Duty on DTA clearances from EOU – Education Cess twice or thrice?
Our recent breaking news story on Education Cess payable by EOUs has evoked response on expected lines. A Netizen sent us this mail:
Sir,
Legally speaking, the analysis in your news report appears doubtful for the following reasons.
(i) For DTA clearances from EOU, duties are payable in accordance with proviso to Section 3(1) of Central Excise Act. This proviso mandates levy of excise duty under the Central Excise Act equivalent to the aggregate duties of Customs under the Customs Act leviable on like goods if imported into India .
(ii) Under proviso to Section 3(1), only measure of duty is prescribed but the duty leviable is under the Central Excise Act. The purpose of this levy is to impose equivalent duties of customs when paid by EOU for DTA clearances, as they are getting their all inputs without payment of duties and this is how it is equated with the aggregate duties of Customs leviable on like goods if imported into India .
(iii) There are several duties which are not levied under the Central Excise Act but levied under the Finance Act. These levies are always applicable for the given situation over and above the levies under the Central Excise Act.
In order to avoid the double duties on EOU clerances to DTA, Government has been issuing notifications exempting these duties right from 1984 and currently the notification applicable is 24/2003-CE dated 31.03.2003. This notification was issued rescinding the earlier Notification No. 125/84, 127/84 & 55/91.
The above aspect of double duty is elaborately explained in CBEC Circular No. 23/84 dated 29.05.1984 issued from File No. 202/12/84-CX-6. This circular was also published in CBEC Bulletin of April - June 1984.
(iv) On introduction of Education Cess in the Finance Act 2004 and Secondary and Higher Education Cess in the Finance Act 2007 , issues have been taken up by the EOU Units as well as Industry with DG-Export Promotion as well as TRU . Both sections in MOF are fully seized of the matter as to the imposition of Education Cess and SHE Cess third time on DTA clearances from EOU but for reasons known only to them, they are not amending Notification No.24/2003-CE.
It appears MOF is not considerate towards existence of EOU which are the creation of MOC and hence reluctance in even correcting the anomalies of taxation .
(v) Your reference to Notification No. 23/2003-CE also does not appear to be correct, as in this notification exemption of certain duties are granted which are leviable under the Central Excise Act. The levies under Finance Act are independent of Central Excise Act though for levy and collection, provisions of the Central Excise Act are extended. In other words, charge is created under the Finance Act and not under the Central Excise Act.
The EOU Units will not have any relief until the double levies are exempted by amending the notification 24/2003-CE.
Thank you very much Sir for taking pains to share your views with us. We do agree that, though the duties payable as are measured as if the goods are imported, the nature of duty is excise duty only and is levied under Section 3. But Notification 23/2003 CE exempted duties levied under Section 3 in excess of the amount payable under the Notification.
If we call one cess as inside Section 3 Cess (included in the aggregate duties of customs) and the other as outside Section 3 Cess, then by virtue of Notification 23/2003, all amounts in excess of the duty payable under Notification 23/2003 CE are exempted and thus the inside Cess stands exempted. But the “outside Section 3 Cess” is payable on the total duty payable under Notification 23/2003 CE. Therefore we reported that there is no double levy as the “inside Section 3 Cess” stands exempted and only one cess is payable, i.e cess leviable under the Finance Act 2004.
In fact, this was the view expressed by the Larger Bench in , while dealing with exemption Notification 2/95-CE which is the old avatar of 23/2003 CE. The Larger Bench held that whatever may be the duty leviable under Section 3 of the Central Excise Act for DTA clearances, the amount payable in excess of the amount mentioned the Notification stands exempted . Actually the Notification exempted duty in excess of 50% of the duty leviable under Section 12 of the Customs Act. When the assessees stared paying only 50% of the BCD on DTA clearances ( without paying any CVD ), the revenue objected and demanded CVD also. The Larger Bench held that though the CVD is leviable under Section 3 of the Central Excise Act, since the amount in excess of 50% of the BCD is exempted , the entire CVD stands exempted.
Notification 24/2003 CE has no relevance to the facts of the case as the same is not applicable if the goods are cleared in DTA.