20/9/2025, 12:32:41 PM 2013 (4) TMI 482 - CESTAT NEW DELHI - LB

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2013 (4) TMI 482 - CESTAT NEW DELHI - LB

Other Citation: 2013 ( 290 ) E.L.T. 372 (Tri. - LB)

KUMAR ARCH TECH PVT LTD Versus COMMISSIONER OF CENTRAL EXCISE,

JAIPUR-II

No.- Appeal No. E/618/2010

Dated:- February 22, 2013

Order No. INTERIM ORDER NO. 120/2013(PB)

Education/S&H cess - Goods cleared by 100% EOU into DTA - double taxation - whether education cess
and S&H Cess is to be levied again in respect of DTA clearances of a 100% EOU on the aggregate of the
duties of customs which already includes the education cess and S&H cess?

Held that – Sections 93 & 94 of Finance Act, 2004 and Sections 138 and 139 of Finance Act, 2007 while
defining the measure of education cess and S&H cess in respect of excisable goods and imported goods
respectively, specifically provide that the aggregate of duties of excise or aggregate of duties of customs
levied by the Central Government , on which this cess is to be levied as surcharge, would not include the
education cess and S&H cess. Thus, the intention of the legislature was never to charge education cess on
education cess. In fact this is not permissible from very mode of this levy as prescribed in Section 91 of the
Finance Act, 2004 and Section 136 of the Finance Act, 2007, as when a new tax is introduced as
surcharge on the existing levies, the base on which the new levy as surcharge is to be calculated will
include only the existing levies, not the new levy.

As decided by the Apex court in the Jain Brothers v. U.O.I., reported in [1969 (11) TMI 1] has held that
there can be no objection for double taxation if the legislature has distinctly enacted it, but while
interpreting general words of taxation, the same cannot be so interpreted as to tax the subject twice over to
the same tax. Thus, this principle which has to be kept in mind while calculating education cess and S&H
cess on DTA clearances of a 100% EOU. Since the DTA clearance of a 100% EOU attract central excise
duty and in terms of proviso to Section 3(1) of Central Excise Act, 1944, the measure of the excise duty
leviable is aggregate of duties of customs charged on import of like goods into India under Customs Act,
1962 read with Indian Customs Tariff Act, 1975 or any other law for the time being in force, this aggregate
of duties of customs on which education cess under Section 93 of Finance Act, 2004 and S&H cess under
Section 138 of Finance Act, 2007 is to be charged, would not include education cess and S&H cess under
Section 94 of Finance Act, 2004 and Section 139 of Finance Act, 2007. In other words, the education cess
and S&H cess would be chargeable only once under Section 93 of Finance Act, 2004 and Section 138 of
Finance Act, 2007 on the sum of basic customs duty and Additional customs duty.

Judgment / Order

Archana Wadhwa,Rakesh Kumar and Mathew John ,JJ.

For the Appellants : Shri Prakash Shah and Mrs Sukriti Das, Advs.

For the Respondent : Shri I Beig, DR

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INTERIM ORDER NO. 120/2013(PB)

Per: Rakesh Kumar:

The appellant are a 100% EOU. In addition to clearances for export out of India, they also make
clearances into DTA on which central excise duty is paid in accordance with the provisions of proviso to
Section 3(1) of Central Excise Act, 1944. In accordance with the proviso to Section 3(1) of Central Excise
Act, the goods manufactured by 100% EOU and cleared into DTA attract central excise duty and the
amount of central excise duty chargeable shall be equal to the aggregate of the duties of customs, which
would be leviable under Customs Act, 1962 or any other law for the time being in force on like goods
produced or manufactured outside India, if imported into India, and where the said duties of customs are
chargeable by reference to their value, the value of such excisable goods shall, notwithstanding anything
contained in any other provision of the Central Excise Act, be determined in accordance with the provision
of the Customs Act, 1962 and the Customs Tariff Act, 1975. Under Section 12 of the Customs Act, 1962,
except as otherwise provided in this Act or any other law for the time being in force, the duties of customs
shall be levied at such rates as may be specified under Customs Tariff Act or any other law for the time
being in force on the goods imported into India or exported from India. The Customs Tariff Act, 1975
specifies the various duties of customs leviable on the goods imported into India. Under Section 2 of the
Customs Tariff Act, 1975, the basic customs duties are leviable at the rate specified in the First and Second
Schedule to the Customs Tariff Act, 1975. Under Section 3(1), any goods imported into. India, in addition to
the basic customs duties chargeable under Section 2, would also attract additional customs duty in an
amount equal to the excise duty for the time being leviable on like articles if produced or manufactured in
India and under Section 3(2) if this duty is at ad valorem rate, the same shall be calculated on the amount
equal to the value of the imported articles determined under Section 14(1) of the Customs Act, 1962 or the
Tariff value fixed under Section 14(2), as the case may be, plus any customs duty chargeable under
Section 12 of the Customs Act, 1962 and any sum chargeable on that article under any law for the time
being in force as an addition to and in the same manner, as duty of customs but not including the duty
referred to in sub-section (1), (3) and (5) of Section 3 and safeguard duty, countervailing duty and anti-
dumping duty referred to in Section 8B/8C, Section 9 and Section 9A respectively of the Customs Tariff Act.
These are other additional customs duties under sub-section (3) & (5) of Section 3 and Section 3A
attracted in same cases, but we are not concerned with the some in this case.

