Custom, Excise & Service Tax Tribunal
4. Whether Order Is To Be Circulated To ... vs Unknown on 4 December, 2009
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
COURT-II
E/MA/Con/401, 402, 536, 621, 792/09
Appeal No.E/1093/2007
Arising out of OIA No.KRS/18/VAPI/2007, dt.27.06.07
Passed by: Commissioner of Central Excise & Customs (Appeals), Vapi
For approval and signature:
Honble Mr. B.S.V. Murthy, Member (Technical)
Honble Mr. Ashok Jindal, Member (Judicial)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the Yes
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
Appellant/s M/s. Sarla Performance Fibers Ltd.,
M/s. Mehta Copper & Alloys Ltd., M/s. Pentair Water India
Pvt. Ltd., M/s. Viraj Profiles, M/s. V.V.F. Ltd., M/s. Galaxy
Surfactants, M/s. Godrej Inds., Interveners
M/s. Bebitz Flanges Works Pvt. Ltd.
Represented by Shri V. Sridharan(Adv), Gajendra Jain(Adv),
Sandeep Sachdeva(C.A.),
Shri Anand Nainawati(Adv), Jigar Shah (Adv)
Shri Hardik Modh (Adv), Shri R. Ravindran (Adv)
Vs.
Respondent/s CCE Vapi
Represented by Shri J.S. Negi (SDR)
CORAM:
MR. B.S.V. MURTHY, MEMBER (TECHNICAL)
MR. ASHOK JINDAL, MEMBER (JUDICIAL)
Date of Hearing:04.12.09
Date of Decision:
ORDER No. /WZB/AHD/2009
Per: B.S.V. Murthy:
1. The Silvassa factory of the appellant-company is a 100% Export Oriented Unit, inter alia, engaged in manufacture of polyester yarn. Apart from clearing the polyester yarn for export, the same is also being removed in DTA on payment of duty of excise in terms of proviso to Section 3(1) of Central Excise Act, 1944 read with Notification No. 23/2003-CE dated 31.3.2003.
2. The appellants during April 2004 to December 2005, in terms of the permission granted by the Development Commissioner, cleared certain quantity of polyester yarn in Domestic Tariff Area (DTA). At the time of said clearances, it paid excise duty under proviso to Section 3(1) of Central Excise Act, 1944 read with applicable exemption notification. Accordingly, as provided in the proviso, it paid aggregate of (a) amount of Basic Customs Duty leviable under Section 12 of the Customs Act, 1962; (b) amount of additional duties leviable under Section 3(1) of the Customs Act, 1975 (including Basic Excise Duty under the main section plus education cess under Section 93 on the excise duty) and (c) Customs education cess under Section 94 of the Finance Act, 2004 read with applicable exemption notification.
3. As per show cause notice dated 3.3.2006, the duty paid by the appellants is excise duty under proviso to Section 3(1) of the Central Excise Act, 1944. According to Revenue the appellants ought to have paid Education cess @2% levied under Section 93 of the Finance Act, 2004 and Rs.1,98,122/- was recoverable from appellants. A show cause notice was issued on 03.03.2006.
4. The proposal made in the show cause notice dated 3.3.2006 was confirmed by Order-in-Original dated 31.7.2006 which in turn was affirmed by the Order-in-Appeal dated 26.6.2007.
5. The CESTAT vide Order dated 10.3.2008 dismissed the appeal. However, on appeal, the Honble High Court of Bombay set aside the Order dated 10.3.2008 and remanded the proceedings to the CESTAT to consider the matter afresh.
6. Honble Mumbai High Court while remanding the matter for a fresh decision observed as follows:-
It, prima facie, appears that under proviso to Section 3 of the Central Excise Act the goods, which are manufactured in EOU, when they are brought to any other place in India, for the purpose of calculating excise duty they are treated as imported goods. Therefore, it appears that by proviso to Section 3 of the Central Excise Act statutory fiction is created that the goods though actually manufactured in India are treated as imported goods for the purpose of calculating and levying the excise duty. Perusal of Section 93 of the Finance Act prima facie shows that for the purpose of levying the education cess as part of excise duty. We, therefore, find prima facie substance in the submission made on behalf of the appellant that when the goods manufactured by EOU, which are brought to any other place in India are to be treated as imported goods for the purpose of levying excise duty, the same fiction will have to be extended while calculating and levying the education cess. We are not expressing any final opinion on this question. We find from the order of the tribunal that the tribunal has not approached the question from this perspective. In our opinion, the tribunal should have considered the purpose for which the statutory fiction has been created by the legislature and whether considering that purpose the fiction can be extended while levying education cess under Section 93 of the Finance Act also.
4. We have been informed that any decision taken on this question is likely to affect a number of EOUs and therefore, in our opinion, the tribunal should also consider issuing general notice making it know that any person representing EOU can address the tribunal on this question so that a well-considered decision on the subject can be taken. In our apinion, therefore, following order would meet the ends of justice.
ORDER
(i) The order impugned in the appeal is set aside.
(ii) The appeal is remitted back to the tribunal for denovo consideration and decision in accordance with law.
(iii) The tribunal shall, before deciding the appeal, consider the question whether in view of importance and likely far reaching affect of their decision, it will be appropriate to issue a general notice enabling any person, who may be adversely affected, being given an opportunity of being heard."
7. Accordingly, as directed by the Honble Mumbai High Court, notice was issued to general public so that all the parties were interested to apply as interveners.
8. We have heard the appellants as well as the interveners and the learned DR on behalf of the Revenue.
9. The submissions made by appellants and the interveners are summarized below:
Submissions made by Sarla Performance Fibres Ltd:
TYPES OF EXCISE DUTIES BEING LEVIED ON EXCISABLE GOODS MANUFACTURED IN INDIA
10.1 The duties of excise leviable on excisable goods manufactured in India are as under:
(i) BED at the rate specified in the First Schedule to the Central Excise Tariff Act, 1985
(ii) SED at the rate specified in the Second Schedule to the Central Excise Tariff Act, 1985;
(iii) Additional duty of excise under Additional Duties of Excise (Textile & Textile Article Act) Act, 1978;
(iv) Additional duty of excise under Additional Duties of Excise (Goods of Special Importance) Act, 1957;
(v) NCCD under Finance Act, 2001;
(vi) Education Cess under Finance Act, 2004 @ 2% on all the above duties of excise under Section 93 of the Finance Act, 2004.
10.2 In respect of polyester yarn being manufactured by the appellants, only the duties specified in (i) and (v) above were leviable.
