Case Law Details
The claim of the appellants for refund of Education Cess was based on the Notification bearing no. 56/2002, dated 14-11-2002, which provided for exemption to the goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (other than the goods specified in Annexure I to the Notification), from so much of the duty of excise or additional duty of excise, as the case may be, leviable thereon under any of the three Acts, namely, The Central Excise Act, 1944; The Additional Duties of Excise (Goods of Special Importance) Act, 1957; and The Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, as was 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 this Notification, it was, inter alia, provided by Paragraph 1A that the exemption contained therein shall be available subject to the condition that the manufacturer first utilizes 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 months and paid only the balance amount in cash. Paragraph 2 of the said Notification laid down the manner in which the said exemption was to be given effect to. Accordingly, a manufacturer was required to submit a statement of the duty paid, other than the amount of duty paid by utilization of Cenvat credit, to the Assistant Commissioner by the 7th of the next month, in which the duty had been paid. This obviously means that the statement of only the duty paid in cash (or from the PLA) was to be submitted. Thereupon, it was to be verified by the Assistant Commissioner or the Deputy Commissioner, and the amount of duty paid in cash was to be refunded to the manufacturer by the 15th day of the said next month. In the event of likelihood of delay in the verification of the statement, refund was to be made on a provisional basis by 15th day of the next month to the month under consideration. Paragraph 2A of the Notification gave an option to the manufacturer to take credit of the amount of duty paid during the month under consideration, other than by way of utilization of Cenvat credit, in his account current, maintained in terms of Part V of the Excise Manual. When such option was exercised by the manufacturer, the credit of duty paid in cash during the month under consideration, could be given by the manufacturer in his account current by the 7th day of the next month to the month under consideration, who upon verification was required to determine the amount correctly refundable to the manufacturer and intimate the same to the manufacturer by 15th day of the next month to the month under consideration. Any excess credit taken, was required to be reversed within 5 days of the intimation to the manufacturer. If the credit was irregularly taken or excess credit is availed and not reversed, it became recoverable as if it was a recovery of duty of excise erroneously refunded.
8.2In our opinion, there was no need for including the provisions relating to Education Cess in the nature of excise duty required to be levied and collected under Section 93 of the Act in the said Notification, because the Education Cess was in the nature of piggy back duty, which would not operate in respect of the excise duty exempted under the relevant law. Moreover, inclusion of the said provisions of Section 93 of the Finance Act, 2004 in the said Notification would have led to an anomalous situation as indicated above. It would also to be noticed that the “refund” contemplated in Paragraph 2 of the Notification in the context of statement of duty paid in cash, has no relevance with any Education Cess in the nature of excise duty, because the provisions of the Notification, including the manner of giving effect to the exemption contained thereunder, were devised only in the context of the excise duties which otherwise would have been payable under the said three Acts, but for such exemption. It cannot, therefore, be said that Education Cess cannot be refunded because there was no provision for its refund in Paragraph 2 of the said Notification. It became refundable because the exemption became operative.
9.For the foregoing reasons, it is evident that when the exempted amount of duty was required to be refunded for operationalising the exemption, Education Cess, which was in the nature of piggy back duty on the excise duties under the said three Acts, was also required to be refunded, because it was not at all leviable, in view of the entitlement to exemption worked out under Paragraph 2 of the said Notification. The impugned orders of the Commissioner (Appeals) cannot, therefore, be sustained and is hereby set aside with consequential reliefs. These appeals are accordingly allowed.
IN THE CESTAT, PRINCIPAL BENCH, NEW DELHI
[CIRCUIT BENCH AT SRINAGAR]
Justice R.K. Abichandani, President
BHARAT BOX FACTORY LTD.
Versus
COMMISSIONER OF C. EX., JAMMU
Final Order Nos. 1018 & 1019/2007-SM(BR)(PB), dated 15-6-2007 in Appeal Nos. E/64 & 65/2007 (SM)
Shri A. Sanjiv Kaul, Co-Rep., for the Appellant.
Shri B.S. Suhag, DR, for the Respondent.
O R D E R
The appellants have challenged the orders of the Commissioner (Appeals) dated 24-10-2006 dismissing the appeals and upholding the order of the adjudicating authority rejecting the refund claim of the appellants on account of Education Cess levied under the Finance Act, 2004.
