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Issues: Whether special excise duty introduced by the Finance Bill, 1978 was chargeable on clearances of goods effected between 17.00 hours and midnight on the Budget day under Rule 224(2A) of the Central Excise Rules, 1944.
Analysis: Rule 224(2A) contemplated an undertaking to pay duty at the enhanced rate, if any, applicable from the date immediately following the date of presentation of the Budget or introduction of the Finance Bill. The special excise duty introduced by the Finance Bill, 1978 was a new levy and, by virtue of Section 4 of the Provisional Collection of Taxes Act, 1931, came into force only on the expiry of the day of introduction, that is, after midnight. The undertaking under Rule 224(2A) could therefore operate only for clearances made after the levy became operative and could not extend to removals made before midnight on the same day.
Conclusion: The appellants were not liable to pay special excise duty on the clearances made between 17.00 hours and midnight on 28-2-1978.
Final Conclusion: The demand for special excise duty on the pre-midnight clearances was unsustainable, and the appeal succeeded with consequential relief.
Ratio Decidendi: A duty introduced by a Finance Bill under the Provisional Collection of Taxes Act becomes leviable only when it comes into force by law, and an undertaking under Rule 224(2A) cannot fasten liability for clearances made before that effective time.
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