DTA Clearances from EOUs - No Third Time Cess - Rules CESTAT
FOR setting up an EOU in India, you need two things. One is LOP from the Development Commissioner and the other is a Master's in Mathematics from a reputed University. The former is required for carrying the operations as EOU and the latter for computing the duties payable on DTA clearances and the CENVAT Credit against such clearances.
In the Sarla Polyesters case 2008-TIOL-985-CESTAT-AHM, the CESTAT held that the third time cess is payable.
The High Court () set aside the CESTAT order and remanded the matter to the Tribunal with the following directions:
We, therefore, find prima facie substance in the submission made on behalf of the appellant that when the goods manufactured by EOU, which are brought to any other place in India are to be treated as imported goods for the purpose of levying excise duty, the same fiction will have to be extended while calculating and levying the education cess. We are not expressing any final opinion on this question. We find from the order of the tribunal that the tribunal has not approached the question from this perspective. In our opinion, the tribunal should have considered the purpose for which the statutory fiction has been created by the legislature and whether considering that purpose the fiction can be extended while levying education cess under Section 93 of the Finance Act also.
We have been informed that any decision taken on this question is likely to affect a number of EOUs and therefore, in our opinion, the tribunal should also consider issuing general notice making it know that any person representing EOU can address the tribunal on this question so that a well-considered decision on the subject can be taken.
On remand, as per the directions of the Bombay High Court, Tribunal served notice to the general public so that all the parties who are interested may also apply as interveners. After hearing the appellants, the interveners and the departmental representative, the CESTAT held, “What is required for the purpose of proviso to Section 3 of Central Excise Act, 1944 is to arrive at aggregate of customs duties and once we take a view that education cess is part of the customs duty and is an enhancement, the question of adding it again does not arise.”
You will have to wait till tomorrow for this very important order.
Also see the following well researched articles published by TIOL on this contentious issue: