1. The captioned appeal was initially filed as a revision application before the Central Government which, under the provisions of Section 35-P of the Central Excises and Salt Act, 1944, has come as transferred proceedings to this Tribunal for disposal as if it were an appeal filed before it.
2. The facts of the case, in brief, are that M/s. Indian Explosives Ltd., the appellants (hereinafter referred to as IEL) are engaged in the manufacture of urea fertilizer. On the day appointed for presentation of the annual Budget of the Central Government for 1978, namely, 28-2-1978, IEL applied for and secured from the Central Excise authorities permission for taking clearance of the goods between 17.00 hours and 24.00 hours on 28-2-1978 on furnishing an undertaking that they would pay the differential amount of duty in case there was an increase in the rate of duty applicable to the goods on the day following 28-2-1978. This was in terms of Central Excise Rule 224(2A).
The quantity of urea which was cleared between 17.00 hours and 24.00 hours on 28-2-1978 was 104 M.T. As it happened, the Finance Bill, 1978, presented to the Parliament on 28-2-1978, levied a special excise duty at l/20th of the basic excise duty (i.e. the duty leviable under the First Schedule to the Central Excises and Salt Act, 1944). The clearances had been effected without payment of this special excise duty. Therefore, the Central Excise authorities demanded, by a show cause notice, the special excise duty amounting to Rs. 932.88 on the said quantity of urea cleared during the said hours. IEL contended that special excise duty was a new levy and was enforceable only from the midnight of 28th February-1st March 1978 and that it could not be levied on goods cleared prior to the said mid-night. The Assistant Collector who adjudicated the matter after hearing IEL held, vide his order dated 25-11-1978, that special excise duty merely amounted to an enhancement of the basic excise duty already leviable and was not a new levy and that, therefore, IEL was liable to pay the differential duty as demanded in view of the undertaking given by them under Rule 224(2A) of the Central Excise Rules. The appeal against this order did not meet with success. It is the Appellate Collector's order dated 2-7-1981 that is now under challenge before us. The Appellate Collector had agreed with the contention of IEL that special excise duty was different from basic excise duty and that it was a new levy, but that its effect was to enhance the incidence of excise taxation. However, he said that Rule 224 applied to all excise duties and that in terms of Rule 224(2A) the new levy became applicable to all clearances made on the Budget day after 17.00 hours.
3. Appearing for the appellants, Shri S.N. Mathur, Consultant, submitted that the goods in question being pre-Budget stock, were not liable to the levy of special excise duty which came into force only from the midnight intervening 28-2-78--1-3-78. The undertaking in terms of Rule 224 was only with reference to any enhancement in an already existing levy (which was not the case here) and did not apply to instances of new levies as in the present case. In accordance with the Provisional Collection of Taxes Act, even enhancement in duty would take effect from only the mid-night following the presentation of the Budget. During the course of the arguments, Shri Mathur referred to the decision of this Tribunal in the case of Sirpur Paper Mills reported in 1984 E.L.T. 546, in support of his contention that special excise duty was a new levy.
4. Appearing on behalf of the Respondent, Shri Sundar Rajan, submitted that the normal working hours of the Central Excise Department being over at 17.00 hours, IEL could not have cleared the goods between 17.00 hours and 24.00 hours without a special permission on furnishing an undertaking in terms of Rule 224 binding themselves to pay any differential amount arising from any enhancement in the excise duty.
Special excise duty was, in effect, enhancement of the basic excise duty. The clearances between 17.00 hours and 24.00 hours under this dispensation should be deemed to be clearances effected during , the following day attracting special excise duty.
5. We have considered the submissions of both sides. Central Excise Rule 224(2) is reproduced below : "Notwithstanding anything contained in these Rules, but without prejudice to the provisions of Sub-rule (1) so far as they relate to restriction on removal of goods before 6.00 a.m. on any day, no goods shall be removed from a factory or a warehouse on the date appointed for the presentation of the Annual or any Supplementary Budget of the Central Government to Parliament (or for the introduction in the House of the People of any Finance Bill or any Bill for the imposition on increase of any duty) unless an application for such removal in the prescribed form has been presented by the licensee to the proper officer and such application has been acknowledged by the proper officer, before 5.00 p.m. on the working day immediately preceding the date aforesaid : (The first proviso is not relevant for our present purpose).
