2024 (8) TMI 1327 - AT - Central Excise

Special Additional Excise Duty (SAED) levied as a Surcharge under Section 147 of the Finance Act 2002 - Additional duty of Excise (AED) levied as Road and Infrastructure Cess under Section 112 of the Finance Act 2018 - goods manufactured and exported by the Respondent viz. Reliance Industries Limited - rejection of refund application on the ground that SAED (Surcharge) and AED (Cess) were payable on MS HSD and ATFwith effect from 1-7-2022 under the said Notification no.4/2022-CE dated 30-6-2022 Notification No.5/2022-CE dated 30-6-2022 and Notification no.10/2022-CE dated 30-6-2022. Whether the levy of special additional excise duty as surcharge under Section 147 of the Finance Act 2002 and additional duty of excise levied as road and infrastructure cess under Section 112 of Finance Act 2018 read with relevant Notifications Nos.04/2022-CE dated 30.06.2022 05/2022-CE dated 30.06.2022 10/2022-CE dated 30.06.2022 and 19/2022 dated 19.07.2022 in respect of SEZ unit is correct and if not whether the respondent are eligible for the refund of the duty which has already been paid by the respondent? HELD THAT - Under both the Sections 147 and 112 of the Finance Act 2002 and 2018 respectively it is clear that both the duties are in addition to the duties of excise chargeable on such goods under the Central Excise Act. Therefore these duties are in other words become a part of duties of excise chargeable on such goods in terms of Section 3 of the Central Excise Act 1944. Moreover sub section (3) of both the Sections 147 of the Finance Act 2002 and Section 112 of Finance Act 2018 clearly provide that the provision of Central Excise Act and the Rules made there under shall as far as may be apply in relation to levy and collection the SAED and AED on the goods in question under that Act or those rules as the case for. In view of this clear position since the levy of SAED and AED under Section 147 and 112 of the Finance Act 2002 and 2018 respectively are in addition to the duties of excise chargeable on such goods under the Central Excise Act the provision of relevant Section 3 of Central Excise Act 1944 shall be statutorily invoked and applied in this case. From the Section 3 which is Parent Act for levy of Excise duty clearly provides that the duties of excise to be called as central value added tax shall be levied and collected on all excisable goods which are produced or manufactured in India. However it clearly eschewed the goods produced or manufactured in Special Economic Zone. The levy of SAED and AED cannot be made in isolation in terms of Section 147 of the Act 2002 and Section 112 of Finance Act 2018 without applying the provision of Section 3 of the Central Excise Act as per the mandate given in sub Section (3) of Section 147 and Section 112 of the Finance Act 2002 and 2018 respectively - in view of the clear statutory provision as reproduced above. In respect of goods manufactured or produced in special economic zones no excise duty as well as SAED and AED is levied. It is a settled law that the subordinate legislation cannot overrule the primary legislation. The primary legislation is enacted by parliament and under the said legislation the executive power is given to make laws in order to implement and administer the requirements of the primary legislation. Such law is the law made by a person or body other than the legislature but with the legislature s authority. Article 13(3) of the Indian Constitution includes within the definition of law forms of subordinate legislation such as order rule regulation notification. Therefore the subordinate legislation in the present case i.e. Notification No.19/2022-CE dated 19.07.2022 which was issued contrary to the provision of Section 3 of Central Excise Act read with Section 147 and 112 of Finance Act 2002 and 2018 respectively. Hence the same cannot prevail over the primary legislation - even though the Notification No.19/2022- CE created the same is not binding for the reason that the same is not in consonance with primary legislations which is Section 3 of Central Excise Act 1944 read with Section 147 of the Finance Act 2002 and Section 112 of the Finance Act 2018. This Tribunal has to give primacy to the primary legislation and not to the subordinate legislation. For levy under Section 147 and 112 of 2002 and 2018 Act respectively the taxable territory needs to be decided on the basis of Section 3 of Central Excise Act 1944 which excludes the territory of SEZ. Therefore as regard the taxable territory such exclusion shall apply mutatis mutandis for levy of SAED and AED under Section 147 of 2002 Act and 112 of 2018 of Finance Act. Similar issue has been considered in the respondent s own case by this Tribunal RELIANCE INDUSTRIES LTD. VERSUS C.C.E ST-CGST CE-RAJKOT 2024 (2) TMI 1419 - CESTAT AHMEDABAD wherein this Tribunal held that goods manufactured in the SEZ unit are not liable to said SAED ( surcharge ) AED (road and infrastructure cess) under Section 147 of Finance Act 2002 and Section 112 of Finance Act 2018 respectively. From the plain reading of the Section 51 of SEZ Act 2005 it makes clear that the provision of SEZ Act shall have overriding effect on any law or Act in respect of the provision which is inconsistent with the provision of SEZ Act. In the present case the SEZ Act exempts all duties in respect of the goods manufactured in the SEZ whereas the Revenue contented that Section 147 of Finance Act 2002 and Section 112 of Finance Act 2018 are independent Act under which the levy of SAED and AED are applicable on SEZ unit also. In this position since the Section 147 of the Finance Act 2002 and 112 of Finance Act 2018 creating an inconsistency with the provision of SEZ Act then the provision of SEZ Act overrides the provision of Finance Act 2002 and 2018. For this reason also the Revenue s proposal for levy of SAED and AED on the respondent s SEZ unit is illegal and incorrect. The respondent was not liable for payment of SAED and AED being an SEZ unit. Hence the said duties so paid are refundable to the respondent along with interest in accordance with law. As a result the revenue s appeal is dismissed.

