2007 (6) TMI 524 - AT - Central Excise

Refund of Education Cess - Area based exemption - Education Cess - Held that - it is evident that when the exempted amount of duty was required to be refunded for operationalising the exemption Education Cess which was in the nature of piggy back duty on the excise duties under the said three Acts was also required to be refunded because it was not at all leviable in view of the entitlement to exemption worked out under Paragraph 2 of the said Notification - appeal allowed.

Issues Involved:

1. Refund claim of Education Cess.
2. Interpretation of Notification No. 56/2002.
3. Applicability of Section 93 of the Finance Act, 2004.
4. Exemption of excise duties under specified Acts.
5. Methodology for working out exemptions and refunds.

Issue-wise Detailed Analysis:

1. Refund Claim of Education Cess:

The appellants challenged the orders of the Commissioner (Appeals) which upheld the adjudicating authority's rejection of the refund claim for Education Cess levied under the Finance Act, 2004. The appellants argued that since Education Cess is a duty of excise paid on the aggregate of duties under the three Acts named in Notification No. 56/2002, it should be refunded along with the other duties.

2. Interpretation of Notification No. 56/2002:

Notification No. 56/2002 provided exemption from excise duty under the Central Excise Act, 1944, Additional Duties of Excise (Goods of Special Importance) Act, 1957, and Additional Duties of Excise (Textiles and Textile Articles) Act, 1978. The exemption was available only if the manufacturer utilized all Cenvat credit and paid the balance amount in cash. The appellants submitted that the Education Cess, being in the nature of excise duty, should also be exempt under this notification.

3. Applicability of Section 93 of the Finance Act, 2004:

Section 93 of the Finance Act, 2004, provided for the levy and collection of Education Cess at the rate of 2% on the aggregate of all duties of excise. The Commissioner (Appeals) reasoned that since the Finance Act, 2004 was not mentioned in Notification No. 56/2002, the refund of Education Cess was not admissible. However, the tribunal found that the Education Cess, being a piggyback duty on excise duties, should not be levied if the primary excise duties were exempted.

4. Exemption of Excise Duties Under Specified Acts:

The tribunal noted that the exemption schemes under the Central Excise Act, 1944, Additional Duties of Excise (Goods of Special Importance) Act, 1957, and Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, did not require a separate exemption for Education Cess. If the primary excise duties were exempted, the Education Cess, which is calculated on these duties, would automatically not be leviable.

5. Methodology for Working Out Exemptions and Refunds:

The methodology for claiming exemption involved submitting a statement of duty paid in cash to the Assistant Commissioner, who would verify and refund the amount. The tribunal emphasized that the refund mechanism was designed to operationalize the exemption and not to treat the refunded amount as duty collected. The Central Board of Excise & Customs (CBEC) had clarified that the refund envisaged in the notification was to give effect to the exemption, not due to excess payment of excise duty.

Conclusion:

The tribunal concluded that the rejection of the refund claim for Education Cess was erroneous. Since the exemption of primary excise duties under the specified Acts was established, the Education Cess, being a piggyback duty, was also not leviable. The impugned orders of the Commissioner (Appeals) were set aside, and the appeals were allowed with consequential reliefs.

Pronouncement:

The judgment was dictated and pronounced in the open court on June 15, 2007.

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