1.1 By Section 91 read with Section 93, 94 and 95 of Finance Act, 2004, the Central Government levied
education cess as surcharge at the rate of 2% of the aggregate duties of central excise on the excisable
goods/aggregate duties of customs on the imported goods/service tax on taxable services levied and
collected under Section 66 of the Finance Act, 1944. By Section 136 read with Sections 138, 139 and 140
of the Finance Act, 2007, Central Government levied secondary and higher education cess (hereinafter
referred to a S&H cess) @ 1% in the same manner. In case of excisable goods, the education cess and
S&H is to be charged on the aggregate of all duties of excise (including special excise duty or any other
duty of excise but excluding education cess on excisable goods), which are levied and collected by Central
Government in the Ministry of Finance (Department of Revenue) under the provisions of Central Excise
Act, 1944 or any other law for the time being in force. In case of imported goods, the education cess and
S&H cess to be calculated on the aggregate of duties of customs which are levied and collected by the
Central Government in the Ministry of Finance (Department of Revenue) under Section 12 of Customs Act,
1962 and any sum chargeable on such goods under any other law for the time being in force as an
addition to, and in same manner as duty of customs but not including - (a) safeguard duty referred to in
Sections 8B/8C of Customs Tariff Act, 1975, (b) countervailing duty referred to in Section 9 of Customs
Tariff Act, 1975, (c) antidumping duty referred to in Section 9A of the Customs Tariff Act, 1975, and (d) the
education cess on imported goods.

1.2 The dispute in the present case is as to how the education cess on the excise duty chargeable on the
goods cleared by 100% EOU into DTA is to be calculated. According to the Department, first, central excise
duty chargeable on the DTA clearance of a 100% EOU is to be calculated by totalling - (a) basic customs
duty chargeable on the goods as if imported into India, (b) additional customs duty equal to the central

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excise duty under Section 3(1) read with 3(2) of the Customs Tariff Act, 1975 plus education cess and S&H
cess under Section 93 of Finance Act, 2004 and Section 138 of Finance Act, 2007 @ 2% and 1%,
chargeable on the like goods manufactured in India, and (c) education cess and S&H cess @ 2% and 1%
respectively on the total of basic customs duty and additional customs duty calculated as above under
Section 94 of Finance Act, 2004 and Section 139 of Finance Act, 2007 and then on this total, education
cess and S&H cess @ 2% and 1% respectively shall be payable again under. Section 93 of Finance Act,
2004 and Section 138 of Finance Act, 2007. According to the appellant, however, since the education cess
and S&H cess being charged as surcharge are basically central excise duty and since while calculating the
aggregate of duties of customs, education cess and S&H cess @ 2% and 1% respectively has already
been added to the total of basic customs duty and additional customs duty, there is no need to charge the
Education Cess and S&H cess once again on the central excise duty calculated in the above manner.

2. This matter had been heard by Division Bench on 17-2-2011 and by order dated 27-7-2011 [2011 (273)
E.L.T. 574 (Tri.-Del.)] the Division Bench referred the following questions of law to the Larger Bench for
decision :-

"Whether education cess and S&H cess are chargeable on DTA clearance made by 100% EOU even if
such cesses were added while calculating the aggregate duties of customs payable under the Customs Act
or any other law in force at the time imported or like goods."

