Compounded levy scheme limited to excise duty; separate education cess and higher education cess remain payable under distinct charging provisions.

The compounded levy scheme under Rule 15 of the Central Excise Rules, 2001 and Notification No. 34/2001-C.E. was confined to excise duty payable under Section 3 of the Central Excise Act, 1944. Education cess and higher education cess were levied under separate charging provisions in the Finance Act, 2004 and the Finance Act, 2007, so they did not form part of the duty discharged under the scheme. Administrative instructions could not expand that statutory scope. Refund claims for the cesses were therefore unsustainable, and the cess liability remained intact.

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Issues: Whether the compounded levy scheme under Rule 15 of the Central Excise Rules, 2001 and Notification No. 34/2001-C.E. discharged only the excise duty liability under Section 3 of the Central Excise Act, 1944 or also covered education cess and higher education cess levied under the Finance Act, 2004 and the Finance Act, 2007.

Analysis: Rule 15 permits payment of excise duty on the basis of notified factors, and Rule 2(e) confines 'duty' to duty payable under Section 3 of the Central Excise Act, 1944. Section 3 is linked to the duties specified in the First and Second Schedules to the Central Excise Tariff Act, 1985. Education cess and higher education cess are levied by independent charging provisions under Section 93 of the Finance Act, 2004 and Section 138 of the Finance Act, 2007. As those levies do not form part of the duty under Section 3, payment under the compounded levy scheme does not by itself discharge the cess liability. Administrative instructions contrary to the statutory scheme could not alter this position.

Conclusion: The compounded levy scheme did not include education cess or higher education cess, and refund of those amounts was not sustainable.

Final Conclusion: The refund order was set aside and the department's appeals were allowed, leaving the cess liability intact.

Ratio Decidendi: A compounded levy scheme confined by statute to duty under the parent excise enactment does not extend to cesses imposed by separate charging provisions in another enactment unless the scheme expressly so provides.

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