Custom, Excise & Service Tax Tribunal
M/S S Kumar Arch Tech Pvt. Ltd vs Cce, Jaipur Ii on 17 February, 2011
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL,
West Block No. 2, R.K. Puram, New Delhi
Date of hearing:17.02.2011
Date of decision:..07.2011
Excise Appeal No. 618 of 2010 -EX
(Arising out of Order-in-Appeal No.449(KKG)CE/JPR-II/2009 dated 13.11.2009 passed by the Commissioner of Central Excise (Appeals-II), Jaipur).
M/s s Kumar Arch Tech Pvt. Ltd. Appellant
Vs
CCE, Jaipur II Respondent
For approval and signature:
Honble Shri Justice R.M.S. Khandeparkar (President)
Honble Shri Rakesh Kumar, Member (Technical)
1. Whether Press Reporters may be allowed to see
CESTAT (Procedure) Rules, 1982.
2. Whether it should be released under Rule 27 of the
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy
of the Order?
4. Whether Order is to be circulated to the Departmental
authorities?
Appearance: Rep. by Ms. Sukriti Das, Advocate for the appellant.
Rep. by Shri I.Beg, DR for the respondent.
CORAM: Honble Shri Justice R.M.S. Khandeparkar, President
Honble Shri Rakesh Kumar, Member (Technical)
Order No/Dated:
Per: Honble Rakesh Kumar:
This appeal has been filed by M/s Kumar Arch Tech Pvt. Ltd., Udaipur (the appellants) against the OIA No. 449 (KKG) CE/JPR-II/2009 dated 13.11.2009. The appellants, a 100% EOU, are manufacturer of PVC sheets falling under Chapter Sub-heading No. 39211900 of the Schedule to the Central Excise Tariff Act, 1985. It has been alleged in the SCN issued to the appellants that they had not paid Education
Cess @ 2%, amounting to Rs. 1,02,473/-, on DTA clearances of their finished product.
2. The Adjudicating Authority, vide OIO No. 87 to 89/2008 CE (Dem.) dated 22.10.2008, held that on DTA clearances by a 100% EOU, duty is leviable under the proviso to sub-section (1) of Section 3 of the Central Excise Act, 1944 which prescribed it to be an amount equal to the aggregate of the duties of customs which would be leviable under the Customs Act, 1962 or any other law for the time being in force on the like goods produced or manufactured outside India if imported into India and the aggregate of duties of customs chargeable under Customs Act, 1962 and any other law in force would be the basic customs duty plus Additional Customs duty equal to central excise duty chargeable including education cess plus education cess on total customs duty. The Adjudicating Authority also held that duty mentioned under Section 3 of the Act being only Central Excise duty the Education Cess @ 2% under Finance Act, 2004 and Secondary and Higher Education Cess @ 1% under Finance Act, 2007 be leviable once again on Excise duty calculated as above and exemption under Notfn. No. 23/2003 CE dated 31.3.2003 is not available because the notfn grants exemption from Excise duty and not from the Cesses. The Adjudicating Authority also relied upon the decision of the Honble Tribunal in Sarla Polyester case reported as [2008 (226) ELT 238 (T)].
3. The order came to be upheld by the Commr. (Appeals), hence this appeal.
4. Heard both the sides.
5. The Ld. Advocate appearing for the appellants submitted that the issue was squarely covered by the decision of the Honble Tribunal in the case of Sarla Performance Fibres Ltd. vs CCE, Vapi, reported as [2010 (253) ELT 203 (Tri. Ahmd.)]. She has also drawn our attention to the fact that Honble Tribunal on remand from the Honble Bombay High Court, has passed a detailed and well reasoned order, and in para 63 of the said order, Honble Tribunal has given a finding that 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. We find ourselves fully agreement with this view also. In view of this categorical finding, she prays for allowing the appeal.
6. The Ld. DR on the other hand submitted that the issue remained covered by the decision of Sarla Polyester. He has also drawn our attention to paras 61 to 63 of the decision of Sarla Performance wherein the Tribunal discusses the issue and comes to conclusion that Cess was in the nature of surcharge. It also concluded that 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.