2. The claim of the appellants for refund of Education Cess was based on the Notification bearing no. 56/2002, dated 14-11-2002, which provided for exemption to the goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (other than the goods specified in Annexure I to the Notification), from so much of the duty of excise or additional duty of excise, as the case may be, leviable thereon under any of the three Acts, namely, The Central Excise Act, 1944; The Additional Duties of Excise (Goods of Special Importance) Act, 1957; and The Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, as was 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 this Notification, it was, inter alia, provided by Paragraph 1A that the exemption contained therein shall be available subject to the condition that the manufacturer first utilizes 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 months and paid only the balance amount in cash. Paragraph 2 of the said Notification laid down the manner in which the said exemption was to be given effect to. Accordingly, a manufacturer was required to submit a statement of the duty paid, other than the amount of duty paid by utilization of Cenvat credit, to the Assistant Commissioner by the 7th of the next month, in which the duty had been paid. This obviously means that the statement of only the duty paid in cash (or from the PLA) was to be submitted. Thereupon, it was to be verified by the Assistant Commissioner or the Deputy Commissioner, and the amount of duty paid in cash was to be refunded to the manufacturer by the 15th day of the said next month. In the event of likelihood of delay in the verification of the statement, refund was to be made on a provisional basis by 15th day of the next month to the month under consideration. Paragraph 2A of the Notification gave an option to the manufacturer to take credit of the amount of duty paid during the month under consideration, other than by way of utilization of Cenvat credit, in his account current, maintained in terms of Part V of the Excise Manual. When such option was exercised by the manufacturer, the credit of duty paid in cash during the month under consideration, could be given by the manufacturer in his account current by the 7th day of the next month to the month under consideration, who upon verification was required to determine the amount correctly refundable to the manufacturer and intimate the same to the manufacturer by 15th day of the next month to the month under consideration. Any excess credit taken, was required to be reversed within 5 days of the intimation to the manufacturer. If the credit was irregularly taken or excess credit is availed and not reversed, it became recoverable as if it was a recovery of duty of excise erroneously refunded.
3. It is not disputed that the appellants paid the excise and additional duties under the said three Acts in cash after having exhausted payments made from the Cenvat account, in respect of which the exemption did not extend. The appellants having paid the duties under the said three Acts and also the Education Cess payable at 2% in respect thereof under Section 93 of the Finance Act, 2004, claimed refunds of the duties and the Education Cess, which was also in the nature of excise duty, as provided by Section 93 of the Finance Act, 2004. As noticed above, since the Finance Act, 2004 was not mentioned in the exemption Notification and only the aforesaid three Acts were referred, the Revenue, while upholding the claim for the refund of duties paid in cash under the said three Acts, denied the refund of the Education Cess, which was also in the nature of the excise duty, paid at 2% of the aggregate of the duties which were paid under the said three Acts, on the ground that the Finance Act, 2004 was not specified in the Notification.
4. The controversy before us centres around the interpretation of the provisions of Section 93 of Chapter VI of the Finance Act, 2004, which provides for levy and collection of Education Cess on excisable goods which was in the nature of excise duty, at the rate of 2% calculated on the aggregate of all duties of excise including special duty of excise or any other duty of excise, which are levied and collected under the provisions of the Central Excise Act, 1944 or under any other law for the time being in force, by the Central Government in the Ministry of Finance.
4.1 The Commissioner (Appeals) in both these matters took the view that in the absence of specific mention of the Education Cess in the nature of excise duty in the said Notification No. 56/2002, refund of Education Cess was not admissible to all these appellants in terms of the said Notification. Referring to the Notification No. 40/2001, dated 26-6-2002 which related to rebate of duty on excisable goods, which Notification was superceded by Notification No. 19/2004, dated 6-9-2004, and noticing that Education Cess on excisable goods under clause 83 of the Finance Bill, 2004 was included in the Explanation (1) of the Notification dated 6-9-2004, the Appellate Commissioner concluded that, if it would have been the intention of the Government to also extend the benefit of refund in respect of Education Cess, the Finance Act, 2004 would have been specifically included in the said Notification as was done under the Notification dated 6-9-2004 in the context of rebates. This line of reasoning has been adopted by the learned Authorized Representatives appearing for the Department in all these appeals. They have supported this reasoning by referring to the decisions of the Apex Court in CCE, New Delhi v. Hari Chand Shri Gopal reported in 2005 (188) E.L.T. 353 (S.C.), Eagle Flask Indus. Ltd. v. CCE, Pune reported in 2004 (171) E.L.T. 296 (S.C.); and CCE, Ahmedabad v. Cadila Laboratories (P) Ltd. reported in 2002 (142) E.L.T. 279 (SC). According to the learned Authorized Representatives for the Department, since there was a condition for payment of cash for availing the benefit of the said Notification, that should be treated as excise duty levied and collected, which would obviously result in attracting the provisions of Section 93 of the Finance Act, 2004, and Education Cess in the nature of excise duty at the rate of 2% became payable notwithstanding the fact that the duties named in the Notification were to be “refunded”.
