2010 (7) TMI 416 - AT - Central Excise

Levy of Education cess on compounded levy - The conjoint reading of Rule 15, Rule 2(e) of the said Rules and Section 3 of the said Act makes it abundantly clear that the scheme which can be introduced in terms of Rule 15 giving option to the manufacturer in that regard would be in relation to the duties payable in terms of Section 3 of the said Act. Section 3 specifically refers to the duties specified in first and second schedule to the Central Excise Tariff Act, 1985. - education cess and higher education cess cannot be said to be part of the compounded levy determined under the compounded levy scheme in terms of Notification No. 34/2001-C.E., dated 28-6-2001 read with Rule 15 of the said Rules. - Education Cess to be levied on compounded levy Appeal Adjournment of hearing Adjournment sought on the ground that ring ceremony required to be attend on day fixed for hearing letter seeking adjournment was received in the open Court - date of hearing was fixed with the consent of both parties - matters were adjourned on so many occasions - application can never be a ground for adjournment.

Summary

Issues Involved:
1. Representation of respondents at the hearing.
2. Refund claim of education cess and higher education cess.
3. Interpretation of compounded levy scheme under Rule 15 of the Central Excise Rules, 2001.
4. Applicability of education cess and higher education cess under Finance Acts, 2004 and 2007.
5. Validity of Board Circular dated 25-8-2008 regarding education cess.

Issue-wise Detailed Analysis:

1. Representation of Respondents at the Hearing:
The records indicate that during the hearing of miscellaneous matters, the parties were represented by their Advocates. Despite the date being given with the consent of the learned Advocate and the learned DR, there was no representation on behalf of the respondents at the time of hearing.

2. Refund Claim of Education Cess and Higher Education Cess:
The department challenged the order passed by the Commissioner (Appeals) allowing the claim of refund filed by the respondents concerning education cess and higher education cess. The refund claim was initially rejected by the adjudicating authority based on the Board Circular dated 25-8-2008, which clarified that the duty payable under the compounded levy scheme refers to basic excise duty and did not include education cess and higher education cess.

3. Interpretation of Compounded Levy Scheme under Rule 15 of the Central Excise Rules, 2001:
The compounded levy scheme was formulated under Rule 15 of the Central Excise Rules, 2001. Rule 15 allows the Central Government to specify goods for which an assessee can opt to pay excise duty based on relevant production factors at a specified rate. The term 'duty' under Rule 2(e) of the said Rules means the duty payable under Section 3 of the Central Excise Act, 1944, which refers to duties specified in the first and second schedules of the Central Excise Tariff Act, 1985.

4. Applicability of Education Cess and Higher Education Cess under Finance Acts, 2004 and 2007:
The education cess was levied under Section 93 of the Finance Act, 2004, and the higher education cess under Section 138 of the Finance Act, 2007. The Tribunal had previously held in the matter of CCE, Jammu v. M/s. Jindal Drugs Limited that the levy of cess is under independent enactments (Finance Acts) and cannot be construed as part of the duty levied under Section 3 of the Central Excise Act. Consequently, education cess and higher education cess cannot be considered part of the compounded levy determined under the compounded levy scheme.

5. Validity of Board Circular dated 25-8-2008 Regarding Education Cess:
The Board Circular dated 25-8-2008 referred to instructions dated 19-12-2007, which stated that no education cess or higher education cess would be leviable over the compounded levy scheme. However, the Tribunal found no basis for these instructions within the provisions of Rule 15 or Rule 96ZO of the erstwhile Rules. The Tribunal clarified that when the provisions of law are clear, the Board's instructions contrary to the law cannot be followed. The letter dated 25-8-2008 clarified that Notification No. 34/2001-C.E., dated 28-6-2001, covers only basic excise duty and does not include education cess or higher education cess.

Conclusion:
The Tribunal concluded that the Commissioner (Appeals) erred in interfering with the order passed by the adjudicating authority. The impugned order was set aside with consequential relief, and the appeals were allowed. The application for adjournment was dismissed as it lacked substance and did not present a genuine ground for adjournment.