3. Heard both sides.

4. Shri Prakash Shah, Advocate and Ms. Sukriti Das, Advocate, the learned Counsels for the appellant,
pleaded that the issue involved in this matter stands decided by a detailed judgment of a Coordinate
Bench of the Tribunal in the case of Sarla Performance Fibers Ltd. v. CCE, Vapi reported in 2010 (253)
E.L.T. 203 (Tri-Ahmd.) wherein the Tribunal held that once the aggregate of customs duties has been
worked out in which the education cess had also been added, the question of arrriving at quantum of
excise duty by adding education cess once again does not arise, that this order of the Tribunal had been
passed in pursuance of the order dated 28-8-2008 of Hon'ble Gujarat High Court reported in 2009 (233)
E.L.T. 43 (Bom.) after issue of a general notice enabling any person, who may be adversely affected, being
given an opportunity of being heard, that the judgment of the Tribunal in the case of Sarla Polyester
reported in 2008 (226) E.L.T. 238 referred to in the referring bench's order, is in the same matter in which
the judgment in the case of Sarla Performance Fibers Ltd. v. CCE reported in 2010 (253) E.L.T. 203 has
been passed, as the name of the appellant had been changed from M/s. Sarla Polyester Ltd. to M/s. Sarla
Performance Fibers Ltd. and in earlier judgment reported in 2008 (226) E.L.T. 238, on appeal being filed
before the Hon'ble Bombay High Court, the Hon'ble High Court had set aside the order and had remanded
the matter for de novo consideration in accordance with the law after issue of a general notice enabling
any personal adversely affected being given an opportunity of being heard, that the education cess and
S&H cess having been levied as surcharge is not a separate levy distinct from the central excise duty and
the judgment of the Hon'ble Himachal Pradesh High Court in the case of Indo Farm Tractors & Motors Ltd.
v. Union of India reported in 2008 (222) E.L.T. 184 (H.P.) referred to in the referral order is contrary to the
ratio of Apex Court's judgment in the case of Sarojini Tea Co. Pvt. Ltd. v. CC, Dibrugarh reported in 1992
(2) SCC 156 wherein Apex Court has held that expression "surcharge" in the context of taxation means an
additional imposition, which results in enhancement of tax and the nature of the additional imposition is the
same as the tax on which it is imposed as a surcharge, that in view of this, once education cess and S&H
cess is added to the sum of the basic customs duty and an Additional customs duty, the question of
charging education cess and S&H cess once again does not arise because once it is enhanced, it is part of
the relevant type of duty, that the proviso to Section 3(1) of the Central Excise Act treats the goods
manufactured and cleared from a 100% EOU into DTA at par with the imported goods for the purpose of
determining the quantum of duty and therefore, there is no question of adding education cess and S&H
once again when the education cess and S&H has already been added to the aggregate of duties of
customs i.e. basic customs duty plus additional customs duty, that when Section 93 and Section 94 of the
Finance Act, 2004 and similarly Section 138 and 139 of the Finance Act, 2007 specifically provide for
exclusion of education cess and S&H cess respectively from the aggregate of the excise duty or customs

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duty, in respect of excisable goods and imported goods respectively, there is no justification for charging
education cess and S&H cess once again on the aggregate of duties of customs which had already
included education cess and S&H cess and that in view of the above submissions, the view expressed by
coordinate bench in the Sarla Performance Fibers Ltd. - 2010 (253) E.L.T. 203 is the correct view.

5. Shri I. Beig, ld. Departmental Representative, pleaded that the education cess levied under Section 91
of the Finance Act, 2004 and S&H cess levied under Section 136 of the Finance Act, 2007 are levies
separate and distinct from the central excise duty/customs duty, that in this regard he relies upon the
judgment of the Apex Court in the case of Union of India v. Modi Rubber Ltd. and Others reported in 1986
(25) E.L.T. 849 (S.C.), wherein the Apex Court held that expression 'duty of excise' cannot be given large
amplitude to include special excise duty or additional excise duty, and that the aggregate of the duties of
customs leviable under Customs Act, 1962 or any law for the time being in force including the education
cess on the imported goods, is the measure of central excise duty leviable on the goods cleared by a
100% EOU into DTA and on this excise duty, the education cess and S&H leviable on the excisable goods
would be chargeable once again. Citing the judgment of Larger Bench of the Tribunal in the case of Vikram
Ispat v. CCE [2000 (120) E.L.T. 800 (Tri. - LB)], he emphasized that the proviso to Section 3(1) of Central
Excise Act, 1944 prescribes only a measure of the central excise duty chargeable on the DTA clearances
made by a 100% EOU and nature of the duty levied on the goods manufactured and cleared by a 100%
EOU into DTA is excise duty and nothing else, that it is well settled law that method adopted by the law
makers in recovery of tax cannot alter its character and that since the aggregate of duties of customs on
import of the like goods into India is the measure of the excise duty chargeable on the goods cleared by
100% EOU into DTA, on this aggregate of duties of customs, education cess and S&H cess would be
chargeable once again, even though the aggregate of duties of customs also include the education cess
and S&H cess. He, therefore, pleaded that the judgment of the Tribunal in the case of Sarla Performance
Fibers Ltd. (supra) is not correct.

