2013 (4) TMI 482 - AT - Central Excise

Tribunal Rules Against Double Taxation of Education Cess on Goods Cleared by 100% Export-Oriented Units into Domestic Market.

The Tribunal ruled that education cess and secondary & higher education cess (S&H cess) should not be imposed again on excise duty for goods cleared by a ... Education cess as surcharge - Secondary and Higher Education Cess - Measure of excise duty for 100% EOU DTA clearance - No cess on cess - Proviso to Section 3(1) of the Central Excise Act is a measure, not a deeming of import - Distinct character of cess vis-a -vis excise/customs dutyEducation cess as surcharge - Secondary and Higher Education Cess - No cess on cess - Whether education cess and S&H cess are payable again on DTA clearances of goods by a 100% EOU when those cesses have already been included while computing the aggregate duties of customs used as the measure of excise duty. - HELD THAT: - The Tribunal held that education cess and S&H cess are distinct levies (cesses) levied as a surcharge, but the mode of levy as surcharge requires that the base for calculating the cess be the existing levies and not include the cess itself. Sections 93 and 94 (and Sections 138 and 139) expressly exclude the education cess/S&H cess from the aggregate of duties of excise or customs on which the cess is to be charged, demonstrating legislative intention not to permit 'cess on cess'. Applying this principle to DTA clearances by a 100% EOU, where proviso to Section 3(1) fixes the measure of excise duty as the aggregate of duties of customs, the aggregate for the purpose of charging education cess/S&H cess must exclude the cesses charged under the Customs provisions; consequently education cess and S&H cess are chargeable only once on the sum of basic customs duty and additional customs duty and not again on the excise duty computed with that aggregate. [Paras 8, 10, 11]Education cess and S&H cess shall not be levied again on the excise duty charged on DTA clearances of a 100% EOU where those cesses have already been included in the aggregate of duties of customs; the cesses are chargeable only once on the sum of basic customs duty and additional customs duty.Proviso to Section 3(1) of the Central Excise Act is a measure, not a deeming of import - Measure of excise duty for 100% EOU DTA clearance - Distinct character of cess vis-a -vis excise/customs duty - Whether the proviso to Section 3(1) of the Central Excise Act effects a legal fiction treating DTA clearances by a 100% EOU as imports, or merely prescribes the measure of central excise duty. - HELD THAT: - The Tribunal concluded that the proviso to Section 3(1) prescribes only the measure of central excise duty payable on DTA clearances by a 100% EOU (viz., an amount equal to the aggregate of duties of customs on like imported goods) and does not operate as a deeming provision to treat such clearances as imports. The Larger Bench precedent (Vikram Ispat) supports that the duty chargeable is central excise duty and the method of its computation does not alter its character. Accordingly, the proviso should not be construed as creating a legal fiction that converts the nature of the clearance into an importation for all purposes. [Paras 9, 16]The proviso to Section 3(1) is a rule for measuring central excise duty on DTA clearances by a 100% EOU and does not amount to treating such clearances as imports.Final Conclusion: The reference is answered by holding that (a) education cess and S&H cess are distinct cesses levied as a surcharge but, by the charging and measurement provisions, cannot be applied on the cesses themselves; therefore where those cesses have already been included in the aggregate of customs duties used as the measure, they shall not be levied again on the excise liability arising on DTA clearances of a 100% EOU, and (b) the proviso to Section 3(1) of the Central Excise Act prescribes the measure of excise duty for such clearances and does not convert them into imports. Issues Involved:1. Calculation of education cess and secondary & higher education cess (S&H cess) on excise duty for goods cleared by a 100% Export-Oriented Unit (EOU) into the Domestic Tariff Area (DTA).Issue-wise Detailed Analysis:1. Calculation of Education Cess and S&H Cess on DTA Clearances by 100% EOU:The core dispute revolves around the method of calculating education cess and S&H cess on excise duty for goods cleared by a 100% EOU into the DTA. The appellant contends that since the education cess and S&H cess are already included in the aggregate customs duties while calculating the excise duty, they should not be charged again. The Department, however, asserts that these cesses should be applied again on the excise duty calculated based on the aggregate customs duties.Legal Provisions and Arguments:- Proviso to Section 3(1) of the Central Excise Act, 1944: This section mandates that goods cleared by a 100% EOU into DTA should attract central excise duty equivalent to the aggregate of customs duties that would be levied on like goods if imported into India.- Section 91, 93, and 94 of the Finance Act, 2004, and Section 136, 138, and 139 of the Finance Act, 2007: These sections impose education cess and S&H cess as surcharges on excise and customs duties.The appellant's argument is based on the premise that once the aggregate of customs duties (which includes education cess and S&H cess) is determined, there is no need to charge these cesses again on the excise duty calculated from this aggregate. They cite the Tribunal's judgment in the case of Sarla Performance Fibers Ltd. v. CCE, Vapi, which supports this view.The Department, on the other hand, argues that education cess and S&H cess are distinct levies and should be charged again on the excise duty calculated from the aggregate customs duties. They rely on the Apex Court's judgment in Union of India v. Modi Rubber Ltd., which held that special excise duty or additional excise duty are distinct from the basic excise duty.Tribunal's Analysis and Conclusion:- Distinct Nature of Cess: The Tribunal acknowledges that education cess and S&H cess are distinct levies from excise and customs duties. However, it emphasizes that the intention of the legislature was not to impose cess on cess. Sections 93 and 94 of the Finance Act, 2004, and Sections 138 and 139 of the Finance Act, 2007, specifically exclude cess from the aggregate of duties on which the cess is calculated.- Proviso to Section 3(1) of the Central Excise Act: The Tribunal clarifies that this proviso provides a measure for calculating excise duty on DTA clearances by a 100% EOU, which should be equivalent to the aggregate of customs duties on like imported goods. This aggregate should not include the education cess and S&H cess.- Principle of Double Taxation: The Tribunal refers to the principle that general words of taxation should not be interpreted to tax the subject twice over to the same tax. Therefore, charging education cess and S&H cess again on the aggregate customs duties (which already include these cesses) would amount to double taxation, which is not permissible.Final Judgment:The Tribunal concludes that the education cess and S&H cess should be charged only once on the sum of basic customs duty and additional customs duty. The point referred by the referring bench is answered accordingly.Separate Judgment by Member (T):While agreeing with the final finding, Member (T) provides additional reasoning. He emphasizes that the interpretation of 'duties of customs' and 'duties of excise' in the proviso to Section 3(1) should be consistent. If 'duties of customs' include education cess and S&H cess, then 'duties of excise' should also include these cesses, leaving no scope for charging them a third time.Conclusion:The Tribunal's judgment clarifies that education cess and S&H cess should not be charged again on the excise duty calculated from the aggregate customs duties for DTA clearances by a 100% EOU. This interpretation aligns with the legislative intent and avoids double taxation.