Summary

Issues Involved:
1. Applicability of Special Additional Excise Duty (SAED) and Additional Duty of Excise (AED) on goods manufactured in SEZ.
2. Interpretation and application of Section 147 of the Finance Act 2002 and Section 112 of the Finance Act 2018.
3. Validity of exemption notifications and their retrospective application.
4. Overriding effect of SEZ Act over other laws.
5. Jurisdiction and applicability of Central Excise Act provisions to SEZ units.

Issue-wise Detailed Analysis:

1. Applicability of SAED and AED on Goods Manufactured in SEZ:
The core issue was whether goods manufactured and exported by the Respondent in the SEZ were subject to SAED and AED. The Respondent argued that since goods manufactured in SEZ are excluded from the charge of Excise Duty under Section 3(1) of the Central Excise Act 1944, they should also be excluded from SAED and AED, which are additional duties of excise. The Tribunal concurred, stating that the exclusion from basic excise duty under Section 3(1) extends to SAED and AED as these are increments to the existing duty.

2. Interpretation and Application of Section 147 of the Finance Act 2002 and Section 112 of the Finance Act 2018:
The Tribunal analyzed Sections 147 and 112, noting that these sections levy additional duties of excise. However, these levies are in addition to the duties chargeable under the Central Excise Act. The Tribunal emphasized that the provisions of the Central Excise Act, including exclusions, apply to these additional duties. Therefore, since SEZ units are excluded from excise duty under Section 3(1), they are also excluded from SAED and AED.

3. Validity of Exemption Notifications and Their Retrospective Application:
The Tribunal reviewed the exemption notifications issued on 30-06-2022 and 19-07-2022, which partially exempted and then fully exempted SEZ units from SAED and AED. The Tribunal held that these notifications did not create a charge where none existed. It was emphasized that exemption notifications cannot create a charge of duty if the primary legislation does not provide for such a charge. Therefore, the Tribunal found that the goods manufactured in SEZ were not liable for SAED and AED even before the issuance of the exemption notifications.

4. Overriding Effect of SEZ Act Over Other Laws:
The Tribunal highlighted Section 51 of the SEZ Act, which states that the provisions of the SEZ Act have an overriding effect over other laws. It was noted that the SEZ Act deems SEZs as territories outside the customs territory of India and treats goods brought from SEZ to Domestic Tariff Area (DTA) as imports. Consequently, the Tribunal concluded that goods manufactured in SEZ cannot be treated as manufactured in India for excise duty purposes, reinforcing the non-applicability of SAED and AED.

5. Jurisdiction and Applicability of Central Excise Act Provisions to SEZ Units:
The Tribunal addressed the argument that the Central Excise Act provisions should apply to SEZ units for the levy of SAED and AED. It was clarified that the Central Excise Act explicitly excludes SEZ units from excise duty under Section 3(1). The Tribunal reiterated that the provisions of the Central Excise Act, including exclusions, apply to the levy and collection of SAED and AED, thus supporting the non-applicability of these duties to SEZ units.

Conclusion:
The Tribunal upheld the Respondent's contentions, ruling that goods manufactured in SEZ are not liable for SAED and AED. The Tribunal emphasized the exclusion of SEZ units from excise duty under Section 3(1) of the Central Excise Act and the overriding effect of the SEZ Act. Consequently, the Tribunal dismissed the Revenue's appeal and affirmed the refund of duties paid by the Respondent.