Education cess on MEIS imports cannot survive where duty liability is exempted, as noted in settled precedent and CBIC clarification.

Education cess and secondary and higher education cess are described as unrecoverable on imports cleared against MEIS scrips where the underlying customs duty liability is exempted. The note states that cess, being computed as a percentage of duty, cannot be enforced independently when no surviving duty exists, and that the relevant CBIC clarification supports discharge through the scrip notwithstanding the separate treatment of cess. It also records that earlier judicial precedent had already settled the issue against the demand, leaving the impugned recovery unsustainable in the stated analysis.

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Issues: Whether education cess and secondary and higher education cess could be demanded in respect of imports cleared against MEIS scrips, and whether the impugned demand survived in view of the governing judicial precedents and CBIC clarification.

Analysis: The disputed demand related to cess sought to be recovered against duty-free imports cleared under the Merchandise Exports from India Scheme. The reasoning accepted that cess, being computed as a percentage of duty liability, could not be recovered where the underlying duty liability itself stood exempted. The decision also noted that the relevant CBIC clarification supported the position that the benefit of discharge through the scrip could not be denied merely because the cess was treated as a separate component, and that the earlier judicial view had already settled the issue against the demand.

Conclusion: The demand for education cess and secondary and higher education cess was not sustainable, and the impugned order was set aside in favour of the assessee.

Final Conclusion: The appeal succeeded and the disputed recovery was annulled on the basis that cess could not be levied or enforced independently in the absence of a surviving duty liability and contrary to the settled judicial position.

Ratio Decidendi: Cess that is calculated as a percentage of exempted duty cannot be independently recovered where the duty liability itself does not exist, particularly when the applicable administrative clarification and binding precedent support the assessee's entitlement.

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