In last budget proposals, Clause 115(1) of the Finance Bill,2021 has introduced Agriculture Infrastructure and Development Cess (in short ‘AIDC’) on the goods specified in the first schedule to Customs Tariff Act, 1975  on being imported into India.

Further, in clause wise explanation in the Memorandum, it has been clarified that in order to avoid additional burden due to imposition of AIDC, the basic Customs duty rates have been lowered on the products on which such cess has been imposed.

Further in the next leg, the above referred clause prescribed the rate of imposition as “at the rate not exceeding the rate of customs as specified in said schedule”. Here before coming upon the contentious part of this clause, it is clear that while prescribing the rate, the “said schedule” means the First schedule to the Customs Tariff Act,1975.

Now concern over the manner in which the rate has been prescribed as “not exceeding the rate of Customs”, leads to irrefutable conclusion that rate of AIDC on the specified goods may be anywhere, lowest from zero to the higest rate of BCD thereupon.

For say, if basic customs duty on a goods is 25% ad valorem, then as per this clause, the rate of AIDC on such goods may be in the range of zero to 25%. The enabling provision for levy and collection of the AIDC have been introduced in the Finance Bill,2021 in this manner.

The AIDC has been imposed not only on the goods mentioned in the First Schedule to the Customs Tariff Act but as an additional duty of excise on the goods specified in Seventh Schedule to the Finance Bill. The Seventh Schedule contains two petroleum products namely motor spirit (Petrol) and HSD. As far concern the rate of levy, it has been clearly mentioned that the rate of AIDC shall be as specified in column (3) of the said schedule.

The levy of AIDC vide clause 115 and 116 have come into force immediately by virtue of the declaration made under the Provisional Collection of Taxes Act,1931

Now close perusal of the above 115 and 116 clauses of the Finance Bill,2021 clearly demonstrates that the clause 116 is unambiguous about the scope of the levy and rate of the imposition, while clause 115  imposing AIDC on the importation, blanketly subjected all the goods mentioned in the first schedule to the Customs Tariff Act  but conundrum starts when the rate of tax has not been prescribed in specific terms.

In the above given facts, perusal of other  budget documents reveals, Notification No. 11/2021-Customs dated 1st February,2021 touches the levy of AIDC. The preamble of the notification says, it is being issued in exercising of the powers conferred u/s 25(1) of the Customs Act read with clause 115 of the Finance Bill,2021.  Factually, the Section 25(1) of the Customs Act grants exemption from the duty, thereby vide this exemption notification, Central Government provided the exemption from AIDC on the goods mentioned in the column (3) from in excess of the amount calculated in the column (4) of the notification. In this arrangement now the question arises, the exemption has been provided, that is fair enough but where the rate of tax is. As the Finance Bill provided only the range of the tax but nowhere notified the specific rate of tax of AIDC.

In such situation, let examine the exemption provided vide above referred exemption notification, where, for say, at serial no.1, all goods falling under sub-heading 071310 shall be exempted from AIDC in excess of 40% AIDC leviable under the clause 115 of the Finance Bill,2021. The AIDC is to be calculated on the assessable value of the imported goods but in absence of a specific rate, it is a million dollar question as how to first compute the AIDC amount (without exemption) and then compute exemption in excess of 40% in terms of the exemption notification.

In the above discussion, the applicability of the AIDC and computation of the exemption are not practically possible, then it is the matter of time to see how this AIDC levy and exemption notification, as in the present form, stand in the judicial scrutiny.

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Qualification: LL.B / Advocate
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Location: Amritsar, Punjab, IN
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March 2021