10.3 An example below would clarify the position.
Excise Duties payable when DTA unit clears polyester yarn are as under:
1Assessable Value 100000.00 2=1*16% Basic Excise Duty U/S 3 of Central Excise Act, 1944 16000.00 3=2*2% Education Cess U/S 93 of FA, 2004 320.00 4=2+3 Total Excise Duties 16320.00 On goods physically imported into India, the following duties were leviable during the disputed period:
a) Basic Customs Duty (BCD) under Section 12 of the Customs Act 1962;
b) Additional duty of customs (CVD) under Section 3(1) of the Customs Tariff Act, 1975
c) Education Cess @ 2% on imported goods under Section 94 of the Finance Act, 2004.
In terms of Section 3(1) of the Customs Tariff Act, 1975, CVD leviable on imported goods is equal to the duties of excise leviable on like goods manufactured in India at rates of excise duty levied on goods manufactured in the country. The Budget Circular dated 8.7.2004 gave an illustration as to how customs education cess would be levied under Section 94 of the Finance Act, 2004. The illustration is reproduced below:
For calculating the customs cess, let landed value of an item be Rs.1000. The duty will be worked out as under:
Landed Value (c.i.f.) Rs. 1000 Customs Duty @ 20% Rs. 200 Landed Cost Rs. 1200 CVD @ 16% +2% Education Cess Rs.195.84 thereon [192+3.84] Total Customs duty Rs.395.84 Total Education Cess will be Rs.7.92 (i.e. 2% of Rs.395.84).
While credit of total CV duty of Rs.195.84 will be available, the cess component of Rs.3.84 would be available as credit only for payment of education cess on final product. 10.4 An example below would clarify the position.
Custom Duties payable when imported into India (Rs.) (Rs.) 1 Assesssable Value 100000.00 2=1*20% Basic Customs Duty U/S 12 of CA, 1962 20000.00 CVD U/S 3 of CTA, 1975 3=(1+2)*16% Basic Excise Duty U/S 3 of CEA, 1944 19200.00 4=3*2% Education Cess U/S 93 of FA, 2004 384.00 5=3+4 CVD U/S 3 of CTA, 1975 19584.00 6=2+5 Sub-total of Customs Duties 39584.00 7=6*2% Education Cess U/S 94 of FA, 2004 791.68 8=6+7 Total Customs Duties 40375.68 MANNER OF COMPUTING THE AMOUNT OF EXCISE DUTY PAYABLE BY AN EOU WHEN IT SELLS IN DTA.
11.1 In terms of Section 3(1) of the Central Excise Act, 1944, the excisable goods manufactured in India are liable to Basic Duty of Excise (BED) at the rates set forth in the First Schedule to the Central Excise Tariff Act and Special Duty of Excise (SED) specified in the Second Schedule to the Central Excise Tariff Act, 1985.
11.2 However, in terms of the proviso to Section 3(1) of the Central Excise Act, 1944, the rates of Central Excise duty mentioned in Section 3(1) are not applicable to the excisable goods which are produced or manufactured in, inter alia, 100% EOU and brought to any place in India (i.e., clearances in DTA). As per this proviso, the excisable goods manufactured in 100% EOU and cleared in DTA are leviable to duties of excise which shall be equal to aggregate of duties of Customs which would be leviable under the Customs Act, 1962, or any other law for the time in force, on like goods produced or manufactured outside India, as if imported into India.
11.3 Therefore, in terms of proviso to Section 3(1) of Central Excise Act, 1944, customs duty payable under Section 3 of the Customs Tariff Act, 1975 on imported goods has to be taken into reckoning. While so reckoning, not only basic excise duty under main section 3 has to be considered, but also education cess under Section 93 of the Finance Act has to be considered.
12.1 The question involved is whether over and above aforementioned amount, excise education cess under Section 93 of Finance Act, 2004 is leviable on the whole amount under proviso to Section 3(1) when EOU clears goods to DTA.
In the example quoted in the table D below, the Revenue is seeking to recover amount referred at Sr.No.9 which is equal to Rs.807.51.
Excise Duties payable when EOU unit clears goods to DTA As per appellants (Rs.) (Rs.) 1 Assessable Value 100000.00 2=1*20% Basic Customs Duty U/S 12 of CA, 1962 20000.00 CVD U/S 3 of CTA, 1975 3=(1+2)*16% Basic Excise Duty U/S 3 of CEA, 1944 19200.00 4=3*2% Education Cess U/S 93 of FA, 2004 384.00 5=3+4 CVD U/S 3 of CTA, 1975 19584.00 6=2+5 Sub-total of Customs Duties 39584.00 7=6*2% Education Cess U/S 94 of FA, 2004 791.68 8=6+7 Total Customs Duties = Excise Duty under proviso to Section 3 of CEA, 1944 40375.68 Table D Excise Duties payable when EOU unit clears goods to DTA As per Department (Rs.) (Rs.) 1 Assessable Value 100000.00 2=1*20% Basic Customs Duty U/S 12 of CA, 1962 20000.00 CVD U/S 3 of CTA, 1975 3=(1+2)*16% Basic Excise Duty U/S 3 of CEA, 1944 19200.00 4=3*2% Education Cess U/S 93 of FA, 2004 384.00 5=3+4 CVD U/S 3 of CTA, 1975 19584.00 6=2+5 Sub-total of Customs Duties 39584.00 7=6*2% Education Cess U/S 94 of FA, 2004 791.68 8=6+7 Total Customs Duties = Excise Duty under proviso to Section 3 of CEA, 1944 40375.68 9=8*2% Education Cess U/S 93 of FA, 2004 807.51 10=8+9 Total duties 41183.19 TRUE NATURE OF SURCHARGE : SURCHARGE ENHANCES THE TAX AND PARTAKES THE CHARACTER OF TAX WHICH IT ENHANCES.
13.1 It is well settled that the expression surcharge in the context of taxation means an additional imposition which results in enhancement of the tax. The nature of the additional imposition is the same as the tax on which it is imposed as surcharge. For instance, a surcharge on land revenue is an enhancement of the land revenue to the extent of the imposition of surcharge. The nature of such imposition is the same viz., land revenue on which it is a surcharge.
13.2 Similarly a surcharge on income tax is indeed income tax only. A surcharge on excise duty is an enhancement of the excise duty to the extent of the imposition of surcharge. The nature of such imposition is the same viz., land revenue, or income tax or excise duty as the case may be on which it is a surcharge.
EDUCATION CESS IS SURCHARGE. ONCE TAX RATE IS ENHANCED, THE SECTION IMPOSING SURCHARGE GETS EXHAUSTED AND IT NEED NOT BE AGAIN LOOKED INTO FOR LEVYING TAX.
14.1 Section 91 of the Finance Act, 2004 which is the charging section levying education cess states that it is in the nature of surcharge. Section 93 only amplifies it. Even otherwise, education cess is in the nature of surcharge, as specified in Section 91 of the Finance Act, 2004.
