1984 (12) TMI 299 - AT - Central Excise

Summary

Issues:
Interpretation of Central Excise Rule 224(2A) regarding the levy of special excise duty on goods cleared before and after the introduction of a new duty.

Analysis:

The case involved a dispute regarding the imposition of special excise duty on goods cleared by M/s. Indian Explosives Ltd. (IEL) on the day of the budget presentation in 1978. The Central Excise authorities demanded special excise duty on urea fertilizer cleared by IEL between 17.00 hours and 24.00 hours on 28-2-1978, as per the Finance Bill, 1978. IEL contended that special excise duty was a new levy enforceable only after midnight and not applicable to goods cleared before that time. The Assistant Collector and the Appellate Collector differed in their interpretation of whether the special excise duty was a new levy or an enhancement of existing duty.

IEL argued that the goods were pre-Budget stock and not liable for special excise duty, citing the Provisional Collection of Taxes Act, which states that any duty enhancement takes effect from midnight following the budget presentation. The Tribunal analyzed Central Excise Rule 224(2A) and the Provisional Collection of Taxes Act to determine the timing of the levy of special excise duty. The Tribunal noted that the special excise duty was a new levy introduced in 1978, and its application was crucial in this case. The Tribunal referred to a previous case, Sirpur Paper Mills, to distinguish between clearances made before and after the introduction of the new duty.

The Tribunal examined the timing of the imposition of special excise duty as per the Finance Bill, 1978, and the Provisional Collection of Taxes Act. It concluded that the special excise duty came into force only after midnight following the budget presentation day. Therefore, goods cleared before this time were not subject to the special excise duty. The Tribunal emphasized that the undertaking under Rule 224(2A) binds the assessee to pay duty at the enhanced rate on goods cleared after the midnight hour when the new levy takes effect. The Tribunal clarified that the undertaking did not apply to clearances made between 17.00 hours and 24.00 hours on 28-2-1978 since the levy of special excise duty itself commenced only after midnight.

In light of the analysis, the Tribunal held that IEL was not liable to pay special excise duty on the clearances of urea fertilizer made between 17.00 hours and 24.00 hours on 28-2-1978. The appeal was allowed, granting consequential relief to the appellants within a specified timeframe.