2024 (1) TMI 1055 - AT - Central Excise

Demanded of interest for the delayed payment of education cess, but refrained from vacating the protest for payment of differential duty. - third time cess payable on clearance of imported goods from 100% EOU to DTA - Principles of natural justice - HELD THAT - It is very clear that the appellant has deposited the money primarily to buy peace with the department. Hence the amount has been paid under protest so that his disagreement on the issue is registered with the department and the amount remains protected from being hit by time bar at a later stage while seeking a refund. In such a situation it was incumbent on the part of the department to vacate the protest through a speaking order at the earliest, after following the procedure as prescribed and following the principles of natural justice. This is because the amount deposited by the Appellant in good faith gets blocked until a decision is rendered in the matter which is a heavy cost for him. Its only after an order is passed vacating the protest that he can move forward by filing a refund claim, if the order is in his favour, or if held against him the Appellant can take up the matter in further appeal. The Hon'ble Apex Court in THE STATE OF JHARKHAND AND ORS. VERSUS BRAHMPUTRA METALLICS LTD. AND ORS. 2020 (12) TMI 1241 - SUPREME COURT held that a decision taken in an arbitrary manner contradicts the principle of legitimate expectation. An authority is under a legal obligation to exercise the power reasonably and in good faith to effectuate the purpose for which power stood conferred. The issue whether educational cess and secondary and higher education cess are chargeable on DTA clearance made by 100% EOU even if such cess were added while calculating the aggregate duties of customs payable under the Customs Act, 1962 or under any other law in force, has been answered by the Larger Bench of the Tribunal in KUMAR ARCH TECH PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II 2013 (4) TMI 482 - CESTAT NEW DELHI - LB where it was held that the education cess and S H cess would be chargeable only once under Section 93 of Finance Act, 2004 and Section 138 of Finance Act, 2007 on the sum of basic customs duty and Additional customs duty. The impugned order set aside - appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are the calculation and payment of education cess by an appellant engaged in the manufacture of surgical gloves, the demand for interest on delayed payment of education cess, and the interpretation of whether educational cess and secondary and higher education cess are chargeable on Domestic Tariff Area (DTA) clearance made by a 100% Export Oriented Unit (EOU).

Calculation and Payment of Education Cess:
The appellant, a 100% EOU manufacturing surgical gloves, had erroneously calculated and discharged the education cess payable on goods cleared to DTA, resulting in short-payment of education cess. The appellant paid the differential amount but did not discharge their interest liability on the delayed payment. The Adjudicating Authority demanded interest for the delayed payment but refrained from vacating the protest for payment of differential duty. The Commissioner (Appeals) upheld the order, leading the appellant to appeal to the Tribunal. The Tribunal noted that the appellant had deposited the money primarily to buy peace with the department and had paid 'under protest' to register disagreement with the department. The Tribunal criticized the Adjudicating Authority for demanding interest on the voluntarily paid amount while refraining from vacating the protest promptly, citing the principle of legitimate expectation.

Interpretation of Cess on DTA Clearance:
The issue of whether educational cess and secondary and higher education cess are chargeable on DTA clearance made by 100% EOU was addressed by the Larger Bench of the Tribunal in a previous case. The Tribunal held that the existing levies, on which the cess is to be levied as a surcharge, would not include the education cess and secondary and higher education cess. Charging education cess on education cess was deemed impermissible, and the Tribunal emphasized the principle against double taxation. The Tribunal concluded that the education cess and secondary and higher education cess would be chargeable only once on the sum of basic customs duty and additional customs duty. In light of this judgment, the Tribunal set aside the impugned order and allowed the appeal with consequential relief, if any.

Separate Judgement:
No separate judgment was delivered by the judges in this case.