14.2 Therefore, the effect of Section 93 of the Finance Act, 2004 is that the rate of central excise duty is being enhanced from 16% to 16.32%, 8% to 8.16% etc. The effect of Section 94 of the Finance Act, 2004 is that the rate of customs duty is being enhanced from 10% to 10.2%, 20% to 20.4% etc. The legislature has invoked a convenient method of enhancing the rate of duty. Instead of amending each and every entry in the tariff schedule in Customs Tariff and Excise Tariff and amending numerous Notifications enhancing each and every rate individually, it was thought convenient to increase the rate of tax by levying surcharge.
14.3 In view of the above, the effect of Section 93 and 94 of Finance Act, 2004 is that they increase the rates of excise duty and of customs duty by 2% of the respective duties.
14.4 Once the above purpose of levying surcharge is achieved, these sections cannot be pressed into service once again for levying tax for any purpose whatsoever. In other words, once the rate is enhanced, these sections get exhausted and they cannot be invoked once again.
14.5 Section 93 of the Finance Act, 2004 is already given full effect by way of considering the increased/enhanced rate of basic excise duty, (including the surcharge of education cess) while computing CVD payable Section 3(1) of Customs Tariff Act, 1975 for calculating the duty payable under the proviso to Section 3(1) of Customs Tariff Act, 1975 for calculating the duty payable under the proviso to Section 3(1) of the Central Excise Act, 1944. Section 93 of the Finance Act, 2004 could not be invoked once again for levying education cess only on the ground that it is an independent cess, over and above what is levied either under main Section 3 or proviso to main Section 3 of the Central Excise Act, 1944.
14.6 In view of the above, when rate of BED considered for BCD already takes into account enhancement imposed as surcharge, levying Education cess @2% under Section 93 of the Finance Act, 1994.
WHENEVER TWO INTERPRETATIONS ARE POSSIBLE, THEN THE INTERPRETATION WHICH AVOIDS DOUBLE TAXATION HAS TO BE PREFERRED OVER AN INTERPRETATION WHICH CONFIRMS DOUBLE TAXATION.
15. Invoking Section 93 of the Finance Act, 2004 once again for levying Education cess amounts to double taxation. It is well settled that any construction which avoids double taxation has to be preferred over a construction which confirms double taxation.
CENTRAL EXCISE ACT, 1944, CUSTOMS TARIFF ACT, 1975, EXIM POLICY/FOREIGN TRADE POLICY TOGETHER FORM AN INTEGRATED SCHEME OF TAXATION. AS FAR AS EOU IS CONCERNED, ALL THESE ENACTMENTS HAVE TO BE INTERPRETED IN AN INTEGRATED MANNER AND IN LIGHT OF EACH AND OTHER AND NOT IN ISOLATION. ONE HAS TO DOVETAIL INTO ANOTHER.
16.1 The Foreign Trade Plicy, Handbook of Procedure, Central Excise Act, 1944 and the Customs Act, 1962 and notifications issued thereunder relating to EOU form an integrated scheme of indirect taxation relating to EOU. All these statutes have to be read as a whole and not in isolation since they are series of statutes relating to same subject matter. Any interpretation relating to EOU scheme has to make a whole and consistent enactment of the series of these statutes.
ONE MORE EFFECT OF ABOVE INTERPRETATION.
17.1 Main clause of Section 3(1) refers to duty of excise levied and collected on excisable goods manufactured in India. The proviso to Section 3(1) refers to duty of excise levied and collected on excisable goods manufactured by an EOU.
17.2 Main clause of Section 3(1) would not cover EOU.
18.1 It is well settled that the legislative language has to be interpreted on the footing that the legislature when it enacts a statue it was aware of already existing statutes.
18.2 Where Section 93(1) of Finance Act, 2004 referred to goods manufactured in India, it intended to cover the goods covered by main clause of Section 3(1) and not the goods covered by the proviso to Section 3(1). The legislature was aware that EOUs have to be separately treated and in the absence of language similar to proviso to Section 3(1) in Section 93, it has to be assumed that it was legislative intent to exclude EOU from the scope of Section 93 of the Finance Act, 2004.
18.3 In view of the above, demand of Education cess @2% under Section 93 of the Finance Act, 2004 once again is not correct.
INTERPRETATION OF A DEEMING FICTION.
19. It is well settled that a deeming fiction should be carried to its logical end.
EFFECT OF DEEMING FICTION IN THE PRESENT FACTS. DEEMING FICTION INCORPORATED IN PROVISO TO SECTION 3(1) HAS TO BE GIVEN FULL EFFECT. CUSTOMS DUTY PAYABLE ON GOODS CLEARED BY EOU TO DTA UNDER PROVISO TO SECTION 3- EXCISABLE GOODS TREATED AS IMPORTED GOODS FOR MEASURE OF EXCISE DUTY UNDER PROVISO TO SECTION 3 CANNOT BE TREATED AS ACTUALLY GOODS MANUFACTURED IN INDIA FOR THE PURPOSE OF SECTION 93 OF THE FINANCE ACT, 2004. DEEMING FICTION HAS TO BE CARRIED TO FINANCE ACT 2004 ALSO.
20.1 The proviso to Section 3(1) mandates that excise duty payable on excisable goods manufactured in 100% EOU and cleared in DTA will be equal to aggregate of duties of Customs which would be leviable under the Customs Act, 1962, or any other law for the time being in force, on like goods produced or manufactured outside India if imported into India.
20.2 In other words, proviso to Section 3(1) of the Central Excise Act, 1944 treats the goods manufactured and cleared from an EOU to DTA units at par with imported goods for purpose of determining the question of duty. Therefore, by virtue of this fiction, one has to forget that the goods under assessment are manufactured in India and thereafter compute the amount of duties payable by EOU on the basis that goods are imported into India.
20.3 The aggregate of duties of Customs leviable under the Customs Act, 1962, or any other law for the time in force, on importation of like goods in India (read with Notification No.23/2003-CE dated 31.3.2003) has to be duly discharged by an EOU when it makes dispatches to DTA. At the time, Basic Customs Duty under Section 12 of Customs Act, 1962, Additional duty (CVD) under Section 3 of the Customs Tariff Act, 1975 and Education cess under Section 94 has to be considered read with any relevant Notification. Also, Education cess @2% under Section 93 of Finance Act, 2004 levied on excisable goods manufactured in India has to be considered and paid as part of CVD under Section 3(1) of the Customs Tariff Act, 1975. Hence, for rate of duty purpose, goods are imported goods as per proviso to Section 3(1) of the Central Excise Act, 1944. It would be incorrect to forget this fiction and relapse back into reading when we refer to Section 93 of Finance Act, 2004 and proceed on the basis that the goods are indeed locally manufactured goods. The fiction that for rate of duty purpose, the goods are to be treated as imported goods should be in consensus to Section 93 of Finance Act, 2004 also.
20.4 Error is being committed because Central Excise Act, 1944 and Section 93 of Finance Act, 2004 are being read individually and not in a composite integrated manner.