It is the contention of the DR that the observation of the Honble Tribunal in the case of Sarla Performance Fibres Ltd. is not correct. The Education Cess is leviable on Customs duty as well as Central Excise duty separately in terms of Sections 93 and 94 respectively of the Finance Act, 2004. Section 3 of Central Excise Act, 1944 stipulates levy and collection of Central Excise duty only. This is also confirmed by the Larger Bench of Honble Tribunal in the case of Vikram Ispat vs CCE, Mumbai III reported as [2000 (120) ELT 800 (Tribunal LB)], wherein it is clearly held that the nature of duty envisaged under Section 3 is Excise duty and nothing else. The said Section also prescribes the measure of Excise duty which is the aggregate of the duties of custom leviable under Customs Act, 1962 or anyother law for the time being in force, on like goods produced or manufactured outside India and imported into India. Therefore, once Excise duty is computed in the manner laid down under Section 3 of CEA, 1944 read with Notification No. 23/2003 CE dated 31.3.2003, Cess under Section 93 of Finance (No. 2) Act, 2004 would be leviable. There is no second or third levy of Cess, as contended by the appellants. What was paid by the appellants was Cess on Customs duty in terms of Section 94 of the Finance (No. 2) Act, 2004, whereas, what is demanded is Cess on Excise duty in terms of Section 93 of Finance (No. 2) Act, 2004. Each time the duty of Customs or Central Excise is paid / payable, Cess would be payable. Besides, the issue is fully covered by Sarla Polyester case reported as [2008 (226) ELT 238 (Tri. Ahmd.)], which was not considered by the Honble Tribunal in Sarla Performance case supra.
7. We have considered the rival submissions. The issue for determination before us is whether Education Cess and Secondary and Higher Education Cess are leviable on the clearances made by a 100% EOU in DTA. To illustrate, the Appellant have calculated the duty payable on DTA clearances as under Excise Duty equivalent to =
Basic customs Duty = 2.5%
Addl. Customs Duty = 16%
Education Cess = 2% of Addl. Customs duty
SH Education Cess = 1% of Addl. Customs duty
--------------------------------
Aggregate of above duties say X Education Cess = 2% of X SH education Cess = 1% of X Total = X + 3% of X = Y
According to the Department, since Y being the aggregate of duties of customs payable at the time of import of like goods into India, in the central excise duty payable at the time of clearance into India, on this, amount of duty education and SH education cess would be payable again. It has been contended by the Ld. Advocate appearing for the appellants that Cess was paid by them on the duties of Customs leviable at the time of import of like goods and when the goods are cleared in DTA, the duties required to be paid are the aggregate of the duties of Customs and since they have already paid Cess on the duties of Customs, the Department is asking to pay Cess on Cess, which is not permissible. They have further contended that Honble Tribunal has passed a detailed order in the matter of Sarla Performance & Fibres (supra) taking into consideration all the aspects and their case is squarely covered by this decision.
8. Since Education Cess is levied in terms of Sections 93 and 94 of the Finance (No. 2) Act, 2004, it would be appropriate to refer to those Sections which are extracted below:
93.?Education Cess on excisable goods. (1) The Education Cess levied under section 91, in the case of goods specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), being goods manufactured or produced, shall be a duty of excise (in this section referred to as the Education Cess on excisable goods), at the rate of two per cent., calculated on the aggregate of all duties of excise (including special duty of excise or any other duty of excise but excluding Education Cess on excisable goods) which are levied and collected by the Central Government in the Ministry of Finance (Department of Revenue), under the provisions of the Central Excise Act, 1944 (1 of 1944) or under any other law for the time being in force.
(2)?The Education Cess on excisable goods shall be in addition to any other duties of excise chargeable on such goods, under the Central Excise Act, 1944 (1 of 1944) or any other law for the time being in force.
(3)?The provisions of the Central Excise Act, 1944 (1 of 1944) and the rules 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 Education Cess on excisable goods as they apply in relation to the levy and collection of the duties of excise on such goods under the Central Excise Act, 1944 or the rules, as the case may be.
94.?Education Cess on imported goods. (1) The Education Cess levied under section 91, in the case of goods specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), being goods imported into India, shall be a duty 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 (52 of 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 (51 of 1975);
(b) the countervailing duty referred to in section 9 of the Customs Tariff Act, 1975 (51 of 1975);
(c) the anti-dumping duty referred to in section 9A of the Customs Tariff Act, 1975 (51 of 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 (52 of 1962) or any other law for the time being in force.
(3)?The provisions of the Customs Act, 1962 (52 of 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 Education Cess on imported goods as they 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.
95.?Education Cess on taxable services. (1) The Education Cess levied under section 91, in the case of all services which are taxable services, shall be a tax (in this section referred to as the Education Cess on taxable services) at the rate of two per cent., calculated on the tax which is levied and collected under section 66 of the Finance Act, 1994 (32 of 1994).
(2) The Education Cess on taxable services shall be in addition to the tax chargeable on such taxable services, under Chapter V of the Finance Act, 1994 (32 of 1994).