Provided further that where a licensee intends to remove goods from a factory or a warehouse after 5.00 p.m. on the date aforesaid, he shall also obtain the permission of the Central Government under Sub-rule (2-A) for such removal.
[Explanation.-For the purpose of Sub-rule (2) and Sub-rule (2-A), "goods" includes goods which may come into existence at any time after the presentation of an application referred to in these sub-rules]." "Where a licensee intends to remove goods from a factory or a warehouse after 5.00 p.m. on the date appointed for the presentation of the Annual or any Supplementary Budget of the Centra! Government to -Parliament [or for the introduction in the House of the People of any Finance Bill or any Bill for the imposition or increase of any duty] he may make application in this behalf in writing to the Central Government undertaking to pay duty at the enhanced rate, if any, that may be applicable to such goods with effect from the date immediately following the date aforesaid and to comply with such condition as the Central Government may specify and thereupon the Central Government may, if it considers it necessary or expedient in the public interest so to do, permit the removal of such goods." 7. The above provisions contemplate 2 situations, the first being imposition of any duty and the second being increase of any pre-existing duty. Special excise duty was introduced for the first time in 1978 and though its effect was to increase the burden of basic excise duty by l/20th, it was a new levy. The question before us is not whether the new levy was attracted in the case of goods manufactured prior to 1-3-1978 but cleared on or after 1-3-1978. This issue came up for consideration in the Sirpur Paper Mills case (supra), and the Bench, by a majority of 2, took the view that special excise duty would be attracted on such clearances. That, however, is not the question here. The question is whether the special excise duty was attracted on clearances of urea fertilizer effected on the Budget day between 17.00 hours and 24.00 hours.
8. Clause 37 of the Finance Bill, 1978, which levied special duties of excise, was covered by a declaration made under the Provisional Collection of Taxes Act of 1931. Section 4 of this Act provides that a declared provision shall have the force of law immediately on the expiry of the day on which the Bill containing it is introduced. In other words, Clause 37 of the Finance Bill, 1978 came into force as law on the expiry of 28-2-1978, the day on which the Finance Bill, 1978 was introduced "in Parliament. In other words, Clause 37 levying special excise duty came into force only after the passing of the mid-night hour on 28-2-1978-1-3-1978. Goods cleared prior to the mid-night hour would not attract special excise duty since the levy itself came into force only after mid-night hour.
9. The Departmental Representative strenuously contended that if the above view is taken, Rule 224(2A) would be rendered infructuous because the undertaking to pay duty at the enhanced rate, if any, that may be applicable to su;h goods, would be devoid of any meaning. We do not agree. On a close reading of the Rule, it would be clear that, the undertaking contemplates paying duty at the enhanced rate, if any, that may be applicable to the goods with effect from the date immediately following the introduction in the Lok Sabha of any Finance Bill or any Bill for the imposition or increase of any duty. A harmonious way. of reading this provision along with Section 4 of the Provisional Collection of Taxes Act would appear to be to take the view that the undertaking is to pay duty at the enhanced rate, if any, on goods cleared after the mid-night hour when the increased duty or new levy would take effect in accordance with the Provisional Collection of Taxes Act. In other words, the undertaking would bind the assessee to pay, in a situation of the present type, special excise duty on clearances effected after the mid-night hour. It would not have the effect of binding himself to pay special excise duty on clearances between 17.00 hours and 24.00 hours on 28-2-1978 for the simple reason that the levy of special excise duty itself came into force only after the mid-night hour.
10. In this view of the matter, there is no question of Rule 224(2A) being rendered nugatory.
11. In the present case, we hold that the appellants were not liable to pay special excise duty on the clearances of urea fertilizer effected by them during the period 17.00 hours to 24.00 hours on 28-2-198. We allow the appeal with consequential relief to the appellants which shall be granted within 3 months from the date of communication of this order.