20.5 The lower authorities are making the deeming fiction created by proviso to Section 3(1) for the purpose of imposition of Education cess @2% under Section 93 of the Finance Act, 2004 meaningless or redundant by not giving full effect to it. The fiction created by proviso to Section 3(1) has to be extended and full effect must be given to that fiction. So done, the goods manufactured in EOU and removed to DTA would remain to be imported goods for the purpose of Section 93 of the Finance Act, 2004 for rate purpose or computability of amount of duty payable. Therefore, for Section 93 of the Finance Act, 2004, the goods for the purpose of rate of duty under proviso to main Section 3(1) which have been deemed to be imported goods, cannot once again be treated as those manufactured in India. Any other interpretation would mean that the deeming fiction would not be given its due play and there would be half way stop. Hence, while levying Education cess for the third time under Section 93 of the Finance Act, 2004, it cannot be ignored that the rate is linked to imported goods and nay amount more than that imposed on imported goods, cannot be levied.
20.6 Chapter 22 of CBECs Customs Manual under the Export Oriented Unit Scheme provides that the measure of excise duty leviable on goods manufactured in EOU/EPZs is worked out exactly in the same manner as applicable to imported goods. Further, vide Circular bearing F. No.305/83/94-FTT dated 15.9.1994, issued by the Board, wherein the matter regarding the availability of end use based exemption notification by 100% EOUs was considered, it was clarified that clearances from 100% EOUs to the DTA are placed on par with imports.
20.7 If the interpretation placed in Section 93 of the Finance Act, 2004 by the lower authorities is to be accepted as correct then the importer would be in an advantageous position than EOU. EOU will be required to pay duty more than duty payable on like goods imported into India. This would destroy the true purpose of proviso to section 3(1) of the Central Excise Act, 1944.
20.8 The Honble High Court of Bombay found favour with the above submission and hence was pleased to direct the CESTAT to consider the submission.
HAVING LEVIED CUSTOMS DUTY INCLUDING CUSTOMS DUTY IN THE FROM/GUISE OF EXCISE DUTY UNDER PROVISO TO SECTION 3, OBJECT WAS NEVER TO LEVY EXCISE DUTY ON GOODS CLEARED BY EOU Legislative intent as per Board Circular.
21. The legislative object was that on goods cleared in DTA, EOU should not suffer central excise duty and other central levies but suffer customs duties including Counter Vailing duty.
(i) Government of India Ministry of Commerce Department of Commerce Resolution dated 21.11.1983 Clause (xx) of the resolution stating that Finished products shall be exempt from excise and other central levies.
(ii) Circular No.23/84 dated 29.5.1984 para 5 thereof
(iii) Circular No.29/2003 dated 3.4.2003 para (xii)(b) and (c) thereof.
AN INTERPRETATION WHICH IMPLEMENTS THE INTENTION SHOULD BE PREFERRED OVER INTERPRETATION WHICH DOES NOT DO SO.
22.1 First time, Education cess under Section 93 is imposed when it is considered part of CVD under Section 3(1) of the Customs Tariff Act, 1975. Second time, Education cess under Section 93 is imposed when the CVD (of which one component is Education cess under Section 93) is considered part of aggregate customs duty and Education cess thereon is imposed under Section 94. Third time, Education cess under Section 93 is imposed when entire duty paid is considered as excise duty under proviso to Section 3(1) of the Central Excise Act, 1944 and thereafter Section 93 is sought to be invoked. The present dispute pertains to imposition of Education cess under Section 93 third time over.
22.2 An interpretation which is in line with this intention has to be preferred.
Submissions made by Godrej Industries Ltd:
23. Department claims that Education cess is to be calculated for the purpose of proviso to Sec.3(1) as mentioned in columns (2) and (3) below. Column (4) shows the contention of the Intervener.
Value of the goods manufactured is Rs.100/-
Basic duty of customs is say 20% (under item 2 of Not.No:23/2003 dt.31.3.2003 as amended only 50% of the duty of customs is to be taken.) Additional duty of customs is say 20% Calculation of excise duty and cesses:
(1) (2) (3) (4) Value of the goods Rs.100/00 Basic duty of customs as per Not. Rs.10/00 Rs.10.00 Rs.10.00 a) Education Cess on Rs.0/20 Rs.0.20 Rs. - customs duty 20% Secondary & Higher Rs.0/10 Rs.0.10 Rs. - Cess ---------------------------------------------------- Total Rs.110/30 Rs.10.30 Rs.10.00 CVD 20% Rs.22/06 Rs.22.06 Rs.22.00 b) Education Cess 2% Rs.0/44 Rs.0.44 Rs. Secondary & Higher Rs.0/22 Rs.0.22 Rs. Education Cess 1% ---------------------------------------------------- Total (Amount proviso Rs.133/02 Rs.33.02 Rs.32.00 (ii) to Sec.3(1) c) Education Cess 2% Rs.0.66 Rs.0.64 Secondary & Higher Rs.0.33 Rs.0.32 Education Cess 1% --------------------------- Total Rs.34.01 Rs.32.96
Education Cess claimed by Dept. is Rs.1.95 against Rs.0.96 claimed by Intervener.
24. In the scheme of things of the Department in respect of DTA clearances of a 100% EOU, education cess and Secondary & Higher Education Cess will be calculated thrice over {i.e. as in (a), (b) and (c) above}.
25. Both in respect of Education Cess as well as the Secondary & Higher Education Cess the nexus for levy is manufacture of production of excisable goods. Education Cess on imported goods, the nexus for levy is importation of goods into India. Further while calculating the aggregate of all levies of duties of Customs, education cess itself is to be excluded. The nexus for levy of excise duty is manufacture of production of excisable goods in India (which is the charging provision). But the extent or measure is customs duty (which is machinery provision). The machinery provision cannot and does not change the character of the levy. What is levied under Sec.3(1) is not a duty of customs under the Customs Act or any other law. It is still a duty of excise notwithstanding the fact that the amount is measured by the customs duty payable on such goods if they were imported from abroad.
26. Board has also acknowledged this position in its circular No:268/69/2001-CX.8 datd 13th Feb. 2002. In respect of clearances of EOU into DTA which were not allowed to be sold in India (as the provision then read), the Board clarified the duty has to be demanded under the main provision of Sec.3 of the Central Excise Act and not under the Customs Act. [This circular was later amended by Circular No:1/2004 Cus dt.15.1.2004. But it merely amended that instead of the main provision of Sec.3(1) the demand should be made under the proviso to Sec.3(1). The aspect that it is only a duty of excise remains unchanged.
27. Based on this circular, the Tribunal in the case of Ghai Overseas P. Ltd. V/s CC reported in 2003 [151] ELT 163 [T] held that a demand under Sec.28 of the Customs Act in respect of DTA clearance of EOU is not maintainable.
