Revenue's Appeal Dismissed: Education Cess Not Applicable on Paper Cess

The appeal filed by the Revenue challenging the imposition of Education Cess on Paper Cess for clearance of Paper and Paper Board was dismissed. The Tribunal held that Education Cess is only applicable on duties levied and collected by the Department of Revenue, excluding duties levied by other ministries. As Paper Cess was imposed by a ministry other than the Department of Revenue, it was not subject to Education Cess. Therefore, the demand for Education Cess on Paper Cess was deemed unsustainable, and the order of the Commissioner (Appeals) was upheld, resulting in the rejection of the Revenue's appeal.

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Issues:
Whether Education Cess is payable on Paper Cess for clearance of Paper and Paper Board.

Analysis:
The appeal was filed by the Revenue against the order of Commissioner (Appeals) where the appeal of the Revenue was dismissed, and the order of the Adjudicating authority was upheld. The issue in question was whether Education Cess is payable on Paper Cess for clearance of Paper and Paper Board. Both the authorities below confirmed that the Education Cess is levied by the Ministry of Industries by the Government of India under the Industrial Development and Regulation Act, 1961.

The Finance (No.2) Bill, 2004, specifically mentioned that Education Cess on excisable goods shall be a duty of Excise, calculated on the aggregate of all duties of Excise, excluding Education Cess on excisable goods, levied and collected by the Central Government. The Revenue argued that Paper Cess is payable on excisable goods, making Education Cess applicable on Paper Cess. They referenced previous Tribunal decisions to support their stance.

However, the Respondent's Advocate pointed to a Division Bench decision that favored the Assessee and highlighted a Board Circular. The Circular clarified that Education Cess should only be calculated on duties levied and collected by the Department of Revenue, excluding duties levied by other ministries but collected by the Department of Revenue. The Tribunal's decision in a similar case emphasized that for a Cess to be included, it must be both levied and collected by the Department of Revenue, which was not the case with Paper Cess.

The Tribunal, after considering the arguments and the Circular, concluded that the Paper Cess, being levied by a ministry other than the Ministry of Finance (Department of Revenue), cannot be subjected to Education Cess. Therefore, the demand for Education Cess on Paper Cess was deemed unsustainable, and the order of the Commissioner (Appeals) was upheld. As a result, the appeal filed by the Revenue was rejected.

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