2011 (8) TMI 99 - HC - Central Excise

Appeal u/s 35G - Notification No.32/99-CE dated 08.07.1999 - It is, therefore, quite clear that the Education Cess is nothing but a surcharge and its levy is completely independent of the levy of excise duty. Its calculation is also independent of the quantum of excise duty, since it is a flat rate of 2% of the aggregate of all duties of excise levied and collected by the Central Government - Held that Education Cess is not exempted under Notification No.32/99-CE dated 08-07-1999 and that CENVAT credit of the Education Cess can be utilized under the CENVAT Credit Rules, 2004 only towards payment of such Education Cess - Appeal is disposed of

Summary

Issues Involved:
1. Maintainability of the appeal under Section 35-G of the Central Excise Act, 1944.
2. Whether Education Cess is a duty exempted under Notification No.32/99-CE dated 08.07.1999.
3. Utilization of CENVAT Credit under the CENVAT Credit Rules, 2004 towards payment of Education Cess.

Issue-wise Detailed Analysis:

1. Maintainability of the Appeal:
The preliminary objection raised by the assessee's counsel was that the appeal is not maintainable under Section 35-G of the Central Excise Act, 1944 and that the appropriate remedy for the Revenue would be to approach the Supreme Court under Section 35-L of the Act. The court referred to Section 35-G which allows appeals to the High Court from orders passed by the Appellate Tribunal, except those relating to the determination of the rate of duty or the value of goods for assessment purposes. The court also analyzed the Supreme Court's interpretation in Navin Chemicals Mfg and Trading Co Ltd vs. Collector of Customs, emphasizing the key words "for purposes of assessment." The court concluded that the determination of the substantial question of law framed does not have a direct and proximate relation to the rate of duty applicable to the goods, thereby rejecting the preliminary objection.

2. Exemption of Education Cess:
The court examined the nature of Education Cess, introduced by the Finance (No.2) Act, 2004, as a surcharge over and above the excise duty levied on the manufacture of goods. It is calculated at 2% on the aggregate of all duties of excise levied and collected by the Central Government. The court noted that the Education Cess is independent of the excise duty and its calculation is based on the aggregate of excise duties, not the rate of duty on the manufacture of goods. Therefore, the Education Cess is not exempted under Notification No.32/99-CE dated 08.07.1999.

3. Utilization of CENVAT Credit:
On the merits of the appeal, the court referred to a similar issue decided in Commissioner of Central Excise, Dibrugarh v. Prag Bosimi Synthetics Ltd, where it was held that the National Calamity Contingency Duty, being a surcharge, is not exempted under Notification No.32/99-CE and that CENVAT credit of such duty can be utilized only towards payment of the same duty under the CENVAT Credit Rules, 2004. Applying the same reasoning, the court held that the CENVAT credit of the Education Cess can be utilized under the CENVAT Credit Rules, 2004 only towards payment of such Education Cess.

Conclusion:
The court disposed of the appeal by holding that the Education Cess is not exempted under Notification No.32/99-CE dated 08-07-1999 and that CENVAT credit of the Education Cess can be utilized under the CENVAT Credit Rules, 2004 only towards payment of such Education Cess. The preliminary objection regarding the maintainability of the appeal under Section 35-G was rejected, and the appeal was disposed of with no costs.