2024 (2) TMI 1419 - AT - Central Excise

Levy and collection of Special Additional Excise Duty (SAED); Road and Infrastructure Cess (RIC) and Agriculture Infrastructure and Development Cess (AIDC) as a duty of Excise/Additional duty of Excise on removal of High Speed Diesel, which was manufactured in the Special Economic Zone (SEZ) to the Domestic Tariff Area (DTA) - whether the provisions of the Central Excise Act, 1944 can be resorted to while construing the provisions governing levy and collection of duty under the three Finance Acts viz SAED under the Finance Act 2002; RIC under the Finance Act 2018 and AIDC under the Finance Act, 2021? - HELD THAT - The judgement in the case of Unicorn 2019 (12) TMI 286 - SUPREME COURT in fact supports the case of the appellant inasmuch as the Apex Court held that while construing the levy and collection provisions with respect to Education cess under the Finance Act, 2004 as also NCCD under the Finance Act, 2001 and Additional Excise duty (Pan Masala and Tobacco Products) under Finance Act, 2005, to which also the provision regarding levy and collection under the Central Excise Act, 1944 and the Rules made thereunder has been made applicable, that provision of Section 5A of the Central Excise Act, 1944 providing for exemption from the levy could have been applied if the Central Government so choose. The appellant was completely justified in contending that the provisions of the Central Excise Act, 1944 with regard to levy and collection of Central Excise duty, to the extent they are not inconsistent, apply equally to the provisions of the Finance Act and accordingly the levy under the Finance Act will apply to goods manufactured or produced in India, other than the goods produced or manufactured in SEZ. There are also substance in the appellant s contention to the effect that the duties under the concerned Finance Acts, being in addition to any other duty of excise, chargeable on such goods under the Central Excise Act, is a clear indication that the levy under the relevant Finance Acts is in itself in the nature of a duty of excise chargeable on goods under Section 3 of the Central Excise Act, 1944. The impugned order is not sustainable and accordingly set aside the same - Appeal allowed.

Summary

Issues Involved:
1. Levy and recovery of Special Additional Excise Duty (SAED), Road and Infrastructure Cess (RIC), and Agriculture Infrastructure and Development Cess (AIDC) on High Speed Diesel (HSD) manufactured in SEZ and removed to DTA.
2. Applicability of Central Excise Act provisions to the levies under the Finance Acts.
3. Interpretation of SEZ as a territory outside the Customs Territory of India.
4. Duplication of duties on goods cleared from SEZ to DTA.

Detailed Analysis:

1. Levy and Recovery of SAED, RIC, and AIDC:
The core issue was whether the Central Excise authorities could levy and recover SAED, RIC, and AIDC on HSD manufactured in SEZ and removed to DTA. The adjudicating authority confirmed the demand for these levies under various sections of the Finance Acts, along with interest and penalties. The appellant argued that these duties were already factored in as part of the additional duty under Section 3(1) of the Customs Tariff Act when the goods were removed to the DTA, and hence, levying them again constituted duplication.

2. Applicability of Central Excise Act Provisions:
The appellant contended that the provisions of the Central Excise Act, 1944 should apply to the levies under the Finance Acts, as stipulated in Section 147(3) of the Finance Act, 2002, Section 112(3) of the Finance Act, 2018, and Section 125(4) of the Finance Act, 2021. They argued that since the Central Excise Act excluded goods manufactured in SEZ from excise duty, the same exclusion should apply to the levies under the Finance Acts.

3. Interpretation of SEZ as a Territory Outside the Customs Territory of India:
The appellant argued that SEZ is a sui generis enclave, considered outside India for taxation purposes. They cited Section 30 of the SEZ Act, 2005, and related rules, which treat clearances from SEZ to DTA as imports, requiring payment of customs duties, including additional duties equivalent to excise duties. The adjudicating authority, however, held that SEZ is not considered outside India for the purposes of the Finance Acts, and thus, the levies were applicable.

4. Duplication of Duties:
The tribunal found that the adjudicating authority ignored the fact that goods removed from SEZ to DTA are treated as imports and subjected to customs duties, including additional duties under Section 3(1) of the Customs Tariff Act. The tribunal noted that levying SAED, RIC, and AIDC again as excise duties would result in higher taxation on SEZ clearances compared to imports, which is contrary to the legislative principle.

Tribunal's Findings:

On Levy and Recovery:
The tribunal concluded that the levies under the Finance Acts could not be imposed again as excise duties, as they were already included in the additional duty under Section 3(1) of the Customs Tariff Act.

On Applicability of Central Excise Act Provisions:
The tribunal agreed with the appellant that the provisions of the Central Excise Act, 1944 should apply to the levies under the Finance Acts. They emphasized that the Finance Acts are not self-contained and rely on the Central Excise Act for levy and collection provisions.

On Interpretation of SEZ:
The tribunal held that SEZ is considered outside the Customs Territory of India for undertaking authorized operations. They noted that clearances from SEZ to DTA should be treated as imports, and thus, subjecting them to additional excise duties under the Finance Acts would lead to double taxation.

On Duplication of Duties:
The tribunal found that the adjudicating authority's interpretation would result in higher duties on SEZ clearances compared to imports, which is inconsistent with the legislative intent. They emphasized the need for a harmonious interpretation of the SEZ Act and the Finance Acts.

Conclusion:
The tribunal set aside the impugned order, holding that the levies under the Finance Acts could not be imposed again as excise duties on goods cleared from SEZ to DTA. The appeal was allowed with consequential relief, if any, in accordance with law.