2008 (8) TMI 359 - HC - Central Excise

Export Oriented Unit - DTA clearance - levy of Education cess - whether the goods manufactured by hundred per cent EOU when sold in India can be subjected to levy of Education Cess under the Central Excise Act? - Held that - appeal is remitted back to the tribunal for de novo consideration and decision in accordance with law.

Summary

Issues Involved:
Whether goods manufactured by a hundred percent Export-Oriented Undertaking (EOU) when sold in India can be subjected to the levy of Education Cess under the Central Excise Act.

Analysis:

1. Treatment of EOU Goods as Imported Goods:
The primary issue in this appeal was whether goods manufactured by an EOU and sold in India should be treated as imported goods for the purpose of calculating excise duty and Education Cess. The court noted that under the proviso to Section 3 of the Central Excise Act, goods manufactured in an EOU and brought to any other place in India are treated as imported goods for excise duty calculation. The court observed that this statutory fiction created by the legislature implies that even though the goods are manufactured in India, they are considered imported goods for excise duty purposes. The court found substance in the argument that this fiction should also extend to the calculation and levy of Education Cess under Section 93 of the Finance Act, as Education Cess is treated as part of excise duty.

2. Tribunal's Approach and General Notice:
The court highlighted that the tribunal had not considered the issue from the perspective of the statutory fiction created by the legislature. It emphasized that the tribunal should have analyzed the purpose behind this fiction and whether it could be extended to the levy of Education Cess. The court emphasized the importance of the decision, noting that it could impact numerous EOUs. Consequently, the court directed the tribunal to set aside the impugned order and reconsider the appeal. The tribunal was instructed to contemplate issuing a general notice to allow any person representing an EOU to address the tribunal on this crucial question, ensuring a well-considered decision is made.

In conclusion, the High Court set aside the impugned order, remitted the appeal back to the tribunal for fresh consideration, and directed the tribunal to assess the issue of treating EOU goods as imported goods for the levy of Education Cess. The court's decision aimed to ensure a comprehensive and just resolution considering the potential widespread implications of the issue on EOUs.