Pay Education Cesses for exempted clearances made under Notf. 108/95-CE, says CERA
A Netizen writes in:
"Exemption notifications are always in the news. And the Notification 108/95-CE has an uncanny ability to always hog the limelight. Some years back, the DGCEI brought it in to the news by alleging (and rightly so) that JBIC (Japan Bank of International Co-operation) is not an International Organization as defined in the notification and hence the assessee is not entitled for the benefit of the notification. However, in all the cases, the benefit of the demand being hit by limitation was extended as the clearances were made on the basis of certificates issued by project authorities. See , & 2011-TIOL-1636-CESTAT-AHM.
Coming back to the notification, it exempts goods when supplied to the United Nations or an International Organization for their official use or supplied to the projects financed by the said United Nations or an international organization and approved by the Government of India, from the whole of -
(i) the duty of excise leviable thereon under section 3 of the Central Excise Act, 1944 (1 of 1944); and
(ii) the additional duty of excise leviable thereon under sub-section (1) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957):
Now, it is the turn of the CERA to tighten the screws in respect of such clearances. The CERA does not per se object to the exemption availed by the assessees in terms of the notification 108/95-CE but says that it is only the duties referred above that are exempted and not the "Education Cesses".
The CERA, it appears , seems to have placed reliance on the Himachal Pradesh High Court decision in Indo Farm Tractors & Motors Ltd. and concluded that in view of the said decision the assessee is required to pay the Education Cesses in respect of all clearances effected in terms of notfn. 108/95-CE. The High Court had in this case held that - The contention of the petitioner that the Education cess is levied @ 2% of the aggregate of the duties and since the petitioner has been exempted from paying excise duty, this 2% cess cannot be calculated is not tenable. The excise duty can always be calculated even if it is not collected and on this notional calculation, the education cess can be calculated. This cess has to be collected in terms of the Finance Act.
The field formations are also reminded of the Supreme Court decision in Mewar Bartan Nirmal Udyog () where it is held that a notification of exemption has to be interpreted in terms of its language and where the language is plain and clear, effect must be given to it.
So, demand notices are being churned and confirmed with amazing speed and in view of the New Year Circular, assessees are having harrowing time.
Incidentally, while reporting the decision in Indo Farm Tractors & Motors Ltd. You (TIOL) had mentioned about the following view taken by the Central Board of Excise & Customs -
+ F.No . 334/3/2004- TRU dt . 8.7.2004
"Issue no. (2): Whether goods that are fully exempted from excise duty/customs duty or are cleared without payment of excise duty/customs duty (such as clearance under bond or fulfilment of certain conditions) would be subjected to Cess.
Clarification: the Education Cess is leviable at the rate of two per cent of the aggregate of all duties of excise/customs (excluding certain duties of customs like anti dumping duty, safeguard duty etc.) levied and collected. If goods are fully exempted from excise duty or customs duty, are chargeable to Nil duty or are cleared without payment of duty under specified procedure such as clearances under bond, there is no collection of duty. Thus, no education cess would be leviable on such clearances.
+ F. No. 345/2/2004-TRU (Pt.), dated 10-8-2004
Issue No. (2): Whether goods that are fully exempted from excise duty/customs duty or are cleared without payment of excise duty/customs duty (such as clearance under bond or fulfilment of certain conditions) would be subjected to Cess.
Clarification: The Education Cess is leviable at the rate of two per cent of the aggregate of all duties of excise/customs (excluding certain duties of customs like anti-dumping duty, safe guard duty etc.), levied and collected. If goods are fully exempted from excise duty or customs duty, are chargeable to NIL duty or are cleared without payment of duty under specified procedure such as clearance under bond, there is no collection of duty. Thus, no education cess would be leviable on such clearances. In this regard, letter D.O. No. 605/54/2004-DBK, dated 21st July, 2004 issued by Member (Customs) may also be referred to.
+ Circular No. 5/2005- Cus dated 31.1.2005 ( F.No . 605/54/2004- DBK )-
Imports against Advance Licence are exempt from all duties of customs and, therefore, it follows that Education Cess at 2% would not be leviable on such imports. In the case of imports under DFRC , the additional duty of customs is payable and, therefore, Education Cess is also payable. On the same principle, Education Cess is also payable in case of imports under EPCG Scheme under which the goods attract a concessional rate of duty of 5%. However, in the case of imports under DEPB Scheme the position is slightly different. As per the notifications governing imports under DEPB Scheme, the basic duty and additional duty are exempt subject to the condition that the duties leviable on the goods are debited from DEPB . In other words, in the case of DEPB Scheme, though the imports are governed by an exemption notification, the fact remains that in case of such imports the duty is debited from the DEPB Scrip. Therefore, it has been decided that in the case of imports under DEPB Scheme, the Education Cess @2% would also be debited from the DEPB Scrip.
Probably, just like the departmental officers not recognizing the existence (when it comes to extending benefit to an assessee) of the aforesaid Circulars, the CERA too feigns ignorance and merrily continues to inflate its "Revenue figures" without bothering about its ramifications."
We had covered this issue extensively in - 11.12.2007.
It would be wishful thinking to expect the Board to come out with a clarification and settle the issue once for all. In the meantime, it is prudent to rein in all such agencies, which exhibit this care a damn attitude!