Education Cess on automobile Cess – yet another view
Last week, we carried two articles by two scholarly Departmental officers who were highly critical of DDT's analysis of the cess on cess . Though we had absolutely no doubt on the issue, we had carried the pieces as they were written by erudite authorities on the subject and we wanted to maintain objectivity in our reporting. But the problem, as a Netizen reminds us, is that we have too many too good interpreters. I am reminded of an industrialist who wanted an adviser with only one hand, because he was fed up of experts who would give him an opinion and immediately say, “on the other hand…” He did not want the other hand.
One of our top authors wrote in, “ Your view was perfect. E cess cannot apply to Sugar Cess and Tea Cess. No way. I will try to prove by writing a detailed article.” Even before he could send in his detailed article to prove the point, another enlightened Netizen sent us this.
The article Education Cess on Automobile Cess - A critique is yet another one on the ongoing debate on levy of cess post the now infamous judgment of Indo Farm Tractors and Motors Ltd . The view that ‘Tax' and ‘Interpretation' is wedded since time memorial and would continue to be so comes to mind. Though the article has raised some pertinent issues, here's an attempt at another ‘interpretation' to the subject matter with reference to few issues from the said article.
a) The judgment of Bombay Burmah Trading Corporation finds mention but has not been discussed upon in the said article. The said judgment discusses Circular of the Board ( F.No.345 /2/2004/ TRU ) dated 10.8.04, wherein it has been clarified that, as the Education Cess was calculated on the aggregate duties of excise/customs levied and collected by the Department of Revenue, only such duties which were (a) levied and collected as duties of excise/customs and (b) both levied and collected by the Department of Revenue should be taken into account for calculating Education Cess .
b) The Board Circular (supra) has not been rescinded. It is also settled law that Circulars issued by CBEC are binding on Department and unless the Board decides to have a relook at the said Circular, the contents therein would be applicable on the Revenue authorities. So, what should the Revenue be doing? Appeal against the Shimla High Court Order and probably find a mention in the Limca Book of Records as the first pro revenue order to be appealed against!
c) Section 93 of Finance Act, 2004 states that education cess is ‘duty of excise', to be calculated on aggregate of all duties of excise including special excise duty or any other duty of excise, but excluding education cess on excisable goods. Basic duty, special duty, AED ( GSI ) ( This additional duty of excise was levied on some goods of special importance under Additional Duties of Excise ( Goods of Special Importance )Act, 1957 now exempted vide notification no 11/2006- CE dated 01.03.2006 ) , AED ( T&TW ) and NCCD are ‘duties of excise'. Other “duties of excise” would include Additional Excise duty on pan masala and tobacco products, duty on Medical and Toilet preparations under Medical and Toilet Preparations (Excise duties) Act, 1955 and Additional duty on mineral products is payable under Mineral Products (Additional Duties of Excise and Customs) Act, 1958. These duties would come under the ambit of duties of excise levied and collected as duties of excise (by the Department of Revenue whether under the Central Excise Act or any under any law for the time being in force ).
d) There is a distinction between Cess and duty of excise/ customs. Cess is a charge levied and collected for specified / definite purposes while duty of excise/ customs is for general revenue purposes. Infact , High Court of Delhi in Pasupati Fabrics Ltd vs Union of India [2004 (165) ELT 35 (Del)] has in the context of Textile Cess levied under Section 5A of Textile Committee Act, 1963 observed that the nature of levy thereof is ‘fee' and not ‘excise' merely because words ‘duty of excise' are used in Section 5A ibid. High Court has arrived at the decision that “ One has to see the real nature of levy under Section 5A of the Act. It is imposition of cess , which is prescribed. Moreover, excise duty is leviable specifically under Central Excises and Salt Act, 1944 --- “
e) This is the difference that apparently the Circular ( supra ) attempts to highlight. Cess may be referred to as ‘duty of excise' but the nature of levy is ‘fee' and not ‘excise' merely because the words ‘duty of excise' are used in the corresponding Act/Rules levying Cess . Cess levied under any other Act for the time being in force would not qualify as duty of excise ( support from the High Court judgment) and according to the Board Circular only such duties which are ( i ) levied and collected as duties of excise/customs and (ii) both levied and collected by the Department of Revenue need to be taken into account while computing education cess .
f) To be fair to the article, there could be an arguable point in the case of cess on sugar, jute, beedis , paper and paper board where the relevant Act/Rules specifically states that the cess is a ‘duty of excise'. An argument could therefore be extended that education cess will be payable on the same as brought out in the article “ Leviability of Education Cess on Sugar Cess ”. However, the High Court judgment in the case of Pasupati Fabrics needs to be considered before arriving at any conclusion qua the interpretation from the judgments referred to in the article. Having said that in the case of Automobile Cess even the provisions of Automobile Cess Act, 1984 does not refer to the said cess as ‘duty of excise' and hence one interpretation could be that there should not be any education cess payable on the said cess , the decision of Tribunal in Mahindra and Mahindra notwithstanding.
g) The Supreme Court judgment in the case of Baranagar Jute Mills v. Inspector, ( ) is in the context of levy of cess on jute and the relevant cess act ( Jute Manufacturers Cess Act ) makes a reference of the said levy as ‘duty of excise'. However, there is no such oblique reference in the Automobile Cess Act, 1984. So one line of argument could be to question whether the said Apex Court judgment should be extrapolated and read to infer the same in the case of levy of cess on Automobiles?
h) Further ‘levy' and ‘collection' are not synonymous terms as held in Somaiya Organics vs State of Uttar Pradesh [ 130 ELT 3 ]. Further ‘levy' does not include ‘collection' as Article 265 of Constitution makes a distinction between ‘levy' and ‘collection' as held in National Tobacco Co of India Ltd [1978 ( 2) ELT ( J399 )] . Same view has been propounded by Apex Court in Hindustan National Glass [2005 (182) ELT 12] wherein it has been held that there is a distinction between levy and collection.
So what am I coming to?? When there are case laws which go either way, interpretations fly the way one would like to see and perceive it, there are subtle efforts by the lawyers/practitioners slugging it out before Tribunal and Courts not to refer to judgments which look the other way- Tribunals overlook decisions of the Courts and Apex Courts judgments are selectively taken to suit one interests- We would continue to encounter such interpretative skills which could then continue to be countered. I for one know that even this above attempt can be ripped and rapped with another umpteen decisions (which look the other way) and support the ‘other school of thought'. But in the context of the Board Circular, the dosage by DDT in capsule 759 is just the “right” dosage for the issue.
So whatever you say, there is always, “on the other hand…”