Third Time Cess - A peep into past
DDT raised this issue in 07.02.2005.
- 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"
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.
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". (Sarla Performance Fibres Ltd v CCE, Vapi - 2010-TIOL-408-CESTAT-AHM)
Ten months after the tribunal order, Board issued a clarification that education cess had to be paid a third time. (Please see - 06.04.2011).
While this confusion was in full swing, the Delhi Bench of the CESTAT did not agree with the decision in Sarla Performance and referred the issue to the Larger Bench - 2011-TIOL-1180-CESTAT-DEL
Revenue also appealed against the Sarla case in the High Court. The Gujarat High Court dismissed the Revenue appeal on the ground that the appeals were not maintainable before the High Court as it was a question of rate of tax and the appeal had to be made to the Supreme Court.
So, the Revenue took the matter to the Supreme Court but the appeal was dismissed on the ground of delay. [See ]
The Larger Bench delivered its order on 22.02.2013 in Kumar Arch Tech Pvt Ltd Vs Commissioner of Central Excise - , holding, "The intention of the legislature was never to charge education cess on education cess. In fact this is not permissible from very mode of this levy as prescribed in Section 91 of the Finance Act, 2004 and Section 136 of the Finance Act, 2007, as when a new tax is introduced as surcharge on the existing levies, the base on which the new levy as surcharge is to be calculated will include only the existing levies, not the new levy. If the Revenue's stand is accepted, and on the sum of Basic customs duty and Addl. Customs duty, first "cess on imported goods" under Section 94 of Finance Act, 2004 and Section 139 of Finance Act, 2007 is charged as duty of customs and on the aggregate of duties of customs, "cess on excisable goods," under Section 93 of Finance Act, 2004 and Section 138 of Finance Act, 2007 is charged, it would amount to charging education cess on education cess for which there is no sanction in law."
Even after the Supreme Court dismissed its appeal and the Larger Bench emphatically ruling against it, the Revenue is not prepared to put an end to its litigation.
Just imagine the amount of time, money and paper wasted!
Also see -
Education cess payable by EoUs on DTA sale : Will this Budget clarify?
Setback for EOUs: CESTAT rules Education Cess is payable on DTA clearances in addition to duties computed under relevant Notifications
And
1. 15. 03.2010
2. 07.05.2010
3. 06.04.2011
4. 12.09.2011
5. 11.05.2012
6. 18.02.2013
7. 16.04.2013