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SURCHARGE FOLLOWS EXCISE DUTY
M/S SRD NUTRIENTS PRIVATE LIMITED (THE APPELLANT (THE assessee) is engaged in the manufacture and clearance of Malted Milk Food (Horlicks) using sweetened milk powder since April 12, 2008 and has set up its factory in the State of Assam. This unit is duly registered with the Central Excise Department. Industrial Policy dated April 01, 2007 for the North-Eastern States, including the State of Assam, was announced by the Ministry of Commerce and Industry (Department of Industrial Policy and Promotion), Government of India to set up a special package for the North-Eastern States to accelerate industrial development of the State. As per this package, new industrial units were entitled to 100% excise duty exemption for a period of 10 years from the date of commencement of commercial production. Pursuant to the said Industrial Policy, the Central Government issued Notification No. 20/2007-Ex. dated April 25, 2007 granting exemption from duties of excise levied under the Central Excise Act, 1944 (hereinafter referred to as the 'Act') read with Section 3(3) of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and Section 3(3) of the Additional Duties of Excise (Textiles & Textile Articles) Act, 1978 to goods cleared from the notified areas within the North-Eastern States. The said Notification provided that the assessee would be entitled to refund of duty paid other than the duty paid by way utilization of CENVAT credit under the CENVAT Credit Rules, 2004. Reproduction of the first three paragraphs of this Notification would be sufficient, which are as follows: "NOTIFICATION: 20/2007-C.E. dated 25-Apr-2007 North-East - Exemption to all goods, except as specified, cleared from Assam, Tripura, Meghalaya, Mizoram, Manipur, Nagaland, Arunachal Pradesh or Sikkim from duty paid other than by utilisation of Cenvat Credit.
In exercise of the powers conferred by subsection
(1) of section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) other than those mentioned in the Annexure
and cleared from a unit located in the States of Assam or Tripura or Meghalaya or Mizoram or Manipur or Nagaland or Arunachal Pradesh or Sikkim, as the case may be, from so much of the duty of excise leviable thereon under the said Act as is equivalent to the amount of duty paid by the manufacturer of goods other than the amount of duty paid by utilization of CENVAT credit under the CENVAT Credit Rules, 2004.
2. In cases where all goods produced by a manufacturer are eligible for exemption under this notification, the exemption contained in this notification shall be available subject to the condition that, the manufacturer first utilises whole of the CENVAT credit available to him on the last day of the month under consideration for payment of duty on goods cleared during such and pays only the balance amount in cash.
3. The exemption contained in this notification shall be given effect to in the following manner, namely:
(a) the manufacturer shall submit a statement of the duty paid other than the amount of duty paid by utilisation of CENVAT credit under the CENVAT credit Rules, 2004, to the Assistant Commissioner or the Deputy Commissioner of Central Excise, as the case may be, by the 7th of the next month in which the duty has been paid other than the amount of duty paid by utilization of CENVAT credit
under the CENVAT Credit Rules, 2004;
(b) the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, after such verification, as may be deemed by utilization of CENVAT credit under the CENVAT Credit Rules, 2004, during the month under consideration to the manufacturer by the 15th of the next month. Provided that in cases, where the exemption contained in this notification is not applicable to some of the goods produced by a manufacturer, such refund shall not exceed the amount of duty paid less the amount of the CENVAT credit availed of, in respect of the duty paid on the inputs used in or in relation to the manufacture of goods cleared under this notification;
(c) if there is likely to be any delay in the verification, Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall refund the amount on provisional basis by the 15th of the next month to the month under consideration and thereafter may adjust the amount of refund by such amount as may be necessary in the subsequent refunds admissible to the manufacturer."
It may be mentioned at this stage that power to grant exemption from payment of excise duty is conferred upon the Central Government vide Section 5A of the Act, which authorises the Central Government to exempt generally, either absolutely or subject to such conditions to be fulfilled, before or after removal, as may be specified in the notification, excisable goods of any specified description from the whole or any part of duty of excise leviable there, if the Central Government is satisfied that it is necessary, in public interest, so to do. The notifications in question have been issued in exercise of the said power conferred by sub-section (1) of Section 5A of the Act. Thus, the central excise duty, which is payable at the rates specified in the Tariff Act, can be exempted, in respect of specified goods, wholly or partly.
As mentioned above, the Parliament levied Education Cess by Finance (No.2) Act, 2004. Chapter VI of the said Finance Act deals with Education Cess. Sections 91 to 93 thereof are relevant and are reproduced below:
"91. 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 purposes of the Union, a cess to be called the Education Cess, to fulfil the commitment of the Government to provide and finance universalisd quality basic education.
(2) The Central Government may, after due appropriation made by Parliament by law in this behalf, utilise, such sums of money of the Education Cess levied under sub-section (11) of section 2 and this Chapter for the purposes specified in sub-section (1), as it may consider necessary.
