C & AG Reports Short/Non-levy of Education Cess on DTA clearances
IN his Audit Report for the FY 2009-10, C & AG once again raises the issue of short/non-levy of education cess on DTA clearances.
Para 2.1 of Report No. 14 of 2009-10 – Union Government (Indirect Taxes – Customs) states that as per section 3 (1) of the Central Excise Act, 1944, the total excise duty in the case of sale of goods by 100 % EOU in DTA shall be equal to the aggregate of duties of customs leviable under the Customs Act, 1962, as if the goods were imported into India and on this central excise duty education cess is leviable. C & AG has reported four instances in the Audit Report wherein the short/non-levy was to the tune of Rs. 2.62 crores. This is popularly known as ‘third time cess'.
In fact this controversial topic was given a decent burial by the Ahmedabad Bench of CESTAT in Sarla Polyesters case 2010-TIOL-408-CESTAT-AHM wherein the CESTAT observed, “Once education cess is added to the customs duties to arrive at aggregate of customs duties, the question of charging education cess again does not arise. Because once it is an enhancement, it is part of the relevant type of the duty. 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”.
This judgment was delivered by the CESTAT after an earlier judgment from this Bench was reversed by the Gujarat High Court. While TIOL has consistently taken a stand that this levy of third time cess did not conform to the prevailing law of the land, there was utter confusion in the field formations as well as the trade and industry as regards the levy of this third time cess.
In this backdrop, CAG's ignorance of law is understandable. But with the judgments of Gujarat High Court and the Ahmedabad Bench of CESTAT conclusively deciding against the levy of third time cess, we hope that CAG takes cognizance of this CESTAT judgment and stops raising these objections. Because, every CAG objection results in a show cause notice in every field formation whether the field formations agree with that objection or not.