2014 (1) TMI 1572 - CGOVT - Central Excise

Rejection of rebate claim of Automobile Cess - Claim rejected on the basis of C.B.E. & C. clarification issued vide F. No. 262/01/2007-CX-8, dated 20-3-2007 - Notification No. 19/2004-C.E. (N.T.) - violation of provision of condition No. 2(b) of Notification No. 19/2004-C.E. (N.T.) - Held that - Government observes that rebate of duty paid on exported goods is to be allowed as per statutory provision contained in the Rules 18 of Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004. The duties to be rebated are specified in Explanation-I of Notification No. 19/2004-C.E. (N.T.) - Similar provision has been made under Section 94 in respect of Education Cess collected as part of customs Duty and under Section 95 Education Cess levied and collected as part of Service Tax. In other words, levy of surcharge under Sections 93, 94 and 95 on respective taxes was the levy for the purpose of Union and was to be utilised by the Union to fulfil the commitment of the Central Government to provide and finance universalised quality of basic education, as has been given out under Section 91 of the Act. The very fact that the surcharge is collected as part of levy under three different enactments goes to show that scheme of levy of Education Cess was by way of collecting special funds for the purpose of Government project towards providing and financing universalised quality of basic education by enhancing the burden of Central Excise Duty, Customs Duty, and Service Tax by way of charging surcharge to be collected for the purpose of Union. But, it was made clear that in respect of all the three taxes, the surcharge collected along with the tax will bear the same character of respective taxes to which surcharge was appended and was to be governed by the respective enactments under which Education Cess in the form of surcharge is levied & collected. The Section 93 specifically says that Education Cess levied under Section 91 shall be a duty of excise. Section 91 also stipulates that these shall be levied and collected as surcharge, a cess to be called Education Cess. Hon ble High Court observed that it was made clear that in respect of these taxes the surcharge collected along with tax will bear the same character of respective taxes to which surcharge was appended and was to be governed by respective enactments under which Education Cess in the form of surcharge is levied and collected. Hon ble High Court has finally allowed the writ petition and allowed the rebate of surcharge on excise duty appropriated by Union of India as Education Cess for funding universalised quality of basic Education Programme. However, Government notes that the Automobile Cess is not levied and collected as surcharge and also there are no parallel provisions with reference to Automobile Cess as contained in Sections 91, 92 and 93 of Finance Act, 2004. Moreover the Automobile Cess is levied and collected in terms of Notification No. S.O. 247(E), dated 22-3-1990 and not under Central Excise Act, 1944. Rebate of Automobile Cess levied and collected under Automobile Cess Rules, 1984 and S.O. No. 247(E), dated 22-3-1990 is not admissible under Rule 18 of Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004. Provisions of Para 1(iii) of the Part I of Chapter 8 of Supplementary Instructions, 2005 and condition 2(b) of Notification No. 19/2004-C.E. (N.T.) stipulate that excisable goods shall be exported within six months from the date on which they were cleared for export from the factory of manufacture or warehouse. In this case initially goods were not cleared for export but it was a stock transfer to their own unit at Hosur on payment of duty. Since the goods are exported from Hosur unit on ARE-1/Invoice, the said goods are cleared for export on the date of preparation of ARE-1 at Hosur unit. Since the goods are exported within six months of their clearance from Hosur unit (date of ARE-1/invoices), the allegation of violation of condition 2(b) of the Notification No. 19/2004-C.E. (N.T.) does not survive and hence, rebate claims cannot be disallowed on this count - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Admissibility of rebate of Automobile Cess paid on exported goods.
2. Violation of Condition No. 2(b) of Notification No. 19/2004-C.E. (N.T.) regarding the export period.
3. Rebate of Secondary and Higher Education Cess (SHE Cess) paid during the intervening period from 1-3-2007 to 7-3-2007.

Detailed Analysis:

Issue 1: Admissibility of Rebate of Automobile Cess Paid on Exported Goods

The applicants argued that Automobile Cess, Education Cess on Automobile Cess, and Secondary & Higher Education Cess on Automobile Cess should be considered as duties of excise and thus eligible for rebate under Rule 18 of the Central Excise Rules, 2002. They cited various judgments and notifications, including the Ministry of Industry's order S.O. 247(E), dated 22-3-1990, and the Central Board of Excise and Customs (C.B.E. & C.) Circular dated 8-10-2007, which clarified that the Automobile Cess would be eligible for rebate as it is considered a duty of excise.

However, the Government observed that the Automobile Cess is not specified in Explanation-I of Notification No. 19/2004-C.E. (N.T.), which lists the duties eligible for rebate. The C.B.E. & C. Circular dated 20-3-2007 explicitly states that the rebate of Automobile Cess cannot be granted as it is not included in the specified duties. The Government also noted that the Rajasthan High Court's judgment in the case of Banswara Syntex Ltd. v. UOI, which allowed the rebate of Education Cess, is not applicable to Automobile Cess as the latter is not levied and collected as a surcharge but under a different notification (S.O. 247(E), dated 22-3-1990).

Therefore, the rebate of Automobile Cess paid on exported goods is not admissible under Rule 18 of the Central Excise Rules, 2002, read with Notification No. 19/2004-C.E. (N.T.).

Issue 2: Violation of Condition No. 2(b) of Notification No. 19/2004-C.E. (N.T.)

The applicants contended that they complied with Condition No. 2(b) of Notification No. 19/2004-C.E. (N.T.), which requires that excisable goods be exported within six months from the date of clearance for export from the factory or warehouse. They explained that the goods were initially transferred from their Mysore unit to their Hosur unit, and the ARE-1 forms were prepared at the Hosur unit when the goods were exported.

The Government agreed with the applicants, noting that the goods were exported within six months of their clearance from the Hosur unit (the date of preparation of ARE-1/invoices). Therefore, there was no violation of Condition No. 2(b), and the rebate claims cannot be disallowed on this ground.

Issue 3: Rebate of Secondary and Higher Education Cess (SHE Cess) Paid During the Intervening Period

The applicants argued that SHE Cess, which was levied with effect from 1-3-2007, should be eligible for rebate even for the period from 1-3-2007 to 7-3-2007, before the amendment to Notification No. 19/2004-C.E. (N.T.) expressly included SHE Cess. They cited the Rajasthan High Court's judgment in Banswara Syntex Ltd. v. UOI, which allowed the rebate of Education Cess for a similar intervening period.

The Government found that SHE Cess qualifies as a duty of excise under clause (a) or clause (e) of Explanation-I to Notification No. 19/2004-C.E. (N.T.), as it is levied and collected under the Central Excise Act, 1944. Therefore, the rebate of SHE Cess paid during the intervening period from 1-3-2007 to 7-3-2007 is admissible.

Conclusion:

The Government modified the impugned Orders-in-Appeal, holding that the rebate of Automobile Cess paid on exported goods is not admissible under Rule 18 of the Central Excise Rules, 2002, read with Notification No. 19/2004-C.E. (N.T.). However, the rebate claims for SHE Cess paid during the intervening period and for goods exported within six months from the date of clearance from the Hosur unit are admissible. The revision applications are partially allowed in these terms.