28. Merely because the measure is in terms of the customs duty payable on such goods if imported into India, the nature of duty does not change from that of excise and the nexus to levy under Sec.3(1) also does not change from that of manufacture of production of excisable goods. The machinery provision does not render the goods to be imported goods nor the levy that of duty of customs.
29. Therefore while calculating the aggregate of duties of customs specified in the proviso (ii) Sec.3(1), Education cess and Secondary & Higher Education Cess cannot be included. This is because, Sec.94 of Finance (No.2) Act 2004 as well as Sec.139 of the Finance Act 2007 are surcharges/cesses to the Customs levy respectively as stated in Sec.91 of the Finance (No.2) Act 2004 and Sec.136 of the Finance Act 2007.
30. Education Cess and Secondary & Higher Education Cess on the customs duty and CVD component of goods as if they are imported can be claimed and included only if the levy itself is made and collected under the provisions of the Customs Act or under any other law as duties of customs. In other words, if the nexus is importation of goods. Here the nexus to levy these cesses still continues to manufacture or production. Merely because the calculation of aggregate of duties is based on the customs duty, the nexus cannot change to one of importation and thereafter once again become one of manufacture. In other words, it would lead to an absurd situation where while calculating the aggregate the nexus is importation and after arriving at the amount, levy is made once again on the nexus as manufacture. Qua the same goods, there cannot be two such nexuses simultaneously. Either they are imported from abroad or manufactured in India. Board clearly accepts that they are manufactured in India in its circulars.
31. Here duty is levied and collected only as duty of excise and not as duty of customs. As the levy and collection still continues to be that of excise, no education cess or Secondary & Higher Education Cess can be added while calculating the customs duty and CVD for arriving at the amount as required under the second proviso to Sec.3(1) of Central Excise Act.
32. Exclusion of these two levies mentioned in Sec.93 and 94 of Finance (No.2) Act 2004 and Sec.138 and 139 of the Finance Act 2007, should be given effect to:
33. In all these four sections for the purpose of calculating aggregates of the duties of excise and/or customs, the education cess as well as Secondary & Higher Education Cess as a surcharge or cess leviable thereon are required to be excluded. Hence, it precludes addition of these levies while calculating the amount based on aggregate of duties of customs specified in proviso (ii) to Sec. 3(1).
34. The purpose of the exclusion appears to be that Education Cess and Secondary & Higher Education Cess are not to be charged in a cascading manner but only once at the end.
35. It must be borne in mind that proviso (ii) of Sec.3(1) is in fact a machinery provision, which specifies the method of calculating levy. The charging section for the purpose of levy of excise still is the main section i.e, Sec. 3(1) itself.
36. In so far as the Education Cess and Secondary & Higher Education Cess are concerned sections 93/94 of Finance (No.2) Act 2004 and Sec.138 and 139 of the Finance Act, 2007 operate as both charging sections as well as machinery sections as they contain the nature of levy as well as the method of calculating and rate of calculation. These provisions also use the term on the aggregate of all duties of . And also provide that these cesses themselves are to be excluded while calculating the aggregate. Only after the aggregate is arrived at, these cesses are to be levied.
37.A. Please compare with Sec.3 of Customs Tariff Act, which levies CVD Sub Sec.(2) provides method of calculating CVD. No exclusion of CVD is seen there. In EC & SHEC the exclusion is conscious. Possibility of situations like the present one was contemplated and exclusion provided to prevent cascading effect (Tax on Tax).
38. Looked at from this point of view also, education cess and Secondary & Higher Education Cess in respect of DTA clearances of EOU can be charged on the amount arrived at without the addition of Education Cess and Secondary & Higher Education Cess while calculating the aggregates.
Not.23/2003 CE dt.31.3.2003 itself does not include these Cesses.
39. Notification 23/2003 CE dt.31.3.2003 as amended till 1.3.2005, as amended by Not.No.22/2006 CE dt.1.3.2006 and as amended by Not.10/2008 CE dt.1.3.2008 against item 2 of the table provides examples of calculating the duty for DTA clearances of an EOU. Though Education Cess is leviable from 2004 and Secondary & Higher Education Cess is leviable from 2007, the examples do not include these levies.
40. It cannot be said to be an omission or oversight. If as is being contended by the Revenue, these levies are to be added while calculating the Customs Duty and CVD components of the amount for DTA valuation, then the Government would have included them in its calculations.
41. It is well settled that since these notifications are placed before the Parliament they attain the status of the law itself. Hence, these examples are binding on the authorities and they cannot contend to the contrary.
Submissions made by Bebtiz Flanges:
42. Education Cess on imported goods, imposed under Section 91 of Finance (No.2) Act, 2004, is calculated on the aggregate of duties of customs levied and collected by the Central Government 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.
43. Section 94 of the Finance (No.2) Act, 2004 refers to education cess as a duty of customs and provides for the calculation thereof in the manner stated hereinabove. The term aggregate of duties of customs includes all duties chargeable under Section 12 of the Customs Act, 1962 and any other sum chargeable on such goods under any other law for the time being in force, but excludes safeguard duty referred to in Section 8B and 8C of the CTA, countervailing duty referred to in Section 9 of CTA, the anti-dumping duty referred to in Section 9A of the CTA and education cess on imported goods.
44. The provision leads to a clear conclusion that what constitutes the aggregate of duties of customs are levies under Section 12 of the Customs Act, 1962 and under Section 3(1) of the CTA. This is further clear from the exclusion clause provided in Section 94, which, amongst others, specifically excludes education cess of imported goods. The intention of the legislature is clearly spelt out from the manner in which the above provision of the Finance (No.2) Act, 2004 is worded. The provision demonstrates that it was never the intent of the legislature to levy cess on cess. The interpretation being given by the Respondents herein would lead to just the situation, which is sought to be avoided by the legislature.
45. Though education cess imposed under Section 91 of the Finance (No.2) Act, 2004 partakes the character of Customs duty, however, it is neither a levy under Section 12 of the Customs Act, 1962 nor under the provision of Section 3(1) of the CTA. The levy and collection of education cess under Section 94 of the Finance (No.2) Act, 2004 is an addition to a duty of customs and in the same manner as a duty of customs. Thus the levy is over and above the aggregate of duties of customs and does not form a part of the same.
46. Further if the Respondents stand is correct then the basic Excise duty equivalent to the aggregate of Customs duties would be inclusive of the education cess on customs duty and secondary and higher education cess on customs duty. In which case the whole amount being Excise duty becomes cenvatable.
47. Education cess is added twice in calculating the aggregate duties of customs in terms of the proviso to Section 3(1). Once on the CVD portion which is equal to Excise duty and again on the total of basic duty+CVD+Education Cess which is equal to Excise duty. There is no provision for adding Education Cess for the third time since as per proviso the maximum duty payable is equal to the aggregate duties of customs which is equal to the aggregate duties of customs which is in the nature of Excise duty and which Education Cess is also paid when added the second time.