5.1. We have considered the submissions from both the sides and perused the records. The issue for
determination is as to whether education cess and S&H Cess is to be levied again in respect of DTA
clearances of a 100% EOU on the aggregate of the duties of customs which already includes the
education cess and S&H cess. To illustrate, according to the appellant, the duty payable on the DTA
clearances made by a 100% EOU is as under :-

Basic customs duty 2.5%

Addl. Customs duty u/s 3(1) read with Sec.3(2) of Customs Tariff Act, 1975 16% on (transaction
(equal to central excise duty leviable on like goods produced or value plus basic
manufactured in India) customs duty)

Education cess under Sec. 93 of Finance Act, 2004 2% of Addl. customs

duty

S&H Education cess under Sec. 138 of Finance Act, 2007 1% of Addl. customs
duty

Aggregate of above duties of customs say X

Education cess & S&H education cess chargeable under Sec. 94 of 3% of X

Finance Act, 2004 and Sec. 139 of Finance Act, 2007

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Total X+3% of X = Y

According to the appellant, central excise duty payable on the DTA clearances is Y and on this no further
education cess and S&H cess under Section 93 of Finance Act, 2004 and Sec. 138 of Finance Act, 2007 is
payable. However, according to the department, since aggregate of duties of customs including education
cess and S&H cess thereon is the measure of the excise duty payable on the goods, the appellant would
be liable to pay education cess and S&H education cess once again on the amount Y as mentioned above,
under Section 93 of Finance Act, 2004 and Section 138 of Finance Act, 2007.

6. Education cess in respect of excisable goods and imported goods is levied under Section 91 read with
Sections 93 and 94 of the Finance Act, 2004. These sections are reproduced below :-

"91. Education Cess. - (1) Without prejudice to the provisions of sub-section (11) of Section 2, there
shall be levied and collected, in accordance with the provisions of this Chapter as surcharge for purposes
of the Union, a cess to be called the Education Cess, to fulfil the commitment of the Government to provide
and finance universalized quality basic education.

(2) The Central Government may, after due appropriation made by Parliament by law in this behalf,
utilize, such sums of money of the Education Cess levied under sub-section (11) of Section 2 and this
Chapter for the purposes specified in sub-section (1), as it may consider necessary.

93. Education Cess on excisable goods. - (1) The Education Cess levied under Section 91, in the case of
goods specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), being goods
manufactured or produced, shall be a duty of excise (in this section referred to as the Education Cess on
excisable goods), at the rate of two per cent, calculated on the aggregate of all duties of excise (including
special duty of excise or any other duty of excise but excluding Education Cess on excisable goods) which
are levied and collected by the Central Government in the Ministry of Finance (Department of Revenue),
under the provisions of the Central Excise Act, 1944 (1 of 1944) or under any other law for the time being
in force.

(2) The Education Cess on excisable goods shall be in addition to any other duties of excise chargeable
on such goods, under the Central Excise Act, 1944 (1 of 1944) or any other law for the time being in force.

(3) The provisions of the Central Excise Act, 1944 (1 of 1944) and the rules made thereunder, including
those relating to refunds and exemptions from duties and imposition of penalty shall, as far as may be,
apply in relation to the levy and collection of the Education Cess on excisable goods as they apply in
relation to the levy and collection of the duties of excise on such goods under the Central Excise Act, 1944
or the rules, as the case may be.

94. Education Cess on imported goods. - (1) The Education Cess levied under section 91, in the case
of goods specified in the First Schedule" to the Customs Tariff Act, 1975 (51 of 1975), being goods
imported into India, shall be a duty of customs (in this section referred to as the Education Cess on
imported goods), at the rate of two per cent., calculated on the aggregate of duties of customs which are
levied and collected by the Central Government in the Ministry of Finance (Department of Revenue), under
section 12 of the Customs Act, 1962 (52 of 1962) and any sum chargeable on such goods under any other
law for the time being in force, as an addition to, and in the same manner as, a duty of customs, but not
including -

(a) the safeguard duty referred to in sections 8B and 8C of the Customs Tariff Act, 1975 (51 of 1975);

(b) the countervailing duty referred to in section 9 of the Customs Tariff Act, 1975 (51 of 1975);

(c) the anti-dumping duty referred to in section 9A of the Customs Tariff Act, 1975 (51 of 1975); and

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(d) the Education Cess on imported goods.

(2) The Education Cess on imported goods shall be in addition to any other duties of customs chargeable
on such goods, under the Customs Act, 1962 (52 of 1962) or any other law for the time being in force.

