TaxTMI 
TaxTMI 
2005 (8) TMI 147
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Duty Entitlement Pass Book (DEPB) Scheme. We are informed by both sides that there is no precedent decision on this issue. 2. Chapter VI of the Finance (No. 2) Act, 2004 imposes Education Cess on imported goods @ 2% of duties of customs levied and collected on such goods :- Extract from the Finance (No. 2) Act, 2004 "81. Education Cess. - (1) Without prejudice to the provisions of sub-section (11) of Section 2, there shall be levied and collected, in accordance with the provisions of this Chapter as surcharge for proposes of the Union, a cess to be called the Education Cess, to fulfil the commitment of the Government to provide and finance universalized quality basic education. (2) The Central Government m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Customs Tariff Act, 1975; and (d) the Education Cess on imported goods. (2) The Education Cess on imported goods shall be in addition to any other duties of customs chargeable on such goods, under the Customs Act, 1962 or any other law for the time being in force. (3) The provisions of the Customs Act, 1962 and the rules and regulations made thereunder including those relating to refunds and exemptions from duties and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the duties of customs on such goods under the Customs Act, 1962 or the rules or the regulations, as the case may be." 3. It was clarified by Ministry of Finance D.O.F. No. 334/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....RU which drafted the budget proposals. For the purpose of removal of doubts it is hereby clarified that the said 2% Education Cess shall be collected in cash only for that portion of aggregate of customs duties which are being collected in cash. In other words, in cases where customs duties are fully exempted under an export promotion scheme then 2% education cess shall also stand exempted. In cases where part of the customs duty is being collected in cash under an export promotion scheme, then 2% education cess shall also be collected on that portion of the customs duty collected in cash as per the illustration given by TRU." 4. However, subsequently another wing of the Ministry of Finance has issued a Circular No. 5/2005-Cus., dt. 31-1....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... from DEPB. In other words, in the case of DEPB Scheme, though the imports are governed by an exemption notification, the fact remains that in case of such imports the duty is debited from the DEPB scrip. Therefore, it has been decided that in the case of imports under DEPB Scheme, the Education Cess @ 2% would also be debited from the DEPB scrip." 5. The lower appellate authority has decided the issue in favour of the respondents contrary to and before issue of the Circular dt. 31-1-2005. Hence this appeal by Revenue. 6. We find that the DEPB Scheme operates under an exemption Notification No. 45/2002-Customs, dated 22-4-2002. The said notification specifically exempts goods imported under DEPB Scheme from basic, additional and speci....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ich case, it becomes nil for exempted DEPB imports. 8. Accordingly, we hold that no Education Cess is leviable on fully exempted DEPB imports and therefore, no debits from DEPB scrip are required. We are also of the view that the Circular dated 31-1-2005 is contrary to the provisions of the Finance (No. 2) Act, 2004 read with Notification No. 45/2002-Customs, dated 22-4-2002. The Revenue appeal is, therefore, rejected. 9. In view of our findings that no debit towards Education Cess is required, it may be necessary for the concerned authorities to ensure that no DEPB credits are allowed at the time of exports giving rise to undue benefit. 10. Before parting with the case, we note that the following remarks have been made by th....