48. All over the country, the levy of Customs Education Cess and Customs Secondary and Higher Education Cess, on imports is uniformly done on the aggregate of Customs Duty. The Revenue, has all over the country issued Public Notices to this effect. Reference is made to Public notice no.08/2005 dated 01st March, 2005, issued by Mumbai Custom House, wherein, Paragraph 3, it has been stated that; 2% of Education Cess is to be levied on the aggregate of Customs duty. The implication, that aggregate of Customs duty is exclusive of Customs Education Cess, cannot be thus escaped. The same principle is automatically applicable to Customs Secondary and Higher Education Cess.
Submissions made by Shri Ambica Polymer Pvt. Ltd.:
49. E cess which is leviable by virtue of section 91/93 of finance act 2004 is a duty of excise. This will be helpful while reading proviso to section 3 in subsequent paras of this petition for arriving at final conclusion.
The amount of E cess payable is not required to be calculated in addition to the amount being aggregate of duties of customs for the reasons as stated blow-
The petitioner herein submit that as aforesaid it is proviso to section 3 of the Central Excise Act which is holding the filed, therefore, it would be proper, relevant & important to examine the said proviso which reads as under-
Provided that the duties of excise which shall be levied & collected on any (excisable goods which are produced or manufactured, (i).(ii) by a 100% Export Oriented Undertaking & brought to any other place in India) shall be an amount equal to the aggregate of the duties of Customs which would be leviable (under the Customs Act 1962(52 of 1962) or any other law for the time being in force), on like goods produced or manufactured outside India if imported in to India and where the said duties of Customs are chargeable by reference to.
50. On going through the wordings of the proviso as above it would be seen that in first line of the proviso the word duty is used in plural with the word excise which is significant. This indicate that the word duties refers to all type of duties of excise irrespective of their name like basic, addl, spl, addl on T&T or cess. Again in subsequent lines of proviso there is mention of aggregate of duties of customs which would be leviable. This also means all type of duties of customs payable by an importer on import of like goods. In short the word duties used with excise and with customs covers all type of duties of excise and the customs including cess and hence the proviso to customs including cess and hence the proviso to Sec.3, be construed accordingly for all purposes.
51. Here it is also important to note that in proviso, in between the lines duties of excise and aggregate of duties customs, an amount equal to has been used which indicates that an amount being aggregate of duties of customs = all duties of excise payable by an EOU and nothing more than that.
Thus, an EOU will first calculate all type of duties of customs including cess and will arrive at an amount and that amount would be equal to all type of duties of excise including cess payable by an EOU under proviso to section 3 as aforesaid.
52. There is no requirement of calculating E cess again separately once an amount equal to aggregate of duties of customs is arrived at for the basic reason that the word duties used with the word excise and also with the word customs in the proviso, covers all type of duties including E cess and that an amount which is arrived at being aggregate of duties of customs is the final amount of duties of excise payable by an EOU, this is what proviso to section 3 says.
Submissions made by Viraj Profiles Ltd.:
53. The nature of the tax is Excise duty, although the measure, as per the charging Section 3, is the rate of customs duty as held by the Larger Bench in Vikram Ispat Versus Collector 2000(122) ELT 800.
54. In the of the aforesaid while the charging Section for levy of duty, in respect of clearances of goods by an EOU in the DTA is the first proviso to Section 3(1) of the said Act the measure thereof is the aggregate of duties of Customs, leviable under the Customs Act, 1962 or any other law for the time being in force, on like goods produced or manufacture outside India if imported into India.
Thus, the aggregate of duties Customs, in the above example, is the sum total of the Basic Customs Duty + CVD + Education Ces on CVD+ Secondary & Higher Education Cess on CVD.
55. Section 94 of the Finance (No.2) Act, 2004 refers to education cess as a duty of customs and provides for the calculation thereof in the manner stated hereinabove. The term aggregate of duties of customs includes all duties chargeable under Section 12 of the Customs Act, 1962 and any other sum chargeable on such goods under any other law for the time being in force, but excludes safeguard duty referred to in Section 8B and 8C of the CTA, countervailing duty referred to in Section 9 of CTA, the anti-dumping duty referred to in Section 9A of the CTA and education cess on imported goods
56. The provision leads to a clear conclusion that what constitutes the aggregate of duties of customs are levies under Section 12 of the Customs Act, 1962 and under Section 3(1) of the CTA. This is further clear from the exclusion clause provided in Section 94, which, amongst others, specifically excludes education cess of imported goods. The intention of the legislature is clearly spelt out from the manner in which the above provision of the Finance (No.2) Act, 2004 is worded. The provision demonstrates that it was never the intent of the legislature to levy cess on cess. The interpretation being given by the Respondents herein would lead to just the situation, which is sought to be avoided by the legislature.
57. Though education cess imposed under Section 91 of the Finance (No.2) Act, 2004 partakes the character of Customs duty, however, it is neither a levy under Section 12 of the Customs Act, 1962 nor under the provisions of Section 3(1) of the CTA. The levy and collection of education cess under Section 94 of the Finance (No.2) Act, 2004 is as an addition to a duty of customs and in the same manner as a duty of customs. Thus the levy is over and above the aggregate of duties of customs and does not form a part of the same.
58. We have considered the submissions made by the appellant as well as other interveners.
59. The issue to be decided is whether the department was right in demanding education cess under relevant provisions of Finance Act leviable as excise duty also after arriving at aggregate of duties of customs levialbe. In terms of proviso to Section 3(1) of the Central Excise Act, 1944 (the Act), when 100% EOU clear the goods and to domestic tariff area (DTA), duties of excise leviable shall be equal to the aggregate of duties of customs. The advocate for the appellant had submitted the calculations as per the appellant as well as, as per the department which have already been reproduced under para 12.1 of this order.
60. Shri Sridharan, learned advocate, submitted that the true nature of education cess is actually a surcharge. For this purpose he relied upon Section 91 of Finance Act, 2004 which reads as under:
91: Education cess (i) when prejudices to the sub section 2 of section 2, there shall be levied and collected, in accordance with the provisions of this chapter as surcharge for the purposes of the union, assess to be called the education cess,.
