Budget-day clearance duty liability upheld where an express undertaking bound the assessee to pay any enhanced rate.

Under Rule 224(2A) of the Central Excise Rules, 1944, clearances made on the Budget day pursuant to an express undertaking to pay any enhanced duty attracted liability at the increased rate once the duty was raised after the Budget proposal. The Tribunal applied the Larger Bench ruling in Vikrant Tyres and held that the undertaking was binding, so the assessee could not repudiate differential duty on the ground that the increase was notified after clearance. It also held that Rule 224(2A) was a special pre-Budget/Budget clearance provision within the rule-making power under Section 37 of the Central Excise Act, 1944, and was not ultra vires. The refund claim therefore failed.

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Issues: Whether duty at the enhanced rate was payable on clearances made under Rule 224(2A) of the Central Excise Rules, 1944 after 1200 hours on the Budget day, and whether Rule 224(2A) was beyond the scope of Section 37 of the Central Excise Act, 1944.

Analysis: The assessee had obtained permission to remove goods on the pre-Budget/Budget day subject to an undertaking that enhanced duty would be paid if the rate increased. The Tribunal held that the matter was governed by the earlier Larger Bench ruling in Vikrant Tyres, which had treated the undertaking as binding and had applied the doctrine of estoppel against a challenge to payment of differential duty after the Budget proposal and subsequent notification. Rule 224 was treated as a special provision for pre-Budget/Budget clearances enacted to carry out the Act in that limited situation, and therefore not as a rule travelling beyond the rule-making power under Section 37. The contention based on the Provisional Collection of Taxes Act did not assist the assessee on the facts, because the clearances were made under the special budget-day procedure with an express undertaking to pay the enhanced duty.

Conclusion: The enhanced rate of duty was correctly recovered, Rule 224(2A) was not ultra vires, and the refund claim was not maintainable.

Final Conclusion: The appeal failed and the order of the lower authority was left undisturbed.

Ratio Decidendi: Where an assessee clears goods on the eve of the Budget under Rule 224(2A) on an express undertaking to pay duty at any enhanced rate, the undertaking is enforceable and the assessee cannot later repudiate liability on the ground that the duty increase was notified after clearance or that the special rule exceeds the enabling power.

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