2013 (4) TMI 481 - HC - Central Excise

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

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 ... Determination of a question having relation to the rate of excise duty - Appeal to High Court under Section 35G of the Central Excise Act, 1944 - Maintainability of appeals involving rate of duty - Inclusion of education cess in computation of excise duty arising from DTA clearances by 100% EOUAppeal to High Court under Section 35G of the Central Excise Act, 1944 - Determination of a question having relation to the rate of excise duty - Maintainability of appeals involving rate of duty - Whether the appeals to the High Court were maintainable in view of the exclusion in sub-section (1) of Section 35G, as the Tribunal's order concerned a question having relation to the rate of excise duty. - HELD THAT: - The Court examined sub-section (1) of Section 35G and held that the exclusion is wide and covers any order of the Tribunal which concerns determination of a question having relation to the rate of excise duty. The dispute before the Tribunal concerned whether education cess (already paid on basic customs duty and CVD) must be included again in the computation of customs duties for the purpose of the proviso to Section 3(1) of the Central Excise Act, thereby affecting the rate at which excise duty would be payable on DTA clearances by a 100% EOU. If the Revenue's contention were accepted, the excise payable would be higher; if the manufacturers' contention were accepted, that component would be excluded. Because the Tribunal's decision directly bears on the rate of excise duty payable, the appeal lies to the Supreme Court under the relevant scheme and not to the High Court under Section 35G(1). The Court therefore upheld the respondents' preliminary objection and found the appeals not maintainable before the High Court. [Paras 16, 17, 18, 19]The appeals are not maintainable before the High Court under Section 35G(1) because the Tribunal's order concerned a question having relation to the rate of excise duty; all Tax Appeals are dismissed.Final Conclusion: The High Court held that the appeals were barred by the exclusion in Section 35G(1) since the Tribunal's decision concerned a question relating to the rate of excise duty; accordingly the appeals were dismissed as not maintainable before the High Court. 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.