5. The learned Counsel appearing in these appeals have contended on behalf of the appellants that since Education Cess was a duty of excise which was paid on the aggregate of duties of excise leviable under the aforesaid three Acts, which were named in the Notification, it should be treated to have been levied under those Acts and, therefore, along with the refund, which was admissible in respect of the duties paid under the said three Acts, even the Education Cess in the nature of excise duty paid at the rate of 2% thereof, was required to be refunded. It was submitted that, the Education Cess was clearly accepted as excise duty, which was paid by the appellants through PLA account in terms of the said Notification. It was submitted that the Appellate Commissioner has committed an error in rejecting the appellants’ claim for refund of the Education Cess paid under Section 93 of the Act on the ground that the provisions of the Finance Act, 2004 relating to levy of Education Cess which was in the nature of excise duty was not incorporated in the said Notification which exempted duties only in respect of the three Acts named therein. It was also argued that, in view of the exemption under the said Notification in respect of the duties payable under the three Acts named thereunder, no Education Cess was payable under the provisions of Section 93. It was, therefore, submitted that, Education Cess would not have been recoverable in connection with the duties which were exempted under the said Notification on its conditions being satisfied.
6. Levy and collection of excise duty is provided for in Chapter II of the Central Excise Act, 1944. The expressions “Duty, Duties, Duty of Excise and Duties of Excise” are required to be construed by including a reference to Central Value Added Tax, as provided in Section 2A of the said Act. A duty of excise, which is to be called as Central Value Added Tax (Cenvat), on all excisable goods which are produced and manufactured in India, is to be levied and collected in such manner as may be prescribed under the Rules on all the excisable goods in the First Schedule to the Tariff Act. Similarly a special duty of excise in addition to Cenvat is required to be levied and collected in the prescribed manner at the rates set forth in the Second Schedule to the Tariff Act on excisable goods specified in the Second Schedule.
6.1 The scheme of exemption is reflected in the provisions of Section 5A of the Act which empowers the Central Government to exempt excisable goods of any specified description from the whole or any part of the duty of excise leviable thereon. Similar exemption is also provided for in Sections 3(3) of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and sub-section (3) of Section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, which provisions have been resorted to while issuing the said exemption Notification.
6.2 It will be noticed that, Chapter VI of Finance Act, 2004, which provided for levy and collection of Education Cess in the nature of duty of excise in Section 93 did not provide for any such exemption; obviously so, because, as my esteemed learned brother very aptly described, it was a “piggy back duty”. The levy and collection of excise duty under Section 93 of the Finance Act, 2004 was at the rate of 2% of the aggregate of all the duties of excise which are levied and collected by the Ministry of Finance under the provisions of not only the Central Excise Act, 1944, but under any other law for the time being in force. Therefore, unless there is excise duty levied and collected under such law, there can arise no question of levy and collection of Education Cess under Section 93 of the said Finance Act, 2004. Levy and collection of Education Cess under Section 93 cannot stand on its own independent of levy and collection of excise duties under the Central Excise Act, 1944 and other laws for the time being in force. In other words, if there is no levy and collection by virtue of any exemption of the excise duties which otherwise would be payable under the Central Excise Act, 1944 or under any other law which could be levied and collected by the Ministry of Finance, there would be no occasion to calculate Education Cess in the nature of excise duty under Section 93 of the Finance Act, 2004. There is no need to provide any scheme of exemption from Education Cess in the nature of excise duty, because if the excise duty in respect of which it is required to be calculated is itself exempted, automatically, no question of levy of the said Education Cess in the nature of excise duty can ever arise. There was, therefore, no need to incorporate the provisions of Chapter VI of Finance Act, 2004 in the said Notification. The reasoning of the Commissioner (Appeals) that because Education Cess in the nature of excise duty which can be levied and collected under Section 93 did not find place in the said Notification which referred to only the aforesaid three Acts proceeds on an erroneous footing, in view of the fact that there is no separate scheme of exemption from Education Cess in the nature of excise duty contemplated in the provisions of Chapter VI of the Finance Act, 2004 nor does such requirement flow from any of the three Acts in respect of which duty exemption has been granted under the said Notification.
