DTA Clearances from EOUs - Third Time Cess - Board accepts CAG View
- 15.03.2010 observed, “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 ”.
The controversy on third time cess for DTA clearances from EOU has been entertaining the litigation world for quite some time. The Tribunal in the Sarla Performance Fibres case clearly held that education cess was not required to be paid a third time. When even the Central Excise Department has no respect for higher judicial orders, can we expect the CAG to have any respect for judicial pronouncements?
The CAG has raised an objection that the cess is required to collected thrice and the Ministry has accepted this objection.
A letter from the DG, Export Promotion says,
“The issue of levy of education cess on the goods cleared into DTA by EOUs has been examined by this office in consultation with TRU. TRU has also ratified that education cess as duty of excise will be charged thrice on the goods manufactured and cleared by EOU (Copyof calculation chart enclosed). Ministry has been accepting the DAPs pertaining to short levy of education cess. Hence, Ministry can not take dual stand on a single issue .”
The Calculation Chart explains it as:
Education cess is payable on normal excise duty as part of CVD under Section 3(1) of Customs Tariff Act, 1975 and again on the Customs duty (BCD+CVD) as in a case of direct import. Hence, this education cesses on aggregate of duty of customs [{BCD+ (CVD+Edu.Cess)+Edu.Cess)+Edu.Cess] is technically and legally chargeable.
Taking into consideration the above, an illustration of duties payable by an EOU vis-à-vis duty payable on direct imports is as under:
Duty | Duty on direct import (Rs.) | Duty on DTA sales by EOU (Rs.) |
|---|---|---|
Basic Cost (A) | 100.00 | 100.00 |
Basic Customs Duty (B) say 10% | 10.0000 | 10.0000 |
(A+B)=C | 110.0000 | 110.0000 |
Duty of Excise (CVD) @ 16% (a) | 17.6000 | 17.6000 |
Edu. Cess @ 2% on CVD (b) | 0.3520 | 0.3520 |
High & Sec. Edu. Cess @ 1% on CVD (b1) | 0.1760 | 0.1760 |
Excise + Cess on CVD (a+b+b1)=D | 18.1280 | 18.1280 |
(C+D) Total | 128.1280 | 128.1280 |
Aggregate Customs Duty | 28.1280 | 28.1280 |
Edu. Cess @ 2% on Aggregate Customs Duty | 0.5626 | 0.5626 |
Higher & Sec. Edu. Cess @ 1% on Aggregate Customs Duty | 0.2813 | 0.2813 |
Central Excise duty equivalent to Customs Duties in terms of Proviso to section 3(1) of C.Ex. Act, 1944 | 28.9718 | 28.9718 |
Education Cess @ 2% on above excise duty | Nil | 0.5794 |
Higher & Secondary Education Cess @ 1% | Nil | 0.2897 |
Duty to be charged on Input/DTA sales | 28.9718 | 29.8410 |
The above calculation is without consideration of any other duty of excise or duty of customs or any sum chargeable on such goods under any other law for the time being in force, as an addition to, and the same manner as, a duty of excise or customs. Any other duty of excise or customs leviable shall also be included for calculation of education cess in the manner stipulated under section 93 & 94 of the Finance Act, 2004 and section 128 & 129 of finance Act, 2007.
Similar would be case for charging Additional Duty of Excise and National Calamity Contingent Duty of Excise on the commodity under purview of these duties like HSD, petroleum oils, crude, tobacco products etc. EOUs would require paying these duties one time extra to the duty paid on imports.
- 31.03.2010 had requested the Board to clarify the issue as field officers will have no respect for CESTAT. Now it is once again proved that even the Board does not have any. There is not even a mention of the Sarla case in the DGEP letter!
Also please see Education cess payable by EoUs on DTA sale : Will this Budget clarify?