Customs, Excise and Gold Tribunal - Mumbai
Commissioner Of Customs vs Reliance Industries Ltd. on 8 August, 2005
Equivalent citations: 2005(188)ELT449(TRI-MUMBAI)
ORDER C. Satapathy, Member (T)
1. Heard both sides. This appeal filed by Revenue involves a small amount of Rs. 42,789/- (ranging from Rs. 11/-to Rs. 19,233/- in respect of the 16 impugned Bs/E) but relates to an important question of law as to whether the newly imposed Education Cess of 2% is leviable on goods cleared under the Duty Entitlement Pass Book (DEPB) Scheme. We are informed by both sides that there is no precedent decision on this issue.
2. Chapter VI of the Finance (No. 2) Act, 2004 imposes Education Cess on imported goods @ 2% of duties of customs levied and collected on such goods :-
Extract from the Finance (No. 2) Act, 2004 "81. Education Cess. - (1) Without prejudice to the provisions of subsection (11) of Section 2, there shall be levied and collected, in accordance with the provisions of this Chapter as surcharge for proposes of the Union, a cess to be called the Education Cess, to fulfil the commitment of the Government to provide and finance universalized quality basic education.
(2) The Central Government may, after due appropriation made by Parliament by law in this behalf, utilise, such sums of the money of the Education Cess levied under sub-section (11) of Section 2 and this Chapter for the purposes specified in sub-section (1), as it may be consider necessary.
82. xxx
83. xxx
84. Education Cess on imported goods. - (1) The Education Cess levied under Section 81, in the case of goods specified in the First Schedule to the Customs Tariff Act, 1975, being goods imported into India, shall be a duly of customs (in this section referred to as the Education Cess on imported goods), at the rate of two per cent., calculated on the aggregate of duties of customs which are levied and collected by the Central Government in the Ministry of Finance (Department of Revenue), under Section 12 of the Customs Act, 1962 and any sum chargeable on such goods under any other law for the time being in force, as an addition to, and in the same manner as, a duty of customs, but not including -
(a) the safeguard duty referred to in sections 8B and 8C of the Customs Tariff Act, 1975;
(b) the countervailing duty referred to in section 9 of the Customs Tariff Act, 1975;
(c) the anti-dumping duty referred to in section 9A of the Customs Tariff Act , 1975; and
(d) the Education Cess on imported goods.
(2) The Education Cess on imported goods shall be in addition to any other duties of customs chargeable on such goods, under the Customs Act, 1962 or any other law for the time being in force.
(3), The provisions of the Customs Act, 1962 and the rules and regulations made thereunder including those relating to refunds and exemptions from duties and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the duties of customs on such goods under the Customs Act, 1962 or the rules or the regulations, as the case may be."
3. It was clarified by Ministry of Finance D.O.F. No. 334/3/2004-TRU, dated 8-7-2004 and further confirmed under Chief Commissioner of Customs, Mumbai Zone-H's Standing Order No. 39/2004 CCO M-II, dated 3-8-2004 that where customs duties are exempted, the Education Cess shall also stand exempted :-
Extract from MOF DOF No. 334/3/2004-TRU, dt. 8-7-2004 "Issue No. (2) : Whether goods that are fully exempted from excise duty/customs duty or are cleared without payment of excise duty/customs duty (such as clearance under bond or fulfilment of certain conditions) would be subjected of Cess.
Clarification : The Education Cess is leviable at the rate of two per cent of the aggregate of all duties of excise/customs (excluding certain duties of customs like anti-dumping duty, safeguard duty etc.) levied and collected. If goods are fully exempted from excise duty or customs duty, are chargeable to Nil duty or are cleared without payment of duty under specified procedure such as clearance under bond, there is no collection of duty. Thus, no education cess would be leviable on such clearances. In this regard, letter D.O. No. 605/54/2004-DBK, dated 21st July, 2004 issued by Member (Customs) may also be referred to.
" Extract from standing Order No. 39/2004, dt. 3-8-2004 "2. It is given to understand that different practices are being followed in the Custom Houses for the purpose of collection of 2% Education Cess on Customs duty under export promotion schemes. The issue has been discussed with TRU which drafted the budget proposals. For the purpose of removal of doubts it is hereby clarified that the said 2% Education Cess shall be collected in cash only for that portion of aggregate of customs duties which are being collected in cash. In other words, in cases where customs duties are fully exempted under an export promotion scheme then 2% education cess shall also stand exempted. In cases where part of the customs duty is being collected in cash under an export promotion scheme, then 2% education cess shall also be collected on that portion of the customs duty collected in cash as per the illustration given by TRU."
4. However, subsequently another wing of the Ministry of Finance has issued a Circular No. 5/2005-Cus., dt. 31-1-2005 (F. No. 605/54/2004-DBK) that in the case of imports under DEPB Scheme, Education Cess @ 2% would be payable by debit from the DEPB Scrip :-
Extract from Circular dt. 31-1-2005 "The undersigned is directed to invite your attention to the above mentioned subject and to say that a doubt has been raised as to whether 2% Education Cess is to be levied on the imports cleared under Advance Licence, DFRC, EPCG and DEPB Schemes.