61. To support his contention that expression surcharge in the context of taxation means an additional imposition which results in enhancement of tax and the nature of the additional imposition is the same as the tax on which it is imposed as surcharge. To support his contention he relies upon the decision of the Honble Supreme Court in the case of CIT Vs. K. Srinivasan [1972 (4) SCC 526] and Sarojini Tea Co. (P) Ltd. Vs. Collector of Dibrugarh [1992 (2) SCC 156] in the case of Shri K. Srinivasan, the Honble Supreme Court analyses the meaning of the term surcharge and held as under:
7. The above legislative history of the Finance Acts, as also the practice, would appear to indicate that the term Income tax as employed in Section 2 includes surcharge as also the special and the additional surcharge whenever provided which are also surcharges within the meaning of Article 271 of the Constitution. The phraseology employed in the Finance Acts of 1940 and 1941 showed that only the rates of income tax and super-tax were to be increased by a surcharge for the purpose of the Central Government. In the Finance Act of 1958 the language used showed that income tax which was to be charged was to be increased by a surcharge for the purpose of the Union. The word surcharge has thus been used to either increase the rates of income tax and super tax or to increase these taxes. The scheme of the Finance Act of 1971 appears to leave no room for doubt that the term Income tax as used in Section 2 includes surcharge.
..
10. The meaning of the word Surcharge as given in the Websiters New International Dictionary includes among others to charge (one) too much or in addition also additional tax. Thus the meaning of surcharge is to charge in addition or to subject to an additional or extra charge. If that meaning is applied to Section 2 of the Finance Act 1963 it would lead to the result that income tax and super tax were to be charged in four different ways or at four different rates which may be described as (i) the basic charge or rate (In Part I of the First Schedule); (ii) surcharge; (iii) special surcharge, and (iv) additional surcharge calculated in the manner provided in the Schedule. Read in this way the additional charges form a part of the income tax and super tax. It is possible to argue and that agreement has been commended on behalf of the Revenue that the word surcharge has been used in Article 271 for the purpose of separating it from the basic charge of a tax or duty for the purpose of distributing the proceeds of the same between the Union and the States. The proceeds of the surcharge are exclusively assigned to the Union. Even in the Finance Act itself it is expressly stated that the surcharge is meant for the purpose of the Union. In the case of Sarojini Tea Co. Pvt. Ltd., after hearing various judgments including K. Srinivasans case, Honble Supreme Court came to the following conclusion:
16. From the aforesaid decisions, it is amply clear that the expression surcharge in the context of taxation means an additional imposition which results in enhancement of the tax and the nature of the additional imposition is the same as the tax on which it is imposed as surcharge. A surcharge on land revenue is an enhancement of the land revenue to the extent of the imposition of surcharge. The nature of such imposition is the same viz.., land revenue on which it is a surcharge.
62. We find that the issue before us is clearly covered by the above decisions and therefore we find ourselves in agreement with the contention that education cess which is a surcharge means an additional imposition which results in enhancement of the tax.
63. The next submission made by Shri Sridharan was that once the tax rate is enhanced, the section imposing surcharge gets exhausted and it need not be again looked into. What is required to be done for the purpose of determination of duty leviable on the goods cleared by a 100% EOU to domestic tariff area is to arrive at aggregate duties of customs leviable on like goods imported. Therefore, once the customs duty is determined and education cess on the whole of customs duty under Section 94 under of the Finance Act is added, the question of adding the education cess under Section 93 of Finance Act does not arise. Because once the surcharge is levied on customs duty, the enhancement of customs duty is over. There cannot be enhancement of the duty twice. As per the proviso to Section 3(1) of the Act, what is required to be determined is the aggregate of the customs duties. Once it is accepted that education cess is only an additional tax and not a separate levy, the question of enhancement twice does not arise. We find ourselves fully agreement with this view also. In addition to the reasons given by the learned advocate, we also find that the very fact that cess is levied as a percentage of customs duty or excise duty and would automatically become nil in case where no excise duty or customs duty is leviable would also support the case of the appellants. Suppose in this case if the like goods imported were to attract no customs duty at all, the question of levy of excise duty equal to customs duty would not arise and therefore there would be no education cess also. Once the levy is a percentage of another duty and what is required to be worked out is the aggregate of customs duties, the percentage addition also once made for the purpose of customs duty, the working of aggregate of customs duty for levy of excise duty is complete. If by adding another percentage as the department has proposed to do, the department is adding something extra to the customs duty which is not supported by the proviso to Section 3(1)
64. The next submission was that the Central Excise Act, Customs Tariff Act, Exim Policy etc. together form an integrated scheme of taxation as far as EOU is concerned and therefore they have to be interpreted in integrated manner. We agree with this submission. We also agree that the action taken by the department in this case is against this basic principle. The proviso to Section 3(1) of the Act requires the department to arrive at aggregate of customs duties and levy an equal amount as excise duty. Therefore, once aggregate of customs duties is determined, applying the provisions of Finance Act as it relates to goods manufactured by 100% EOU does not arise. We find the following decision cited by the learned advocate relevant in this context.
1. K.P. Varghese Vs. ITO. [1981 (4) SCC 173] In this case, the Honble Supreme Court observed that the Income Tax Act 1961 and the Gift Tax Act 1958 are parts of an integrated submissions of taxation and the same amount which is chargeable as gift could not be intended to be charged also as capital gains.
65. Next submission was that the very fact that duty on the goods manufactured by 100% EOU when cleared to DTA has to be charged not under main Section 3(1) of the Act but under the proviso shows that EOU has been given a separate treatment in the Act. Further, provisions relating to exemption to excisable goods under Section 5A, provisions relating to job work, provisions relating to cenvat credit show that in all these places EOUs have been treated separately. In the absence of specific provisions relating to EOU in Section 93 of Finance Act relating to education levy, it has to be assumed that the legislative was to excludive EOU from the scope of Section 93 of the Finance Act, 2004. We are not considering this aspect in detail since we consider that the issue can be decided in favour of the appellant on the basis of the other submissions with which we have found ourselves in agreement.
66. The next submission made was that a deemed fiction should be carried to its logical end. For this purpose, the learned advocate cited Lord Asquith in East End Dwelling Co. Ltd. Vs. Finsbury Borough Council [1951 (2) ALL ER 587] wherein he stated as under:
If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequence and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must case or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs.
67. Honble Supreme Court in UIO Vs. Jalyan Udyog [1993 (68) ELT 9 (SC)] also observed as under:
19. It is well settled that where a fiction is created by a provision of law, the court must give full effect to the fiction, and as is often said, it should not allow its imagination to be boggled by any other considerations. Fiction must be given its due play; there is to be no half way stop.
25. The notification shifts the date of import in the case of a ship which is imported as an ocean going vessel but is subsequently broken up from the actual date of import to the date of breaking up by creating a legal fiction. Once it is held that it is open to the Central Government to impose such a condition or to create such a fiction, as the case may be, the condition or the fiction has to be given full effect to. It must be deemed that the ship is imported on the date it is broken up (as explained hereinabove) and its value and rate of duty should be determined with reference to such date.