(3) The provisions of the Customs Act, 1962 (52 of 1962) and the rules and regulations made thereunder,
including those relating to refunds and exemptions from duties and imposition of penalty shall, as far as
may be, apply in relation to the levy and collection of the Education Cess on imported goods as they apply
in relation to the levy and collection of the duties of customs on such goods under the Customs Act, 1962
or the rules or the regulations, as the case may be."

6.1 There are identical provisions (Section 136 read with Section 138 & 139) in Finance Act, 2007
regarding levy of Secondary and Higher Education Cess.

7. From perusal of the above provisions, it will be seen that education cess and S&H Cess are cess levied
by the Union Government as a surcharge. This surcharge in case of excisable goods attracting central
excise duty is charged on the aggregate of all duties of excise including special excise duty or any other
duty of excise but excluding education cess on exicable goods, which are levied and collected by Central
Government in the Ministry of Finance (Department of Revenue) under the provisions of Central Excise
Act, 1944 or any other law for the time being in force. Similarly, the education cess and S&H Cess on
imported goods is levied as surcharge on aggregate of duties of customs which are levied and collected by
the Central Government in the Ministry of Finance (Department of Revenue) under Section 12 of the
Customs Act, 1962 and any sum chargeable on such goods under any other law for the time being in force
as an addition to, and in the same manner as a duty of customs but not including (a) safeguard duty
referred to in Section 8B/8C of Customs Tariff Act, 1975, (b) countervailing duty referred to in Section 9 of
the Customs Tariff Act, 1975, (c) Anti-dumping duty referred to in Section 9A of the Customs Tariff Act,
1975, and (d) Education Cess on imported goods. Both the Section 93 as well as 94 of the Finance Act,
2004 and Sections 138 and 139 of the Finance Act, 2007 provide that education cess S&H cess on
excisable goods or imported gods shall be in addition to any other duties of excise/customs chargeable on
such goods under the Customs Act, 1962/Central Excise Act, 1944 or any other law for the time being in
force. However, it is also clear that there is no intention to charge cess on cess as the aggregate of duties
of excise or the duties of customs on which the cess on excisable goods or imported goods is to be
charged, is not to include the cess on excisable goods and cess on imported goods respectively. There
would be no cess on cess if the measures for the central excise duty and customs duty are independent
and there is no overlapping. However, this does not happen in all the cases and on one such instance
when this does not happen is the excise duty payable on the goods cleared by 100% EOU into DTA. In
terms of proviso to Section 3(1) of Central Excise Act, 1944, the central excise duty chargeable on the DTA
clearance of 100% EOU is an amount equal to the aggregate of duties of customs which would be leviable
under the Customs Act, 1962 or any other law for the time being in force on like goods produced or
manufactured outside India if imported into India and where the said duties of customs are chargeable at
an adv. rate the value of such excisable goods shall be determined in accordance with the provisions of
Customs Act, 1962 and the Customs Tariff Act, 1975. The proviso to Section 3(1) is reproduced below :-

SECTION 3. Duties specified in the [[First Schedule and the Second Schedule] to the Central Excise
Tariff Act, 19851 to be levied. - (1) [There shall be levied and collected in such manner as may be
prescribed, -

[a duty of excise to be called the Central Value Added Tax (CENVAT)] on all excisable goods [(excluding
goods produced or manufactured in special economic zones)] which are produced or manufactured in
India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);]

(b) special duty of excise, in addition to the duty of excise specified in clause (a) above, on excisable
goods [(excluding goods produced or manufactured in special economic zones)] specified in the Second
Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) which are produced or manufactured in India,
as, and at the rates, set forth in the said Second Schedule :]

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[Provided that the duties of excise which shall be levied and collected on any [excisable goods which are
produced or manufactured, -

[(i) * * ** * * *]

(ii) by a hundred per cent export-oriented undertaking and [brought to any other place in India],

shall be an amount equal to the aggregate of the duties of customs which would be leviable [under the
Customs Act, 1962 (52 of 1962) or any other law for the time being in force], on like goods produced or
manufactured outside India if imported into India, and where the said duties of customs are chargeable by
reference to their value; the value of such excisable goods shall, notwithstanding anything contained in any
other provision of this Act, be determined in accordance with the provisions of the Customs Act, 1962 (52
of 1962) and the Customs Tariff Act, 1975 (51 of 1975)."