2. The matter has been examined by the Ministry. The Education Cess imposed in the last Budget is leviable @ 2% of the aggregate duties of customs (except safeguard duly under sections SB and 8C, countervailing duty under section 9 and anti-dumping duty under section 9A of the Customs Tariff Act, 1975) on all items imported into India. Imports against Advance Licences are exempt from all duties of customs and, therefore, it follows that Education Cess at 2% would not be leviable on such imports. In the case of 'imports under DFRC, the additional duty of customs is payable and, therefore, Education Cess is also payable. On the same principle, Education Cess is also payable in case of imports under EPCG Scheme under which the 'goods attract a concessional duty of 5%. However, in the case of imports under DEPB Scheme the position is slightly different. As per the notifications governing imports under DEPB Scheme, the basic duty and additional duty are exempt subject to the condition that the duties leviable on the goods are debited from DEPB. In other words, in the case of DEPB Scheme, though the imports are governed by an exemption notification, the fact remains that in case of such imports the duty is debited from the DEPB scrip. Therefore, it has been decided that in the case of imports under DEPB Scheme, the Education Cess @ 2% would also be debited from the DEPB scrip."
5. The lower appellate authority has decided the issue in favour of the respondents contrary to and before issue of the Circular dt. 31-1-2005. Hence this appeal by Revenue.
6. We find that the DEPB Scheme operates under an exemption Notification No. 45/2002-Customs, dated 22-4-2002. The said notification specifically exempts goods imported under DEPB Scheme from basic, additional and special additional duties of customs. However, in terms of the conditions specified in the said notification, the exemption operates by allowing duty credit in the Duty Entitlement Pass Book on exports at the rates specified and subsequently by debiting an amount equal to duty payable, against such credit in the Pass Book, on imports. As such, such crediting and debiting of duty amounts is a matter of procedure and convenience, but the notification basically provides full exemption from customs duty. Our view is supported by earlier decision of the Tribunal in Essar Steel Ltd. v. CCE, Vishakhapatnam - , wherein it was held that Modvat credit against DEPB Debits cannot be allowed, as duties are exempted under the DEPB Scheme and the relevant notification.
7. We find that the provisions in the said Finance Act specify the Education Cess as 2% of the customs duty levied and collected. In the case of imports under the DEPB Scheme, which are fully exempt, the customs duty is nil. Hence the Education Cess being 2% of the customs duty is also nil. If it were the intention of the Parliament to debit and credit Education Cess for imports under DEPB Scheme, then the quantum of Cess would have been specified in absolute terms with a notification similar to Notification No. 45/2002 with similar conditions. That is, however, not the case. On the other hand, the Cess has been specified at the rate of 2% of the customs duty in relative terms. In which case, it becomes nil for exempted DEPB imports.
8. Accordingly, we hold that no Education Cess is leviable on fully exempted DEPB imports and therefore, no debits from DEPB scrip are required. We are also of the view that the Circular dated 31-1-2005 is contrary to the provisions of the Finance (No. 2) Act, 2004 read with Notification No. 45/2002- Customs, dated 22-4-2002. The Revenue appeal is, therefore, rejected.
9. In view of our findings that no debit towards Education Cess is required, it may be necessary for the concerned authorities to ensure that no DEPB credits are allowed at the time of exports giving rise to undue benefit.
10. Before parting with the case, we note that the following remarks have been made by the lower appellate authority in his order :-
"If the departmental officers are working under the belief that non-fdllowing the principle of natural justice would result into remanding the case back to them, then I would like to make it clear that it would result into setting aside the order passed by them and in such cases necessary action is required to be taken against such officers for loss of revenue. Hence department should be careful in future while passing such orders."
It is the department's contention that in this case the respondents did not insist on any show cause notice, nor any orders were issued. The respondents had filed appeals against the assessments made on the Bills of Entries which the lower appellate authority has proceeded to hear. It was open to him to remand the matter to the original authority for adjudication and issue of speaking orders. He, however, has chosen to hear the appeals in the absence of any appealable orders. We are of the view that in the circumstances of this case, it was not proper for him to pass the aforesaid general remarks against the department. There is no requirement under the law for the Commissioner (Appeals) to declare what he will do in respect of future appeals. He is duty bound to deal with each appeal before him on its own merit. We are also of the view that where there is a breach of the principles of natural justice, it will be appropriate for a departmental appellate authority to remand the matter for fresh adjudication with the direction to follow principles of natural justice as has been done by the Tribunal in the past on numerous occasions. Such remands are necessary not only to ensure observance of principles of natural justice by the lower authorities but also to protect the interest of public revenue which should not be allowed to suffer by setting aside recti-fiable orders.
11. The Registry is directed to send copies of this order to DGFT and Member (Customs) in view of our observations in Paragraph 9 above.
(Pronounced in Court on 8-8-2005)