Education Cess on Target Plus imports not payable where customs duties were exempt and the supporting circular had been struck down.

Imports made under the Target Plus Scheme were held not liable to Education Cess where basic customs duty and additional customs duty were exempted under the relevant notification. The operative reasoning was that, if no basic customs duty or countervailing duty was collected in cash, Education Cess could not be debited from the scheme licence or account. The departmental circular relied upon by Revenue could not sustain the levy because it had already been struck down and the position was supported by earlier judicial pronouncements. The result was that 2% Education Cess was not payable on such imports.

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Issues: Whether 2% Education Cess was payable on imports made under the Target Plus Scheme, and whether the departmental circular relied upon by Revenue could sustain the levy.

Analysis: The imported goods were covered by the Target Plus Scheme, under which basic customs duty and additional customs duty stood exempted through the relevant notification. The appellate authority had found that when no basic customs duty or countervailing duty was collected in cash, Education Cess could not be debited from the licence/account issued under the scheme. That view was supported by earlier judicial pronouncements holding that the levy of Education Cess could not survive in such a situation, and the circular relied upon by Revenue had already been struck down.

Conclusion: 2% Education Cess was not payable on the imports under the Target Plus Scheme, and the Revenue's challenge failed.

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