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2007 (6) TMI 325 - AT - Central ExciseEducation cess - Refund claim of Education cess - Area based exemption - 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. The impugned orders of the Commissioner (Appeals) cannot therefore be sustained and are hereby set-aside with consequential reliefs - appeal allowed.
Issues Involved:
1. Refund claim of Education Cess under Notification No. 56/2002. 2. Interpretation of Section 93 of the Finance Act, 2004. 3. Applicability of exemption Notification No. 56/2002 to Education Cess. 4. The reasoning of the Commissioner (Appeals) on the non-inclusion of Education Cess in the exemption Notification. 5. Methodology for operationalizing the exemption under Notification No. 56/2002. Issue-Wise Detailed Analysis: 1. Refund Claim of Education Cess Under Notification No. 56/2002: The appellants challenged the Commissioner (Appeals) orders that upheld the adjudicating authority's rejection of their refund claim for the Education Cess levied under the Finance Act, 2004. The refund claim was based on Notification No. 56/2002, which provided exemptions from excise duty for certain goods. 2. Interpretation of Section 93 of the Finance Act, 2004: Section 93 of the Finance Act, 2004, provides for the levy and collection of Education Cess on excisable goods at a rate of 2% calculated on the aggregate of all duties of excise. The appellants argued that since Education Cess is a duty of excise, it should be refunded along with the other excise duties under the said Notification. The Commissioner (Appeals) had denied this on the grounds that the Finance Act, 2004, was not specified in the Notification. 3. Applicability of Exemption Notification No. 56/2002 to Education Cess: The Notification No. 56/2002 did not explicitly mention the Finance Act, 2004, which led to the Revenue denying the refund of Education Cess. The appellants contended that the Education Cess, being in the nature of excise duty, should be treated as covered under the exemption provided for the excise duties levied under the three Acts mentioned in the Notification. 4. The Reasoning of the Commissioner (Appeals) on the Non-Inclusion of Education Cess in the Exemption Notification: The Commissioner (Appeals) reasoned that if the Government intended to extend the refund benefit to Education Cess, it would have included the Finance Act, 2004, in the Notification, as done in Notification No. 19/2004 for rebates. This reasoning was supported by the Department, citing various Supreme Court decisions. The Tribunal found this reasoning erroneous, stating that the Education Cess, being a "piggyback duty," did not require a separate exemption scheme under the Finance Act, 2004. 5. Methodology for Operationalizing the Exemption Under Notification No. 56/2002: The Notification required manufacturers to first utilize Cenvat Credit and then pay the remaining duty in cash, which would be refunded. The Tribunal clarified that the methodology for working out the exemption, including the submission of statements and verification by the Assistant Commissioner, was designed to operationalize the exemption and not to treat the paid amount as duty levied and collected. The Tribunal emphasized that the "refund" mechanism was to give effect to the exemption, not to imply that the duty was levied and collected. Conclusion: The Tribunal concluded that the Education Cess, being in the nature of excise duty and calculated on the aggregate of duties exempted under the three Acts, was also refundable. The impugned orders of the Commissioner (Appeals) were set aside, and the appeals were allowed with consequential reliefs. The Tribunal highlighted that including the Finance Act, 2004, in the Notification would have led to unintended exemptions for other duties, which was not the legislative intent. The Tribunal's decision was pronounced in the open court on 12th June 2007.
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