Central Excise Act, 1944 – Central Excise Tariff Act, 1985 – National Calamity Contingent Duty (NCCD), Education Cess and the Secondary & Higher Education Cess – Liability of – Appellantlimited company was exempted from, inter alia, Central Excise Duty (CENVAT) under the second schedule of the Act, 1985 – Appellant was not paying National Calamity Contingent Duty, Education Cess and Secondary & Higher Education Cess – Dispute arose pertaining to the liability of the appellant to pay three cesses referred – An audit objection report was prepared on account of the failure of the appellant to pay the aforementioned three cesses – A show cause notice was given to the appellant – Writ petition filed by the appellant before the High Court against the show cause notice was dismissed – On appeal, held: The issue of the Education Cess and the Secondary & Higher Education Cess is covered by the SRD Nutrients Pvt. Ltd. case, which held that these cesses are a surcharge levied and collected on the total value of the excise duty and the excise duty itself is exempted, there cannot be any question of any recovery of these cesses, as the substratum does not exist – Therefore, appellant not liable to pay the Education Cess and the Secondary & Higher Education Cess – Insofar as NCCD is concerned, it is levied on the product – However, it is in nature of excise duty – It has to bear the same character as those respective taxes to which the surcharge is appended – NCCD will not cease to be an excise duty, but is the same as an excise duty, even if it is levied on the product – Once the excise duty is exempted, NCCD, levied as an excise duty cannot partake a different character and, thus, would be entitled to the benefit of the exemption notification – Thus, appellant not liable to pay NCCD as well – Finance Act, 2001 – s.136 – Finance Act, 2004 – ss. 91 and 93 – Finance Act, 2007 – ss.136 and 138.
Allowing the appeal, the Court
HELD: 1. The controversy before this Court is now in a narrow compass, on account of the subsequent judicial pronouncement in SRD Nutrients Pvt. Ltd. v. Commissioner of Central Excise, Guwahati. The issue of the Education Cess and the Secondary & Higher Education Cess, is covered against the Department in view of this judgment and that is how, also, the Department appears to have understood now, in view of the written synopsis placed before this Court. In the facts of that case, there was an initiative for development of industries in the North-Eastern States of Assam, Tripura, Meghalaya, Mizoram, Manipur, Nagaland, Arunachal Pradesh, etc. A Notification exempting goods from payment of excise duties was issued in respect of those States. Education Cess and Secondary & Higher Education Cess, as imposed under the Finance Acts of 2004 and 2007, respectively were also sought to be levied on the appellant therein. The gravamen of the reasoning of this Court is that since these cesses are a surcharge levied and collected on the total value of the excise duty, and the excise duty itself is exempted, there cannot be any question of any recovery of these cesses, as the substratum does not exist. Not only that, this Court also took into account how the Department itself had viewed the situation regarding Education Cess and Secondary & Higher Education Cess, which are payable as surcharge on the excise duty, once the excise duty is exempted. The Circular dated 10.08.2004 issued by the Department also clarified this position. Therefore, the result of the aforesaid discussion is that the appellant is not liable to pay Education Cess and Secondary & Higher Education Cess. [Paras 12, 13 and 24] [146-G; 151-A]
3. The real bone of contention which survives for consideration is the NCCD. The reason for this is that while the two cesses discussed aforesaid were in the nature of levy on the excise duty payable, the NCCD is levied on the product itself, as per Section 136 of the Finance Act, 2001. It is this aspect, inter alia, which was canvassed by the Department to persuade this Court to take a different view from the one taken qua the other two cesses. [Para 16] [149-A-B]
4. On a proper appreciation of the judicial pronouncement in SRD Nutrients Pvt. Ltd., this Court is not inclined to take a different view from the one taken for Education Cess and Secondary & Higher Education Cess, even while considering the issue of NCCD. [Para 21] [150-C]
5. In SRD Nutrients Pvt. Ltd. gave its imprimatur to the view expressed by the Rajasthan High Court in Banswara Syntex Ltd. The rationale is that while there may be surcharges under different financial enactments to provide the Government with revenue for specified purposes, the same have been notified as leviable in the nature of a particular kind of duty. In the case of NCCD, it is in the nature of an excise duty. It has to bear the same character as those respective taxes to which the surcharge is appended. NCCD will not cease to be an excise duty, but is the same as an excise duty, even if it is levied on the product. Thus, when NCCD, at the time of collection, takes the character of a duty on the product, whatever may be the rationale behind it, it is also subject to the provisions relating to excise duty, applicable to it in the manner of collection as well as the obligation of the taxpayer to discharge the duty. Once the excise duty is exempted, NCCD, levied as an excise duty cannot partake a different character and, thus, would be entitled to the benefit of the exemption notification. The exemption notification also states that the exemption is from the “whole of the duty of excise or additional duty of excise.” Thus, the appellant would not be liable to pay the NCCD. [Paras 22, 23] [150-D-G]
SRD Nutrients Pvt. Ltd. v. Commissioner of Central Excise, Guwahati (2018) 1 SCC 105 : [2017] 11 SCR
43 – relied on.
Banswara Syntex Ltd. v. Union of India (2007) SCC OnLine Raj 365 – approved.
Novopan India Ltd., Hyderabad v. CCE and Customs, Hyderabad (1994) 3 Suppl. SCC 606 : [1994] 3 Suppl. SCR 549; Union of India v. Wood Papers Ltd.
(1990) 4 SCC 256 : [1990] 2 SCR 659 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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