7.1 Thus, the measure of central excise duty payable on the DTA clearance of a 100% EOU is the
aggregate of duties of Customs chargeable under Customs Act, 1962 and any other law for the time being
in force on import of like goods into India and if the rate of duties of ad valorem, the value for this purpose
is to be determined under the provisions of Customs Act, 1962 and Customs Tariff Act, 1975. Here the
question arises as to whether the duty of customs leviable under any other law for the time being in force
would also include the education cess and S&H Cess on imported goods levied as a duty of customs.
According to the department, the proviso to Section 3(1) of the Central Excise Act, 1944 provides only the
measure of the excise duty chargeable on the DTA clearance of a 100% EOU and this measure is the
aggregate of the duties of customs chargeable on import of like goods into India under the provisions of
Customs Act, 1962 or any other law for the time being in force and accordingly, the aggregate of duties of
customs would also include the education cess levied as customs duty under Section 94 of the Finance
Act, 2004 and S&H Cess levied as customs duty under Section 139 of the Finance Act, 2007 and since
this aggregate is the central excise duty payable on the DTA clearances, on this aggregate the education
cess and S&H cess on excisable goods would be chargeable once again under the provisions of Section
93 of the Finance Act, 2004 and Section 138 of the Finance Act, 2007.

7.2 The plea of the appellant on the other hand is that - (a) proviso to Section 3(1) is a legal fiction under
which the goods manufactured by 100% EOU and cleared into DTA are to be treated as the goods
imported into India and since on the aggregate of duties of Customs, Education Cess and S&H Cess
leviable on imported goods @ 2% and 1% respectively have already been added, there is no need to add
the education cess and S&H cess once again, and (b) the Education cess and S&H Cess being charged
as surcharge in terms of Section 91 of Finance Act, 2004 and Section 136 of the Finance Act, 2007, in
view of the Apex Court's judgment in the case of Sarojini Tea Co. Pvt Ltd. reported in (1992) 2 SCC 156,
the same have treated as mere enhancement of the tax on which the same are levied and not a different
tax and therefore once the aggregate of duties of customs i.e. basic customs duty plus additional customs
duty has been enhanced by 2% and 1%, there is no need to charge education cess and S&H cess once
again.

7.3 The Coordinate Bench in the case of Sarla Performance Fibers Ltd. reported in 2010 (253) E.L.T. 203
(Tribunal-Ahmd.) accepting the above mentioned contentions of the appellant has held that education cess
is not chargeable once again on aggregate of duties of customs, which also include the education cess on
the total of the basic customs duty and additional customs duty.

8. We do not agree with the Appellant's plea that the education cess and S&H cess being levied as
surcharge is not a separate levy, as from the wordings of Section 91 of the Finance Act, 2004 and Sec. 136
of the Finance Act, 2007, it is clear that what has been levied is a cess to be called education cess and
S&H cess to fulfil the commitment of the Central Government to provide and finance universalized quality
of basic education and Secondary and Higher education cess and this cess is to be levied as to be as
surcharge. Thus, the character of this levy is cess and the mode of the levy is surcharge and merely
because it is levied as surcharge to finance the Government's commitment to provide universalized quality
of basic education and Secondary and Higher education, it cannot be said to be a mere surcharge having

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the same character as the tax on which it is charged. The education cess and S&H cess could as well
have been levied as a percentage of the value of the goods. In fact cess is a term generally used for
taxation for some special administrative purpose. In addition to the education cess and S&H cess, there
are a number of other cesses, which are levied by different ministries and a number of them are collected
by the Department of Revenue as duty of excise. Cenvat Credit Rules, 2004 also treats education cess
and S&H cess as levies distinct and different from the excise duties. Hon'ble Gauhati High Court in case of
CCE, Shillong v. Dharampal Satyapal Ltd. reported in 2012 (275) E.L.T. 71 (Gauhati) has held that
exemption Notification No. 32/99-C.E. does not cover education cess and levy of education cess is
completely independent of the levy of excise duty. Therefore, we are of the view that just because the
education cess and S&H cess are levied as surcharge on the aggregate of excise duties or customs
duties, levied and collected by the Ministry of Finance (Department of Revenue), this cannot be treated as
mere addition to the excise duty or customs duty. In, our view, therefore, the education cess and S&H cess
have to be treated as different and distinct levies from the excise duties and customs duties on which the
same are charged.

