlier noticed, makes the time of removal the crucial time with reference to which the value has to be determined. These cases cannot be read to lay down that the rate of duty to be applied must be that which is in force on the date of manufacture or production. The learned counsel also referred to a decision of a Division Bench of this Court in Kirloskar Brothers Ltd. v. Union of India-1978 ELT (J 33) (M.P.). In that case the goods were wholly exempt from excise duty at the time of manufacture. They were, however, removed after the withdrawal of exemption. A Division Bench of this Court held that as the goods were wholly exempt at the time of manufacture, they were not exigible to excise duty. No reference whatsoever is made in the judgment to Rule 9-A. When an application for leave to appeal to the Supreme Court was made, the Division Bench rejected the leave application by a speaking order which is reported as Union of India v. Kirloskar Brothers-9U E.L.T. (J690). It appears that at the time of hearing the leave application the attention of the Court was drawn to Rule 9-A and the decision of the Supreme Court in Orient Paper Mills v. Union of India-AIR 1967 SC. 1564. After referring to them the Court observed : 'There can be no doubt that as laid down by their Lordships, the rate would be as existing at the time of removal'. The Court, however, made a distinction where duty was imposed for the first time after manufacture by saying : 'The question will be different where the charging Section, namely Section 3 of the Act is to be considered to ascertain as to at what point of time excise duty is payable when the impost is made for the first time.' As in that case, the goods were wholly exempt on the date of manufacture, it was held that they would not be subjected to duty even though they were not exempt on the date of removal. Special leave was applied for by the Union of India in that case which was refused. By order passed on 1st September, 1977, the Supreme Court 'dismissed the SLP on merits.' The learned counsel for the petitioner argues that the view taken by this Court in Kirloskar Brothers' case must be taken to have been approved by the Supreme Court as the SLP was dismissed on merits. The order of the Supreme Court does not give any reasons. The words 'dismissed the SLP on merits' are too vague for declaration of any law under Article 141 of the Constitution. Moreover, as pointed out by us earlier, this Court when refusing leave to appeal to the Supreme Court made a distinction and held Rule 9-A to be not applicable because the goods in that case were wholly exempt on the date of manufacture. In the Court's opinion in that case, if goods are liable to excise duty both on the date of manufacture and on the date of removal, then only the rate of duty applicable would be that prevailing on the date of removal but if the goods are wholly exempt on the date of manufacture they would not be liable to excise duty even if before the date of removal the exemption is withdrawn. All that we need say here is that Kirloskar Brother's case is distinguishable on facts and the decision in that case must be confined to its own facts. In the case before us, the goods were exigible to excise duty both on the date of manufacture and on the date of removal. They were never wholly exempt. The exemptions were only partial in that the rate of duty as fixed by Tariff Item No. 18 of the First Schedule was reduced from time to time by notifications issued under Rule 8. As the goods were never wholly exempt, Kirloskar Brother's' case has no application here.
9. The learned counsel for the petitioner also argues that in case we held that the Central Government has power to make a rule to fix the time with reference to which the rate of duty is to be applied, Rule 9-A will suffer from excessive delegation. We are not impressed by this argument. The nature of duty and the rate of duty are fixed by Section 3 of the Act. What is delegated under that Section to the Central Government is the prescription of the manner of levy and collection of the duty. The basic policy having been laid down by the Act itself, Rule 9-A cannot be challenged on the ground of excessive delegation. Apart from that, as pointed out earlier, Section 38 of the Act contains the laying requirement. Thus, the rules made under the Act are under the constant supervision and control of Parliament. It has been held that by enacting a laying clause the Legislature keeps control over the delegate and the delegated legislation in such a case cannot suffer from excessive delegation [see RK. Paniah & Sons v. Excise Commr.-AIR 1975 SC. 1007, at p. 1011]. Rule 9-A cannot, in our opinion, be held to be invalid on the ground of excessive delegation.
10. The petition fails and is dismissed with costs. Counsel's fee Rs. 200/-. The balance amount of security, if any, be refunded to the petitioner.