2008 (3) TMI 72 - AT - Service Tax

Education Cess Upheld on EOU for DTA Clearance: Legal Interpretation Clarified

The Tribunal upheld the demand for education cess at the time of Domestic Tariff Area (DTA) clearance by a 100% Export Oriented Unit (EOU). The decision ... Education cess - 100% EOU - duty of excise equivalent to aggregate customs duty - proviso to Section 3 of the Central Excise Act, 1944 - education cess leviable in addition to other duties of excise - measure of excise being customs dutyEducation cess - 100% EOU - duty of excise equivalent to aggregate customs duty - education cess leviable in addition to other duties of excise - Whether education cess at 2% is payable on the excise duty required to be paid by a 100% EOU on DTA clearances, notwithstanding payment of customs education cess at the time of import. - HELD THAT: - The Tribunal examined the statutory scheme under Section 3 and the applicable finance provisions and accepted the view that where a 100% EOU clears goods to DTA the duty payable is an excise duty determined by reference to aggregate customs dues (measure equivalent to customs duty). The education cess, introduced to be levied on duties of excise, is chargeable in addition to any other excise duties. Consequently the fact that an education cess component may have been paid as part of customs duty at import does not negate the statutory obligation to levy education cess on the excise duty payable at the time of DTA clearance. The Larger Bench decision treating the proviso-derived levy as an excise duty was applied, and the Tribunal held that education cess @2% on the excise duty (computed as per proviso to Section 3) is in accordance with law. The appellant's reliance on decisions on different factual matrices was found inapplicable. [Paras 4, 5, 6, 7]Education cess at 2% is payable on the excise duty required to be discharged by the 100% EOU on DTA clearances; the impugned demand is upheld and the appeal rejected.Final Conclusion: The Tribunal upholds the impugned order and dismisses the appeal, holding that education cess is leviable in addition to the excise duty payable by a 100% EOU on DTA clearances. Issues:Dispute over payment of education cess at the time of clearance of goods in DTA by a 100% EOU.Analysis:1. The appellant, a 100% EOU engaged in manufacturing textile yarns, cleared goods for export and in DTA on payment of excise duty equivalent to 50% of aggregate customs duties. The dispute arose regarding the payment of education cess at the time of DTA clearance. The appellant argued that since they paid customs education cess during import, further education cess at DTA clearance was not justified. They contended that being a 100% EOU, they cannot be made liable for duty exceeding what is specified under Section 3(i) proviso. The Assistant Commissioner's order demanding education cess beyond customs duty was challenged.2. The appellate authority upheld the demand for education cess, citing Section 3 of the Central Excise Act, 1944, which mandates excise duty on goods produced by a 100% EOU to be equivalent to customs duties on imported goods. The duty includes education cess, payable at 2% on the aggregate of all excise duties. The authority referred to a Tribunal decision stating that though the duty is excise, its measure is customs duty. Education cess is to be paid at DTA clearance in addition to excise duty, as per Clause 83 of the 2004 Bill.3. The Commissioner (Appeal) emphasized that education cess is to be levied on all excise duties, including special excise duty, in addition to any other duties. The duty paid by a 100% EOU for DTA clearances is considered excise duty under the statute, making it liable for education cess. The contention that education cess cannot be levied on duty determined under Section 3 proviso was dismissed, stating the law is clear on levying education cess on excise duties.4. The Tribunal affirmed the appellate authority's decision, stating that education cess is to be levied on all excise dues, irrespective of customs education cess payment during import. The case laws cited by the appellant were deemed irrelevant to the present case. The appeal was rejected, upholding the demand for education cess at the time of DTA clearance by the 100% EOU.