68. We find ourselves in agreement with the learned advocate. For all purposes, goods cleared to DTA from 100% EOU were treated as import but having been located within the country, nature of levy has to be a levy on the manufacture. Hence the need for a proviso and also explanation as to how the excise duty leviable on these goods have to be determined. Therefore, customs duty payable on imported goods is the measure of excise duty payable on goods cleared by EOU to DTA and therefore they cannot be treated as goods actually manufactured in India. The deemed fiction has to be carried to Finance Act also. Further, we also find that Chapter 22 of CBEC provides that the measure of excise duty leviable on goods manufactured in EOU is worked out exactly in the same manner as applicable to imported goods. This also supports the view canvassed by the learned advocate.
69. As pointed out by the learned advocate, since the object was not to levy excise duty on goods cleared by EOU, the question of adding education cess under Section 93 of Finance Act after determination of aggregate of customs duties does not arise.
70. Now we come to the submissions made by Shri Ravindran, intervening on behalf of Godrej Industries Ltd. The conclusions submitted by Shri Ravindran have been reproduced in para 23 onwards. According to him, education cess has to be added only at the aggregate level and not at the level of each type of duty. For this purpose it is his submission that what is levied is not a duty of customs but a duty of excise measured and only the measure is customs duty. There is no dispute about this contention. However, we are not convinced about the correctness of the calculation made by the learned advocate. As already observed by us with regard to the nature of education cess, it is a surcharge and is in the nature of enhancement by the quantum of education cess under Section 94 of Finance Act. Afterwards, to arrive at additional customs duty, what is required to be worked out is equallant excise duty levialbe. Therefore, since education cess enhances the quantum of excuse duty, additional customs duty at its own level has to be enhanced by the quantum of education cess. Since the aggregate of both the duties is again considered as customs duties in total, the addition of education cess again becomes necessary. Therefore, we do not find any logic in the submissions made by the learned advocate. Even though the contention that goods are manufactured in India is accepted, the fact remains that right from the inception of the 100% EOU scheme, the EOUs are treated differently as we have observed elsewhere. They are treated differently for various purposes under different provisions of excise law that being the position, only for the purpose of education cess, there cannot be a different treatment. Therefore what is required to be done is to calculate the aggregate of customs duties and thereafter apply it to 100% EOUs. Unless the calculation method adopted for arriving at aggregate of customs duties itself is challenged, which to our mind has not been done till now, challenging the same on other grounds does not appeal to us. As regards the submission that there is no specific exclusion of CVD in the provisions relating to education cess as compared with Section 3 of Customs Tariff Act, it is well accepted that additional customs duty is levied after calculating the excise duty leviable on like goods manufactured in India. This is the logic for levy of education cess separately on CVD while calculating customs duties.
71. As regards submissions made relating to Notification No.23/2003-CE dated 31.3.2003, in an exemption notification, the purpose is to provide exemption. If the calculation method provided in a notification results in lower levy of any duty, it has to be taken as specific exemption under that notification and cannot be treated as laying down the law and method of calculation for the purpose of levy itself. Notification itself is a part of subordinate legislation and therefore it cannot over ride the provisions of enactments made by the legislature. The provisions of Finance Act, Customs Act and Central Excise Act definitely stand at a much higher footing when compared to a notification and therefore omission or inclusion of a particular method of calculation does not help the case of the learned advocate. We have already explained the logic behind adding education cess at the level of customs duties as well as additional customs duties.
72. As regards the submissions made on behalf of Bebitz Flanges Works Pvt. Ltd., we find that the submissions are already covered by our discussions earlier and therefore we do not consider it necessary to discuss the same.
73. On behalf of Shri Ambica Polymers Pvt. Ltd., it was submitted that in view of the fact that proviso to Section 3 of the Act uses the word duties of excise i.e. an amount equal to and duties of customs, what is required is to calculate an amount equal to the aggregate of duties of customs and once that is done, it would be equal to all duties of excise payable by a EOU. Our attention was drawn to the fact that education cess is also to be treated as an excise duty for all purposes. Therefore, in terms of proviso to Section 3 of the Act, this cannot be a question of adding education cess once again. We agree with this submission.
74. On behalf of Viraj Profiles Ltd., it was submitted that the nature of the tax is excise duty but the measure for arriving at the quantum is the rate of customs duty and for this purpose reliance was placed on Vikram Ispat Vs. Collector reported in 2000 (122) ELT 800. We agree that the decision of the Larger Bench supports the case of the appellants and therefore once aggregate of duties of customs is worked out, the question of arriving at the quantum of excise duty by adding education cess does not arise.
75. Learned DR has relied upon the decision of the Tribunal in the case of Favorite Industries [2003 (156) ELT 802 (Tri Mumbai)] in support of his contention that the deeming provisions contained in the import export policy is limited to the benefits that would be available for deemed exports. It is not possible to say that it is export is for all intents and purposes. None of the benefits referred to is provided for in the Customs Act, 1962 or in the Central Excise Act, 1944. Such supply will not be for the purpose of this Act be deemed to be exports. Thus the drawback under Section 74 or 75 ibid will not be available. We do not find the decision relevant in the present context. In the case of 100% EOUs, when goods are cleared to 100% EOU it is deemed export; when a 100% EOU imports goods, no customs duty is charged because a 100% EOU is treated as a customs bonded warehouse; when a 100% EOU clears the raw materials imported, it is required to pay the customs duties if the clearance is to domestic tariff area. Originally when the 100% EOU scheme was introduced, it was treated that clearances to domestic tariff area would be treated as imports. As pointed out by the learned advocate for the appellants, the deemed fiction has to be applied in all respects. The benefits or the liabilities will have to be calculated as per the provisions of relevant law and there cannot be a general rule. In fact this is what seems to be the conclusion in the decision of the Tribunal in Favorite Industries case. This conclusion would show that the decision of the Tribunal in Favorite Industries case would not in any way affect the conclusions that we have reached already. Further, the learned DR also submitted that as per the provisions of Section 93(2) of Finance Act, 1994, the education cess leviable on excisable goods shall be in addition to any other duties of excise chargeable on such goods. In fact this is the ground on which the department has proceeded to add education cess once again after arriving at aggregate of customs duties. The answer to this is the conclusion drawn by us with regard to the contention that education cess is only a surcharge and is in the nature of enhancement of duties. Therefore, once education cess is added to the customs duties to arrive at aggregate of customs duties, the question of charging education cess again does not arise. Because once it is a enhancement, it is part of the relevant type of the duty. What is required for the purpose of proviso to Section 3 of Central Excise Act, 1944 is to arrive at aggregate of customs duties and once we take a view that education cess is part of the customs duty and is an enhancement, the question of adding it again does not arise.
76. Before we conclude, we would like to thank the learned advocate for the appellants as well as all the learned advocates for the interveners and the learned DR who provided valuable assistance in deciding this issue.
77. In the result, the appeal filed by M/s. Sarla Performance Fibers Ltd. is allowed.
(Pronounced in Court on _________________) (Ashok Jindal) (B.S.V. Murthy) Member (Judicial) Member (Technical) jk ??
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