(3) The provisions of Chapter V of the Finance Act, 1994 (32 of 1994) and the rules made thereunder, including those relating to refunds and exemptions from tax and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Education Cess on taxable services, as they apply in relation to the levy and collection of tax on such taxable services under Chapter V of the Finance Act, 1994 or the rules, as the case may be.
From the above, it can be seen that Education Cess is levied in the following cases:
(i) in the case of goods specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), being goods manufactured or produced;
(ii) in the case of goods specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), being goods imported into India; and
(iii) in the case of all services which are taxable services, shall be a tax (in this section referred to as the Education Cess on taxable services).
Thus, Cess is leviable on import of goods under Section 94 of the Finance (No. 2) Act, 2004 and also on production or manufacture of goods under Sections 93 of the Finance (No. 2) Act, 2004. The contention, therefore, that the Cess, if demanded on DTA clearance by 100% EOU would be a Cess on Cess as they had already paid Cess on the goods imported, is not tenable. It can be seen that levy of Cess is on the activity, i.e., either on import of goods or on manufacture or production of specified goods. The present case relates to levy of Cess under Section 93 of the F.A. (No. 2) Act, 2004 on production or manufacture of goods and clearance thereof in DTA whereas, the appellants had paid Cess under Section 94 leviable on the import of goods.
9. Since Section 3 of the Central Excise Act, 1944 (CEA, 1944) provides for the levy and collection of the Excise duty, it would be pertinent to refer to the relevant portion thereof which is extracted below: -
SECTION 3. Duties specified in the [[First Schedule and the Second Schedule] to the Central Excise Tariff Act, 1985] to be levied. (1) [There shall be levied and collected in such manner as may be prescribed, -
(a) [a duty of excise to be called the Central Value Added Tax (CENVAT)] on all excisable goods [(excluding goods produced or manufactured in special economic zones)] which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);]
(b) special duty of excise, in addition to the duty of excise specified in clause (a) above, on excisable goods [(excluding goods produced or manufactured in special economic zones)] specified in the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) which are produced or manufactured in India, as, and at the rates, set forth in the said Second Schedule.] [Provided that the duties of excise which shall be levied and collected on any [excisable goods which are produced or manufactured, -
*???*?[(i) * ]???*???*???*???*???
by?(ii) a hundred per cent export-oriented undertaking and [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 into India, and where the said duties of customs are chargeable by reference to their value; the value of such excisable goods shall, notwithstanding anything contained in any other provision of this Act, be determined in accordance with the provisions of the Customs Act, 1962 (52 of 1962) and the Customs Tariff Act, 1975 (51 of 1975).
A plain reading of the above provisions makes it amply clear that it lays down the manner of levy and collection of the duty of Excise. It has rightly been pointed out by Ld. DR that the Larger Bench of this Tribunal in the case of Vikram Ispat vs CCE, Mumbai III reported as [2000 (120) ELT 800 (Tribunal LB)], has held that the nature of duty envisaged under Section 3 is Excise duty and nothing else. The said Section also prescribes the measure of the Excise duty so far as 100% EOUs are concerned which would be the aggregate of the duties of Customs payable on import of like goods in India. Merely because the measure of duty is the aggregate of the duties of Customs, it does not mean that the nature of duty becomes Customs duty. It remains duty of Excise only. Therefore, for computation purposes, the aggregate of the duties of Customs plus cess payable under Section 94 of the Finance Act, 2004 is to be taken into consideration. The duties of Customs are specified under Customs Tariff Act, 1975 whereas Cess on the duties of Customs is levied under Section 94 of the Finance (No. 2) Act, 2004. Since the excise duty payable or DTA clearance is aggregate of duties of customs plus education cess payable on import of like goods, or the excise duty so calculated, education cess under Section 93 of Finance Act, 2004 would be attracted once again.
10. The appellants have also contended that the Notfn. No. 23/2003 CE dated 31.3.2003 itself provides the manner of payment of duty in case of DTA clearances by 100% EOU, therefore, there was no need to deviate therefrom and demand Cess while the Cess was already paid on the duty determined in terms of the said Notfn. The relevant portion of the said Notfn. is extracted below:
In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) (hereinafter referred to as the Central Excise Act), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts excisable goods of the description specified in column (3) of the Table below, and falling within the Chapter, heading No. or sub-heading No. of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the Central Excise Tariff Act), specified in the corresponding entry in column (2) of the said Table, produced or manufactured in an export oriented undertaking or an Electronic Hardware Technology Park (EHTP) Unit or a Software Technology Park (STP) Unit and brought to any other place in India in accordance with the provisions of Export and Import Policy and subject to the relevant conditions specified in the Annexure to this notification, and referred to in the corresponding entry in column (5) of the said Table, from so much of the duty of excise leviable thereon under section 3 of the Central Excise Act as specified in the corresponding entry in column (4) of the said Table.
