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2019 (3) TMI 1427 - SC - Central ExciseArea based exemption - Liability towards National Calamity Contingent Duty (NCCD), Education Cess and Secondary Higher Education Cess - manufacturing establishment which is exempted from payment of Central Excise Duty - appellant was apparently paying an automobile cess, but the NCCD, Education Cess and Secondary Higher Education Cess were not being paid - Section 136 of the Finance Act, 2001. Held that - Sections 91 93 of the Finance Act, 2004 introduced the Education Cess as a duty of excise calculated on the aggregate of all duties of excise. Sections 136 138 of the Finance Act of 2007 similarly imposed Secondary Higher Education Cess, on the same pattern as the Education Cess - It is relevant to note that in terms of the show cause notice, the cesses were being so demanded on account of the fact that they had not been specifically exempted, even though they were a duty in the nature of excise, whether leviable on the product (NCCD) or on the amount of excise duty payable (Education Cess and Secondary Higher Education Cess). The Department took a legal stand that the exemption notification had to be construed strictly and that there had been wilful suppression of facts. The demand raised was also specified. There was an initiative for development of industries in the North-Eastern States of Assam, Tripura, Meghalaya, Mizoram, Manipur, Nagaland, Arunachal Pradesh, etc. A Notification exempting goods from payment of excise duties was issued in respect of those States. Education Cess and Secondary Higher Education Cess, as imposed under the Finance Acts of 2004 and 2007, respectively were also sought to be levied on the appellant therein. The gravamen of the reasoning of this Court is that since these cesses are a surcharge levied and collected on the total value of the excise duty, and the excise duty itself is exempted, there cannot be any question of any recovery of these cesses, as the substratum does not exist. Not only that, this Court also took into account how the Department itself had viewed the situation regarding Education Cess and Secondary Higher Education Cess, which are payable as surcharge on the excise duty, once the excise duty is exempted. Levy of NCCD - Held that - The exemption notifications, like the one in question must be read in a manner that give them a liberal interpretation, provided that no violence is done to the language employed. The rationale for the same is well enunciated in Novopan India Ltd., Hyderabad v. CCE and Customs, Hyderabad, 1994 (9) TMI 67 - SUPREME COURT OF INDIA apart from in other judicial pronouncements. In such cases, it is not as if the principle of strict interpretation of tax law has been given a complete go by, but that rule of interpretation would apply at a different stage, i.e., to determine whether the exemption is applicable to the assessee or not. Once such exemption is indeed found to be applicable to the assessee in question, a liberal approach is to be adopted by the Court in construing the language, such as to allow the benefit to be reaped by the beneficiary in question. When NCCD, at the time of collection, takes the character of a duty on the product, whatever may be the rationale behind it, it is also subject to the provisions relating to excise duty, applicable to it in the manner of collection as well as the obligation of the taxpayer to discharge the duty. Once the excise duty is exempted, NCCD, levied as an excise duty cannot partake a different character and, thus, would be entitled to the benefit of the exemption notification. The exemption notification also states that the exemption is from the whole of the duty of excise or additional duty of excise . Also the exemption itself is for a period of ten years from the date of commercial production of the unit - the appellant would not be liable to pay the NCCD. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Liability towards National Calamity Contingent Duty (NCCD) 2. Liability towards Education Cess 3. Liability towards Secondary & Higher Education Cess Detailed Analysis: 1. Liability towards National Calamity Contingent Duty (NCCD): The appellant, a manufacturing establishment, was exempted from Central Excise Duty (CENVAT) under the Central Excise Act, 1944, but the dispute arose over the liability to pay NCCD. NCCD was imposed under Section 136 of the Finance Act, 2001, as a duty of excise in addition to other excise duties. The appellant argued that NCCD should also be exempted as it is in the nature of excise duty. The Supreme Court held that NCCD, though levied on the product, retains the character of an excise duty. Thus, since the excise duty itself is exempted, NCCD should also be exempted. The exemption notification states that the exemption is from the "whole of the duty of excise or additional duty of excise." Therefore, the appellant was not liable to pay NCCD. 2. Liability towards Education Cess: The Education Cess was introduced under Sections 91 & 93 of the Finance Act, 2004, as a duty of excise calculated on the aggregate of all duties of excise. The Supreme Court referred to the judgment in SRD Nutrients Pvt. Ltd. v. Commissioner of Central Excise, Guwahati, which held that since Education Cess is a surcharge on excise duty and the excise duty itself is exempted, there cannot be any recovery of Education Cess. The Court also noted that the Department had clarified in a circular that if goods are fully exempted from excise duty, no Education Cess would be leviable on such clearances. Therefore, the appellant was not liable to pay Education Cess. 3. Liability towards Secondary & Higher Education Cess: Similar to the Education Cess, the Secondary & Higher Education Cess was imposed under Sections 136 & 138 of the Finance Act, 2007, on the same pattern as the Education Cess. The Supreme Court held that the principles applicable to Education Cess also apply to Secondary & Higher Education Cess. Since these cesses are levied as a surcharge on excise duty and the excise duty is exempted, there cannot be any recovery of Secondary & Higher Education Cess. Therefore, the appellant was not liable to pay Secondary & Higher Education Cess. Conclusion: The Supreme Court set aside the impugned orders and quashed the show cause notice dated 26.8.2011, holding that the appellant is not liable to pay NCCD, Education Cess, and Secondary & Higher Education Cess. The appeal was allowed, and the parties were directed to bear their own costs.
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