92. Definition. - The words and expressions used in this Chapter and defined in the Central Excise Act, 1944 (1 of 1944), the Customs Act, 1962 (52 of 1962) or Chapter V of the Finance Act, 1994 (32 of 1994), shall have the meanings respectively assigned to them in those Acts or Chapter, as the case
93. Education Cess on excisable goods. –
(1) The Education Cess levied under section 91, in the case of goods specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), being goods manufactured or produced, shall be a duty of excise (in this section referred to as the Education Cess on excisable goods), at the rate of two per cent, calculated on the aggregate of all duties of excise (including special duty of excise or any other duty of excise but excluding Education Cess on excisable goods) which are levied and collected by the Central Government in the Ministry of Finance (Department of Revenue), under the provisions of the Central Excise Act, 1944 (1 of 1944) or under any other law for the time being in force.
(2) The Education Cess on excisable goods shall be in addition to any other duties of excise chargeable on such goods, under the Central Excise Act, 1944 (1 of 1944) or any other law for the time being in force.
(3) The provisions of the Central Excise Act, 1944 (1 of 1944) and the rules 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 Education Cess on excisable goods as they apply in relation to the levy and collection of the duties of excise on such goods under the Central Excise Act, 1944 or the rules, as the case may be." As the assessee was denied refund of the Education Cess and Higher Education Cess, he challenged the order of the Assessing Officer by filing appeal before the Commissioner of Central Excise and Custom (Appeals), Guwahati. However, these appeals were
dismissed by the Commissioner and the order of the Commissioner has been upheld by the Customs Excise & Service Tax Appellate Tribunal (CESTAT) by the impugned judgment. Said order is the subject matter of these appeals.
It may be pointed out at the outset that in its brief order, the Service Tax Appellate Tribunal (hereinafter referred to 'Tribunal') has taken note of two of its earlier judgments which were relied upon by the appellant.
These are :
(i) Bharat Box Factory Ltd. v. Commissioner of C. Ex., Jammu [2007 (214) ELT 534 (Tri.- Del.)]
(ii) Cyrus Surfactants Pvt. Ltd. v . Commissioner of Central Excise, Jammu [2007 (215) ELT 55 (Tri.-Del.)]
In both these decisions, the Delhi Bench of theTribunal had opined that the Education cess and Higher Education Cess were also refundable along with the excise duty. The Revenue, on the other hand, had relied upon another judgment of Tribunal in the case of Commissioner of Central Excise, Jammu v. Jindal
Drugs Ltd. [2011 (267) ELT 653 (Tri.-Del.)]. In this judgment which was also rendered by the Delhi Bench of the Tribunal, a contrary view has been taken, viz., the Excise Department was under no obligation to refund the Education Cess and Higher Education Cess as the notification exempted only the excise duty and, therefore, it is the excise duty which was to be refunded. The CESTAT, by impugned judgment, has preferred to follow the view taken by the Tribunal in Jindal Drugs Ltd. case on the ground that it is later in point of time in which earlier judgment in Cyrus Surfactants Pvt. Ltd. case has also been considered. Against the judgement of the CESAT special leave petition was filed. The Supreme court accepted the
appeals, holding that the appellants were entitled to refund of Education Cess and Higher Education Cess which were paid along with excise duty once the excise duty itself was exempted from levy.
The operative part of the judgment reads as under:-
One aspect that clearly emerges from the reading of these two circulars is that the Government itself has taken the position that where whole of excise duty or service tax is exempted, even the Education Cess as well as Secondary and Higher Education Cess would not be payable. These circulars are binding on the Department.
Education Cess is on excise duty. It means that those assessees who are required to pay excise duty have to shell out Education Cess as well. This Education Cess is introduced by Sections 91 to 93 of the Finance (No.2) Act, 2004. As per Section 91 thereof, Education Cess is the surcharge which the assessee is to pay.
Section 93 makes it clear that this Education Cess is payable on 'excisable goods' i.e. in respect of goods specified in the first Schedule to the Central Excise Tariff Act, 1985. Further, this Education Cess is to be
levied @ 2% and calculated on the aggregate of all duties of excise which are levied and collected by the Central Government under the provisions of Central Excise Act, 1944 or under any other law for the time being in force. Sub-section (3) of Section 93 provides that the provisions of the Central Excise Act, 1944
and the r ules made ther eunder, including those related to refunds and duties etc. shall as far as may be applied in relation to levy and collection of Education Cess on excisable goods. A conjoint reading of these provisions would amply demonstrate that Education Cess as a surcharge, is levied @ 2% on the duties of excise which are payable under the Act. It can, therefore, be clearly inferred that when there is no excise duty payable, as it is exempted, there would not be any Education Cess as well, inasmuch as Education Cess @ 2% is to be calculated on the aggregate of duties of excise. There cannot be any surcharge when basic duty itself is Nil.
The Education Cess and Higher Education Cess levied @ 2% of the excise duty would partake the character of excise duty itself.
Authorities relied upon : 2017 346 ELT 353, 2012-TIOL-1837-CESTAT-BANG, 2011 (267) ELT 653 (Tri. Del.), 2010-TIOL-1659-CESTAT-KOL, 2007 (216) ELT 16 (Raj.), 2007 (215) ELT 55 (Tri.-Del.), 2007 (214) ELT 534 (Tri.-Del.) 1998 (3) SCC 570, 1997 (92) ELT 303 (SC) AIR 1977 SC 2279.