TABLE Sr. No. Chapter or heading No. or sub-heading No. Description of Goods Amount of Duty Condi-tions (1) (2) (3) (4) (5)
1.
Any Chapter All goods Duty of excise leviable thereon as is equivalent to the special additional duty of customs leviable on such goods under section 3A of the Customs Tariff Act, 1975 (51 of 1975) read with proviso to sub-section (1) of section 3 of the said Central Excise Act, 1944.
12. Any Chapter All goods In excess of the amount equal to fifty per cent. of the duty leviable under section 3 of the Central Excise Act :
Provided that the duty payable in accordance with this?? notification in respect of the said goods shall not be less than the duty of excise leviable on the like goods produced or manufactured outside the export oriented undertaking, Electronic Hardware Technology Park unit or Software Technology Park unit, which is specified in the said Schedule read with the any other relevant notification issued under sub-section (1) of section 5A of the Central Excise Act :
Provided further that nothing contained in the first?? proviso shall apply to the goods which are chargeable to Nil rate of duty leviable under section 12 of the Customs Act, 1962 read with any other notification for the time being in force issued under sub-section (1) of section 25 of the said Customs Act.
Illustration.- Assuming product X has the value Rs. 100 under section 14 of the Customs Act, 1962 and is chargeable to basic custom duty of 25% ad valorem, additional duty of 16% ad valorem and special additional duty of 4% ad valorem. The computation of duty required to be paid would be as follows :
Basic Customs duty = Rs. 25/-
Value for the purpose of calculation of additional duty = Rs. 100/- + Rs. 25/- = Rs. 125/-
Additional duty = 16% of Rs. 125/-= Rs. 20/-
Value for the purpose of special additional duty if leviable = Rs. 100/- + Rs. 25/- + Rs. 20/- = Rs. 145/-
special additional duty if leviable= 4% of Rs. 145/-= Rs. 5.8/-
Total duty payable but for this exemption= Rs. 25/-+ Rs. 20/- + Rs. 5.80/-= Rs. 50.80/-
50% of aggregates of the duties of customs= 50% of Rs. 50.80/-= 25.40/-
Duty required to be paid in accordance with this notification is Rs. 25.40/- provided it is not less than the duty of excise leviable on like goods produced or manufactured outside the oriented undertaking, etc. 2 (Emphasis supplied) From the perusal of the Notfn., it is evident that the Notfn. grants exemption from the duty of Excise leviable under Section 3 of CEA, 1944 and provides the manner of calculation to arrive at the duty of Excise leviable. It does not grant exemption from payment of Cess. The Honble Supreme Court of India in the case of UOI & Others vs M/s Modi Rubber Limited & Others [1986 (25) ELT 849 (SC)] has held that if there is reference only of Central Excise Act in an exemption Notification, it means only basic Excise duty is exempted and not the other duties leviable based upon basic excise duty and that exemption to other duties can be given only when there is reference of the relevant Act in the Notfn.
11. The Tribunal in Sarla Performance case supra at para 63 has observed as under: -
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. However, Ld. DR has drawn our attention to the decision of the Honble High Court of Himachal Pradesh in the case of Indo Farm Tractors & Motors Ltd. vs Union of India reported as [2008 (222) ELT 184 (H.P.)]. It has been held by the Honble High Court in para 17 as under: -
The contention of the petitioner that the Education cess is levied @ 2% of the aggregate of the duties and since the petitioner has been exempted from paying excise duty, this 2% cess cannot be calculated, is not tenable. The excise duty can always be calculated even if it is not collected and on this notional calculation, the education cess can be calculated. This cess has to be collected in terms of the Finance Act. The above observation of the Honble High Court is in total contrast with the views expressed by the Tribunal.
12. For the reasons stated above, we do not find ourselves in agreement with the findings of the Tribunal in Sarla Performance case supra. Besides, we also notice a contrary decision of Tribunal in the case of Sarla Polyester case reported as [2008 (226) ELT 238 (Tri. Ahmd.)]. We deem it fit to refer the matter to the Larger Bench to consider the following question of law:
Whether Education Cess and Secondary and Higher Education Cess are leviable on DTA clearances made by a 100% EOU, even if such cesses were added while calculating the aggregate of duties of customs payable under Customs Act or any other law in force at the time of import of like goods.
13. Registry is directed to place this matter before Honble President for consideration.
( Justice R.M.S. Khandeparkar ) (President) ( Rakesh Kumar ) Member (Technical) Ckp.
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