Sudhir Power Ltd. Vs Commissioner of Central Excise & Service Tax (CESTAT Chandigarh)
The dispute concerns whether an Export Oriented Unit (EOU) was required to calculate Education Cess and Secondary & Higher Education Cess twice while determining duty on Domestic Tariff Area (DTA) clearances under Explanation 2(ii) to Section 3(1) of the Customs Tariff Act, 1975. The Revenue argued that cess must be applied two times: once after calculating Basic Customs Duty (BCD) and duty under Section 3(1), and again after adding Special Additional Duty (SAD) under Section 3(5) of the Central Excise Tariff Act, resulting in an effective duty of 26.628%. The appellant maintained that the cess should apply only once, after computing BCD and duty under Section 3(1), leading to a lower rate of 25.852%. A show cause notice dated 17.06.2014 demanded differential duty of ₹4,58,878 along with interest and penalty. The original authority dropped the demand on 18.02.2015, but the Commissioner (Appeals), by order dated 28.03.2018, upheld the proposals in the show cause notice.
The appellant argued that the issue was already settled by decisions of the Supreme Court, a Larger Bench of the Tribunal, and other Tribunal benches, holding that Education Cess and Secondary & Higher Education Cess, being surcharges, cannot be levied twice once they have already enhanced the duty. They submitted that once cess is added to customs duties to arrive at the “aggregate of customs duties” under the proviso to Section 3(1), charging cess again on the value so computed is unnecessary. They relied on the Larger Bench ruling in Vikram Ispat, which held that the measure of collection does not alter the nature of the duty, and once excise duty is calculated under the proviso to Section 3(1), cess already levied cannot be imposed again. They also submitted that even otherwise, any differential amount could be adjusted from SAD inadvertently paid and that interest and penalty do not arise when the demand itself is untenable. Several decisions were cited, including Sarla Performance Fibres Ltd., Meghmani Dyes, Kumar Arch Tech, Meneta Automotive Components, Consolidated Coin Company, Kadimi Tools, Contacare Ophthalmics, SKM Egg Products, EID Parry, and Komal Enterprises.
