2013 (4) TMI 481 - HC - Central Excise

High Court dismisses tax appeals on education cess for 100% EOU, directs Supreme Court review.

COMMISSIONER OF CENTRAL EXCISE, CUSTOMS & SERVICE TAX, VAPI Versus M/s SARLA PERFORMANCE FIBRES LTD

The High Court dismissed all tax appeals, upholding the Tribunal's decision that education cess is not payable by a 100% EOU on DTA clearances. The Court ... Eduction cess (for the third time) on the aggregate of the duties of the customs - whether a Tribunal is justified in holding that the education cess is not leviable under Section 93 (1) of the Finance Act, 2004 upon the 100% EOU in clearance of DTA? - Notification No. 23/03 CE dated 31.03.2003 ignored by Tribunal - Maintainability of appeal - Held that:- Exclusion clause in sub-section (1) of Section 35G is worded in an expansive manner and excludes all appeals arising out of orders of the Tribunal relating among other thing to the determination of any question having a relation to the rate of duty of excise. What is excluded from the purview of the High Court's jurisdiction is not merely an order of Tribunal which decides the rate of duty of excise but any order which concerns determination of any question which has relation to such rate of duty of excise. Expression “any question having a relation to the rate of duty” is a wide one. Whether the manufacturers are required to pay education cess on the computation of the customs duty and the CVD on which, once they have already paid such education cess Tribunal ruled in favour of the manufacturers and rejected the Revenue's case that such education cess was required to be paid once again. Thus such decision of the Tribunal would certainly be covered under the expression 'the order determining a question having relation to the rate of duty of excise'. If the Department is correct in its stand, the manufacturers would have to pay excise duty at a rate higher than what they have been paying. Computation of excise duty would have to include component of education cess . On the other hand, if the manufacturers are correct in their stand, such education cess would be excluded. In any case, it would have a direct bearing on the rate at which manufacturers should pay the excise duty on their clearances in the DTA from EOU Units. In that view of the matter, the respondents' preliminary objection is required to be upheld. Question having relation to the rate of duty of excise or to the value of goods for the purposes assessment lies to the Supreme Court under Section 35L (b) the Act and not to the High Court under Section 35(G). Issues Involved:1. Justification of Tribunal's decision on education cess payable by 100% EOU on DTA clearances.2. Levy of education cess under Section 93(1) of the Finance Act, 2004.3. Validity of Notification No. 23/03 EC dated 31.03.2003.4. Interpretation of deemed fiction for legislative intent.5. Ignoring Notification No. 23/03 CE dated 31.03.2003.Issue-wise Detailed Analysis:Issue I: Justification of Tribunal's Decision on Education Cess Payable by 100% EOU on DTA ClearancesThe Tribunal held that education cess on the aggregate of customs duties is not payable by 100% EOU in respect of DTA clearances under the proviso to Section 3(1) of the Central Excise Act, 1944. The Department contended that the respondent should pay education cess on the entire amount computed, including customs duty and CVD. The Tribunal concluded that education cess is a surcharge and part of the customs duty, and thus, charging it again is not required.Issue II: Levy of Education Cess Under Section 93(1) of the Finance Act, 2004The Tribunal decided that education cess is not leviable under Section 93(1) of the Finance Act, 2004, upon the 100% EOU in clearance of DTA. The Department's argument was that the respondent should pay additional education cess on the aggregate amount, but the Tribunal found that once education cess is added to customs duties, it should not be charged again.Issue III: Validity of Notification No. 23/03 EC dated 31.03.2003The Tribunal held that Notification No. 23/03 EC dated 31.03.2003 is a subordinate piece of legislation and should not be acted upon over the Statute. The Department's reliance on this notification was dismissed by the Tribunal, emphasizing that the notification cannot override the statutory provisions.Issue IV: Interpretation of Deemed Fiction for Legislative IntentThe Tribunal ruled that the deemed fiction for legislative intent should not be stretched to an unrealistic end. The Department's interpretation that education cess should be charged again on the aggregate duties was rejected, as it would lead to an illogical extension of the legislative intent.Issue V: Ignoring Notification No. 23/03 CE dated 31.03.2003The Tribunal ignored Notification No. 23/03 CE dated 31.03.2003, which the Department argued provided a self-explanatory answer to the issues involved. The Tribunal maintained that the notification could not be considered above the statutory provisions.Preliminary Objection on Maintainability:The respondents raised a preliminary objection regarding the maintainability of the appeals before the High Court, citing Section 35G of the Central Excise Act, 1944. They argued that the appeals relate to the rate of duty payable, which should be addressed by the Apex Court under Section 35L of the Act. The High Court agreed with this contention, referencing several precedents, and concluded that the appeals involve questions related to the rate of duty of excise, thus falling outside the jurisdiction of the High Court.Conclusion:The High Court dismissed all tax appeals, upholding the Tribunal's decision and ruling that the appeals should be addressed by the Supreme Court due to their relation to the rate of duty of excise.