9. We also find it difficult to accept the other plea of the appellant that proviso to Section 3(1) is a legal
fiction under which the goods manufactured by a 100% EOU and cleared into DTA are to be treated as
goods imported into India. On perusal of the proviso, we find that what this proviso provides is a measure
of central excise duty leviable on the DTA clearance of 100% EOU and this measure is the aggregate of
the duties of customs on the import of like goods into India and if the rate of duty is ad valorem, duty is to
be calculated on the value determined under the provisions of Customs Act, 1962 and Customs Tariff Act,
1975. In fact a Larger Bench of the Tribunal in the case of Vikram Ispat reported in 2000 (120) E.L.T. 800
(Tribunal-LB) has held that the duty chargeable on the DTA clearance of a 100% EOU is a central excise
duty and the method adopted by the law makers in recovering this duty cannot alter its character and what
the proviso to Section 3(1) of Central Excise Act, provides is only the measure of the central excise duty
leviable on the DTA clearances of a 100% EOU. Therefore, in our view, it would not be correct to treat the
clearance of the goods manufactured by 100% EOU into DTA as deemed imports into India.

10. However, we are not in agreement with the stand of the Revenue for another reason. The charging
provisions of education cess and S&H cess are Section 91 of the Finance Act, 2004 and Section 136 of the
Finance Act, 2007 respectively according to which,' this levy is a 'cess' levied as surcharge to enable the
Central Government to finance its commitment to provide universalized quality of basic education and
secondary and higher education. Surcharge on a tax means additional tax on that tax. As discussed
above, though education cess and S&H cess being cess to enable the Government to finance its
expenditure on providing basic education and secondary and higher education, is a levy different and
distinct from the tax on which it is levied as surcharge, the mode or measure of this levy is surcharge at the
rate of 2% and 1% on the existing levies i.e. the taxes being collected by the Government as -

(a) Central excise duties under Central Excise Act, 1944 or any other law in force;

(b) customs duties under Customs Act, 1962 read with Customs Tariff Act, 1975 or any other law in force;
and

(c) Service tax levied under Section 66 of the Finance Act, 1994.

Since the cess levied as surcharge under Section 91 of Finance Act, 2004 and Section 136 of Finance
Act, 2007 has to be on the existing levies, the existing levies, obviously, would not include this cess.

For this reason only, Sections 93 & 94 of Finance Act, 2004 and Sections 138 and 139 of Finance Act,
2007 while defining the measure of education cess and S&H cess in respect of excisable goods and
imported goods respectively, specifically provide that the aggregate of duties of excise or aggregate of
duties of customs levied by the Central Government in the Ministry of Finance (Deptt. of Revenue), on
which this cess is to be levied as surcharge, would not include the education cess and S&H cess. Thus,
the intention of the legislature was never to charge education cess on education cess. In fact this is not
permissible from very mode of this levy as prescribed in Section 91 of the Finance Act, 2004 and Section

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136 of the Finance Act, 2007, as when a new tax is introduced as surcharge on the existing levies, the
base on which the new levy as surcharge is to be calculated will include only the existing levies, not the
new levy. If the Revenue's stand is accepted, and on the sum of Basic customs duty and Addl. Customs
duty, first "cess on imported goods" under Section 94 of Finance Act, 2004 and Section 139 of Finance Act,
2007 is charged as duty of customs and on the aggregate of duties of customs, "cess on excisable goods,"
under Section 93 of Finance Act, 2004 and Section 138 of Finance Act, 2007 is charged, it would amount
to charging education cess on education cess for which there is no sanction in law. Apex Court in case of
Jain Brothers v. U.O.I., reported in (1970) 77 ITR 107 has held that there can be no objection for double
taxation if the legislature has distinctly enacted it, but while interpreting general words of taxation, the
same cannot be so interpreted as to tax the subject twice over to the same tax. In our view, it is this
principle which has to be kept in mind while calculating education cess and S&H cess on DTA clearances
of a 100% EOU. Since the DTA clearance of a 100% EOU attract central excise duty and in terms of
proviso to Section 3(1) of Central Excise Act, 1944, the measure of the excise duty leviable is aggregate of
duties of customs charged on import of like goods into India under Customs Act, 1962 read with Indian
Customs Tariff Act, 1975 or any other law for the time being in force, this aggregate of duties of customs on
which education cess under Section 93 of Finance Act, 2004 and S&H cess under Section 138 of Finance
Act, 2007 is to be charged, would not include education cess and S&H cess under Section 94 of Finance
Act, 2004 and Section 139 of Finance Act, 2007. In other words, the education cess and S&H cess would
be chargeable only once under Section 93 of Finance Act, 2004 and Section 138 of Finance Act, 2007 on
the sum of basic customs duty and Additional customs duty.

11. The point referred by the referring bench stands answered as above.

(Pronounced on 22-2-2013)

12. Per: Mathew John, Member (T), - While I agree with the final finding as recorded above, I would like
to add my reasoning for the same in a different manner in the following paragraphs.

