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TMI Blog2012 (7) TMI 1064X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration before this Court in the above mentioned case of Gujarat Ambuja Exports Ltd. Anr.(Supra). This Court held as under: Having thus heard the learned counsel for the parties and having perused the documents on record, we may notice that education cess was introduced in the year 2004-05 by enacting sections 81 to 85 in the Finance Act, 2004. These provisions are included in Chapter VI titled 'Education Cess'. Section 81 which is the charging section provides inter alia that there shall be levied and collected, in accordance with the provisions of this Chapter, as surcharge for the purposes of the Union, a cess called the Education Cess to fulfil commitment of the Government to provide and finance universalised quality basic education. Section 83 pertains to levy of education cess on the specified goods manufactured or produced in India. Section 84 which is relevant for our purpose pertains to education cess to be levied in case of specified goods at the rate of 2% calculated on the aggregate of duties of customs which are levied and collected by the Central Government. Section 84 reads as under:- 84. (1) The Education Cess levied under section 81, in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng global market opportunities and to stimulate sustained economic growth by providing access to essential raw materials, intermediates, components, consumables and capital goods required for augmenting production. Chapter 7 of the Export and Import Policy pertains to duty exemption schemes. Various duty remission schemes framed by the Government enables post export replenishment/remission of duty on the inputs used in the export production. Duty Entitlement Passbook Scheme is one such duty remission schemes. The object of DEPB scheme is to neutralise the incidence of customs duty on the import component of the export product. Such neutralisation is provided by way of grant of duty credit against export product. In such a scheme, an exporter may apply for credit, as a specified percentage of FOB value of exports made in freely convertible currency. The credit shall be available against such export products and at such rates as may be specified by the Director General of Foreign Trade. The duty credit under the scheme would be calculated by taking into account the deemed import component of an export product as per the SION norms and the basic customs duty payable on such deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority in terms of paragraph 4.3 of the Export and Import Policy; (ii) the importer has been permitted credit entries in the said Duty Entitlement Pass Book by the Licensing Authority at the rates notified by the Government of India in the Ministry of Commerce for the products exported; (iii)the said Duty Entitlement Pass Book is produced before the proper officer of Customs for debit of the duties leviable on the goods but for exemption contained herein: From the nature of DEPB scheme and the exemption granted to imports made under such scheme, it can be seen that the very purpose is to neutralise the import duty component on the imported goods used for production of export items. Such object is achieved through the DEPB scheme under which the exporter is given the facility of utilising the credits in the DEPB scrips for the purpose of adjustment against the customs duty liability on the goods imported for the ultimate purpose of export on value addition. We may recall that Chapter 7 of the Export import Policy pertains to duty exemption/remission schemes. Para 7.1 thereof provides that the duty exemption scheme enables import of inputs required for export production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Ltd. (supra) appeals to us. In the said decision, the Tribunal taking note of the provisions contained in section 81 and 84 of the Finance Act, 2004 held that the impugned circular No.5/2005 is not legally sustainable. The Tribunal held that crediting and debiting of entries in the passbook is a matter of procedure and convenience and in essence, the Notification No.45/2002 provides for full exemption from payment of customs duty. We may also recall that the Larger Bench of the Tribunal in the case of Essar Steel Ltd. (supra) held that mere entry in the DEPB book is not sufficient for eligibility of Modvat credit availed on the strength of Bill of Entry where the importer had availed of benefit of the exemption from payment of customs duty. This would further go to show that while no customs duty is paid, there would be no question of availing Modvat credit on such duty. We may notice that vide circular dated 8-7-2004, the Ministry of Finance, in a question whether goods that are fully exempt from excise/customs duty or are cleared without payment of such duty would be subject to education cess, clarified that the education cess is leviable at the rate of 2% of the aggreg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Customs Act, 1962, no education cess is demanded by the respondents. In fact, the impugned notification itself is sufficiently clear and records that imports against Advanced Licences are exempt from all duties of customs and therefore, it follows that education cess at 2% is not leviable on such imports. In case of DEPB, however, a distinction is sought to be drawn on the premise that though the importers are governed by exemption notification, the fact remains that in case of such imports, the duty is debited from DEPB scrip. To our mind, such distinction is not valid. The clarificatory circular itself refers to the imports made under the DEPB scheme being covered under exemption notification. Such exemption is, of course, subject to fulfillment of certain conditions. One of the conditions includes that of adjustment of credit in the DEPB scrip. This, however, is merely procedural in nature and would not change the nature of benefit from one being of exemption. Respondents, however, have contended that Education Cess is not exempt under Notification No.5/2002 and the importer therefore cannot pay the same on imports made under the DEPB scheme. We may recall that under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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