In the article "Excisability, thy name is confusion" (July 14) Sukumar Mukhopadhyay has said, "Nil rate of duty is also a rate of duty" relying on Supreme Court decisions on the cases of Wallace Flour Mills (1989) and Vazir Sultan Tobacco (1996). In fact, the Supreme Court in the case of Associated Cement Co Ltd vs Commissioner of Customs (2001) has reiterated that "if by virtue of an exemption notification the rate of duty was reduced to nil, the goods specified in the Tariff Act would still be regarded as excisable goods on which nil rate of duty was payable". Hence, the Supreme Court has not categorically stated that goods with a nil tariff rate can also be considered "excisable goods".
In a subsequent decision in Collector of Central Excise, Vadodara vs Dhiren Chemical Industries (2002), while considering the eligibility for an exemption notification subject to the payment of appropriate duty on raw materials, the Supreme Court has held that, "An exemption notification that uses the said phrase applies to goods which have been made from duty paid material. In the said phrase, due emphasis must be given to the words 'has already been paid'. For the purposes of getting the benefit of the exemption under the notification, the goods must be made from raw material on which excise duty has, as a matter of fact, been paid, and has been paid at the 'appropriate' or correct rate. Unless the manufacturer has paid the correct amount of excise duty, he is not entitled to the benefit of the exemption notification" (paragraph six of the judgment). In paragraph seven, the Court observed, "Where the raw material is not liable to excise duty or such duty is nil, no excise duty is, as a matter of fact, paid upon it. To goods made out of such material the notification will not apply." Hence, the argument that "Nil rate of duty is also a rate of duty" is on very fragile ground. A collective reading of the definition under Section 2(d) of the Central Excise Act, 1944, the Supreme Court decision in Dhiren Chemical Industries and the decision of the Customs, Excise and Service Tax Appellate Tribunal in Amaravathi Co-operatives Sugar Mills vs CCE, (2013) suggests that "the rate of duty being nil, the goods are not excisable goods".
Prasad Tendulkar Pune
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