Cum-duty price – whether Education Cess(es) also figure therein?
DDT is once again thankful to this netizen who keeps on sending interesting quips generating worthy debates.
Those were the days when the Excise Department refused to grant cum duty benefits even though the Tribunal in Sri Chakra Tyres had extended the same. Not even the Supreme Court decision in Maruti Udyog [] provided any relief to the manufacturers who were told by the adjudicating authorities that they were bound by the Board's Circular dated 745/69/2003-CX dated 26.9.2003 which informed that Review Petitions were filed by the Department before the Supreme Court & decision is awaited. It was also clarified therein that since Section 4 had been amended by the Finance Act, 2003 [w.e.f 14.05.2003], said benefit would apply prospectively & as far as earlier cases are concerned, the department's stand is clear – no cum-duty benefits.
The department's Review petitions were dismissed on 9 th December 2004 & the Board graciously withdrew its earlier instruction by issuing another Circular 803/36/2004-CX dated 27.12.2004.
Now, it appears that the benevolent officers have started extending cum-duty benefits on all counts, left, right & center meaning to say while demanding Central Excise duty, be it on clandestine removals or on grounds of under valuation, they are working out the Assessable value by considering the Excise duty element as well as the Education Cess component of 2% and Secondary & Higher Education Cess component of 1%.
The Explanation in Section 4(1) of the CEA '44 inserted w.e.f 14.5.2003 reads – For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods.
But is Cess really a TAX/DUTY & whether the same is abatable?
The treatise “ Supreme Court on Words & Phrases ” by Justice R.P.Sethi has this to say about “Cess” –
++A ‘cess' may either be a tax or a fee. Whether a cess in a given context is a tax or a fee depends upon the purpose for which it is levied. [Kunwar Ram Nath v Municipal Board (1983) 3 SCC 357: AIR 1983 SC 930]
++The word ‘cess' is used in Ireland and is still in use in India although the word ‘rate' has replaced it in England . It means a tax and is generally used when the levy is for some special administrative expense, which the name (health cess, road cess, education cess etc.) indicates. When levied as an increment to an existing tax, the name matters not for the validity of the cess must be judged of in the same way, as the validity of the tax to which is an increment. [M/s Guruswamy & Co. Etc. vs. State of Mysore & Ors (1967)1 SCR 548; India Cement Ltd. vs. State of T.N (1990) 1 SCC 12, 23: AIR 1990 SC (85)]
Education Cess & SHE Cess unlike Sales Tax and Other taxes is not directly relatable to the Value of the goods but are levied as an increment to Excise duty & hence it is debatable as to whether the benefit of cum-duty-price should be extended in the matter of Cesses too.
If the answer provided in question 6.5 of the FAQ on Service Tax issued by the CBEC in association with DGST on 21 st December 2007 is an indication, both Cesses are required to be abated while computing the Assessable value. But are they correct?
Do you have a view?