7. The contention raised on behalf of the Revenue that, since for availing the benefit of the said Notification, the manufacturer was required to pay duty on goods cleared, after having exhausted the Cenvat credit, in cash or through PLA, it should be treated as duty levied and collected, though at first blush attractive, is devoid of any substance, on a closure scrutiny of Paragraph 2 of the said Notification. The opening part of Paragraph 2 clearly declares that, the exemption contained in the said Notification shall be given effect to in the manner laid down thereunder. In the scheme of the exemption of the nature granted under this Notification, it appears that no exemption is available until the manufacturer utilizes all the Cenvat credit. It is only in respect of the balance amount which is paid thereafter in cash or through PLA, that the question of availing benefit of exemption can arise. The method devised in Paragraph 2 requiring the manufacturer to furnish a statement of duty paid in cash by the 7th of the next month, or the option given to him to take credit of such amount in his account current, and the verification thereafter which is required to be done by the Assistant Commissioner by 15 day of the next month, is only a methodology for working out the extent of exemption and for ascertaining whether any excess was paid, which was required to be refunded along with the duties paid in cash or which could be taken credit of by the manufacturer himself where he exercises option, as contemplated by Paragraph 2A of the said Notification. At the end of this exercise, which is aimed at working out the exemption to which the manufacturer is entitled, it would be incongruous to say that such extent of exemption should be treated as duty levied and collected. In this context, even the Central Board of Excise & Customs (CBEC), had issued clarification by its Circular No. 682/73/2002-CX, dated 19-12-2002 from which the relevant portion contained in Paragraph 3 thereof is extracted hereunder :
“3. In this context, it may be pointed that the ‘Refund’ envisaged in the Notifications is not on account of any excess payment of excise duty by the manufacturers, but is basically designed to give effect to exemption. In other words, the mechanism has been adopted to operationalise the exemption envisaged in these two notifications. In view of this aspect of the matter, the provisions of Section 11B of the Central Excise Act, 1944 would not apply in the case of these Notifications.” [Emphasis added]
7.1We may also incidentally refer to the clarification issued by letter dated 10th August, 2004 by the Ministry of Finance on the question, whether the goods that are fully exempted from excise duty/customs duty, would be subjected to Education Cess. It was clarified in answer to issue no. 2 that if the goods are fully exempted from excise duty and are chargeable to NIL duty, there is no collection of duty and, therefore, no Education Cess would be leviable on such clearances.
7.2Therefore, once the entitlement to exemption of the duty of excise or additional duty of excise, which would otherwise be payable under the three Acts named in the Notification, is established by following the manner indicated in Paragraph 2 for ascertaining the extent exemption, there cannot arise any question of imposing Education Cess in the nature of excise duty under Section 93.
8.The ground for rejecting the claim for refund of Education Cess in the nature of excise duty paid at the rate of 2% on the portion of excise duties which were exempted, given by the Commissioner (Appeals) and adopted by the learned Authorized Representatives for the Department, that there was no mention of the provisions of Education Cess in the nature of excise duty leviable under Section 93 in the said Notification, would be self-defeating and counter-productive, as will be seen hereafter.
8.1If the provisions of Chapter VI of the Finance Act, 2004 relating to levy and collection of Education Cess in the nature of excise duty were included along with the three Acts in the said Notification, unintended adverse consequences would follow for the Revenue. It is clear from the wordings of Section 93 that the Education Cess in the nature of excise duty which is required to be levied and collected at the rate of 2% of the aggregate of all duties of excise would be applicable not only in respect of the excise duties that can be levied and collected under the Central Excise Act, 1944, Additional Duties of Excise (Goods of Special Importance) Act, 1957 and Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, but also in respect of all other excise duties which are levied and collected by the Union Finance Ministry under any other law for the time being in force. Inclusion of the provisions of Section 93 of the Finance Act, 2004 in the Notification would have created an exemption from levy of Education Cess even in the context of excise duties payable under the other laws in respect of which no excise duty exemption was intended under the said Notification. To illustrate, if the provisions of Finance Act, 2004 were also mentioned in the said Notification along with the said three Acts, then even the Education Cess in the nature of excise duty leviable on Cess in the nature of excise duties under Section 3 of the Sugar Cess Act, 1982, Section 15 of the Oil Industries Development Act, 1974, and Section 3 of the Jute Manufacturers Cess Act, 1983, in respect of which no exemption is granted, would stand exempted.
8.2In our opinion, there was no need for including the provisions relating to Education Cess in the nature of excise duty required to be levied and collected under Section 93 of the Act in the said Notification, because the Education Cess was in the nature of piggy back duty, which would not operate in respect of the excise duty exempted under the relevant law. Moreover, inclusion of the said provisions of Section 93 of the Finance Act, 2004 in the said Notification would have led to an anomalous situation as indicated above. It would also to be noticed that the “refund” contemplated in Paragraph 2 of the Notification in the context of statement of duty paid in cash, has no relevance with any Education Cess in the nature of excise duty, because the provisions of the Notification, including the manner of giving effect to the exemption contained thereunder, were devised only in the context of the excise duties which otherwise would have been payable under the said three Acts, but for such exemption. It cannot, therefore, be said that Education Cess cannot be refunded because there was no provision for its refund in Paragraph 2 of the said Notification. It became refundable because the exemption became operative.
9.For the foregoing reasons, it is evident that when the exempted amount of duty was required to be refunded for operationalising the exemption, Education Cess, which was in the nature of piggy back duty on the excise duties under the said three Acts, was also required to be refunded, because it was not at all leviable, in view of the entitlement to exemption worked out under Paragraph 2 of the said Notification. The impugned orders of the Commissioner (Appeals) cannot, therefore, be sustained and is hereby set aside with consequential reliefs. These appeals are accordingly allowed.
