Budget day tax levy takes effect only after midnight, leaving pre-midnight clearances outside the new duty.

A taxing provision introduced through a Finance Bill under the Provisional Collection of Taxes Act, 1931 becomes operative only on expiry of the day of its introduction. Goods cleared before midnight on the budget day therefore remain subject to the pre-existing nil rate, and the new levy cannot be applied to those clearances. On the stated facts, tea cleared at about 5.30 p.m. on the day the Bill was introduced was not liable to the proposed duty, so no duty demand could be sustained on such clearances.

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Issues: Whether the levy of duty introduced by the Finance Bill on the budget day applied to tea cleared from the factory before midnight on that day.

Analysis: Section 3 of the Provisional Collection of Taxes Act, 1931 permits a declaration that a provision relating to imposition or increase of duty shall have immediate effect, and section 4(1) provides that the declared provision acquires force of law only on the expiry of the day on which the Bill is introduced. On the facts, the Bill was introduced on 27.02.1999 and the goods were cleared at about 5.30 p.m. on the same day, before the declared levy became operative. The earlier Tribunal decision followed the same principle that budget provisions take effect only from midnight following the budget day, and the contrary precedents concerned different factual situations involving enhancement of existing duty or other distinct issues.

Conclusion: The new levy did not apply to clearances made before midnight on the budget day, so no duty demand could be sustained on such clearances.

Final Conclusion: The impugned orders were unsustainable and the appeals succeeded with consequential relief.

Ratio Decidendi: A taxing provision introduced by a Finance Bill under the Provisional Collection of Taxes Act, 1931 becomes operative only on expiry of the day of introduction, so goods cleared before midnight on the budget day are governed by the pre-existing nil rate.

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