13. The whole matter is centred around Section 3 of Central Excise Act, 1944 in so far as it relates to
duties payable on goods cleared from a hundred per cent export oriented undertaking when goods are
cleared to Domestic Tariff Area (DTA). The said provision is reproduced below:

"3(1) There shall be levied and collected in such manner as may be prescribed, -

(a) a duty of excise to be called the Central Value Added Tax (CENVAT) on all excisable goods
(excluding goods produced or manufactured in special economic zones) which are produced or
manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act,
1985 (5 of 1986);

(b) a special duty of excise, in addition to the duty of excise specified in clause (a) above, on excisable
goods (excluding goods produced or manufactured in special economic zones) specified in the Second
Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) which are produced or manufactured in India,
as, and at the rates, set forth in the said Second Schedule :

Provided that the duties of excise which shall be levied and collected on any

excisable goods which are produced or manufactured, -

(i) * * * * * * *

(ii) by a hundred per cent export-oriented undertaking and brought to any other place in India, shall be
an amount equal to the aggregate of the duties of customs which would be leviable under the Customs
Act, 1962 (52 of 1962) or any other law for the time being in force, on like goods produced or
manufactured outside India if imported into India, and where the said duties of customs are chargeable by
reference to their value; the value of such excisable goods shall, notwithstanding anything contained in any

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other provision of this Act, be determined in accordance with the provisions of the Customs Act, 1962 (52
of 1962) and the Customs Tariff Act, 1975 (51 of 1975)."

14. We are concerned with clause (ii) of the proviso. The sum and substance of Revenue's argument is
that the expression "duties of excise" used in the proviso will not include education cess and secondary &
higher education cess. But the expression "duties of customs" used in the same proviso will include
education cess and secondary & higher education cess. So first "duties of customs" have to be calculated
including education cesses (Twice - once as a part of duty under Section 3(1) of Customs Tariff Act, 1975,
as per provisions of Section 93 of Finance Act, 1994 and Section 138 of Finance Act, 2007 imposing
cesses on excisable goods and again as per provisions of Section 94 of Finance Act, 1994 and Section
139 of Finance Act, 2007 imposing such cesses on goods imported into India). Then it is argued that the
said cesses should again be applied for a third time under Section 93 of Finance Act, 1994 and Section
138 of Finance Act, 2007 on the said aggregate so worked out for the reason that "duties of excise"
mentioned in the proviso does not include such cesses.

15. I do not agree with the argument because it disturbs the principle that duties payable on goods cleared
into DTA from a hundred per cent export oriented unit should be on par with the duties payable on goods
imported from abroad into the country. Secondly if the expression "duties of customs" in the said proviso is
interpreted to mean duty including education cesses the expression "duties of excise" used in the same
expression should also be interpreted in a similar manner in which case there is no scope for including the
cesses for a third time in the calculation.

16. So I agree with the order as recorded above.

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Citations:

1. 1992 (1) TMI 340 - Supreme Court

SAROJINI TEA CO. (P) LTD Versus. COLLECTOR OF DIBRUGARH, ASSAM AND ANR
2. 1986 (8) TMI 60 - Supreme Court
UNION OF INDIA AND OTHERS Versus MODI RUBBER LIMITED AND OTHERS
3. 1969 (11) TMI 1 - Supreme Court
Jain Brothers And Others Versus Union of India And Others
4. 2011 (8) TMI 99 - GAUHATI HIGH COURT
Commissioner of Customs and Central Excise, Shillong Versus M/s Dharampal Satyapal Limited,
Guwahati
5. 2008 (8) TMI 359 - HIGH COURT OF JUDICATURE AT BOMBAY
SARLA PERFORMANCE FIBERS LTD. Versus COMMISSIONER OF C. EX. & CUSTOMS
6. 2007 (7) TMI 150 - HIGH COURT, HIMACHAL PRADESH
INDO FARM TRACTORS & MOTORS Versus UNION OF INDIA
7. 2011 (7) TMI 490 - CESTAT, NEW DELHI
KUMAR ARCH TECH PVT. LTD. Versus COMMISSIONER OF C. EX., JAIPUR-II
8. 2010 (2) TMI 335 - CESTAT, AHMEDABAD
SARLA PERFORMANCE FIBERS LTD. Versus COMMISSIONER OF C. EX., VAPI
9. 2008 (3) TMI 72 - CESTAT, AHMEDABAD
SARLA POLYESTER LTD. Versus COMMISSIONER OF CENTRAL EXCISE, VAPI
10. 2000 (8) TMI 111 - CEGAT, NEW DELHI
VIKRAM ISPAT Versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III

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