AGRICULTURE AND INFRASTRUCTURE DEVELOPMENT CESS

[Mr. M. GOVINDARAJAN]

Cess on imported goods

Clause 115 of Finance Bill, 2021 provides for the levy of cess called ‘Agriculture and Infrastructure Development Cess’ on imported goods.  Clause 115(1) provides that there shall be levied and collected, in accordance with the provisions of this section, for the purposes of the Union, a duty of customs, to be called Agriculture Infrastructure and Development Cess, on the goods specified in the First Schedule to the Customs Tariff Act, 1975, being the goods imported into India, at the rate not exceeding the rate of customs duty as specified in the said Schedule, for the purposes of financing the agriculture infrastructure and other development expenditure.

Cess on excisable goods

Clause 116 of the Finance Bill, 2021 provides that there shall be levied and collected, in accordance with the provisions of this section, for the purposes of the Union, an additional duty of excise, to be called Agriculture Infrastructure and Development Cess, on the goods specified in the Seventh Schedule, being the goods manufactured or produced, at the rates specified in column (3) of the said Schedule, for the purposes of financing the agriculture infrastructure and other development expenditure.

Utility of Cess

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

Valuation of cess

Where the duty is leviable on the goods at any percentage of its value, then, for the purposes of calculating the Agriculture Infrastructure and Development Cess under this section, the value of such goods shall be calculated in the same manner as the value of goods is calculated for the purpose of customs duty under section 14 of the Customs Act, 1962.

Additional duty

The Agriculture Infrastructure and Development Cess on imported goods shall be in addition to any other duties of customs chargeable on such goods, under the Customs Act, 1962 or any other duties of excise chargeable on such goods under the Central Excise Act, 1944 or any other law for the time being in force.

Application of customs provisions

The provisions of the Customs Act, 1962 and the rules and regulations made there under, including those relating to assessment, non-levy, short-levy, refund, exemptions, interest, appeals, offences, and penalties shall, as far as may be, apply in relation to the levy and collection of the Agriculture Infrastructure and Development Cess on imported goods as they apply in relation to the levy and collection of duties of customs on such goods under the said Act, or the rules or regulations, as the case maybe.

Applicability of provisions of Central Excise Act

The provisions of the Central Excise Act, 1944 and the rules and the regulations made there under, including those relating to assessment, non-levy, short-levy, refund, exemptions, interest, appeals, offences, and penalties shall, as far as may be, apply in relation to the levy and collection of the cess leviable under this section in respect of scheduled goods as they apply in relation to the levy and collection of duties of excise on such goods under the said Act or the rules or regulations, as the case maybe.

Exemption from Cess

Vide Notification No. 11/2021-Customs, dated 01.02.2021,  the Central Government exempts goods of the description specified in column (3) of the Table below and falling within the Chapter, heading or sub-heading or tariff item of the First Schedule to the Customs Tariff Act, 1975 as specified in column (2) of the said Table, from so much of the Agriculture.   Infrastructure and Development Cess leviable thereon under the said clause of the Finance Bill, 2021, as is in excess of the amount calculated at the rate specified in column (4) of the said Table.

Table 

Sl.No.	Chapter or heading or subheading or tariff item of the First Schedule	Description of goods	Rate
(1)	(2)	(3)	(4)
1.	0713 10	All goods	40%
2.	0713 20 10	All goods	30%
3.	0713 20 20	All goods	50%
4.	0713 20 90	Chick Peas (Garbanzos)	50%
5.	0713 40 00	Lentil (Mosur)	20%
6.	0808 10 00	All goods	35%
7.	1511 10 00	All goods	17.5%
8.	1507 10 00, 1512 11 10	All goods	20%
9.	2204, 2205, 2206, 2208	All goods	100%
10.	2701, 2702, 2703	All goods	1.5%
11.	3102 10 00, 3102 30 00	All goods	5%
12.	31	Muriate of potash, for use as manure or for the production of complex fertilizers	5%
13.	3105 30 00	Di-ammonium phosphate, for use as manure or for the production of complex fertilizers	5%
14.	5201	All goods	5%
15.	7106 or 98	Silver, including silver dore	2.5%
16.	7108 or 98	Gold, including gold dore	2.5%
17.	Any Chapter	All goods other than goods mentioned against serial numbers 1 to 16 above.	Nil
18.	Any Chapter	All goods on which exemption from basic customs duty is claimed and allowed under the advance authorization.	Nil
19.	Any Chapter	All goods on which exemption from basic customs duty is claimed and allowed under the notifications, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), mentioned in the ANNEXURE.	Nil

Clarification on payment of Cess by EOUs

The Government of India vide Notification No. 11/2021- Customs dated 1st February, 2021  vide Sr. no. 19 read with serial no. 7 of the Annexure to the said notification has fully exempted goods imported by EOUs/EHTP units/STP units (collectively called EOUs) from the Cess as the goods imported by these units enjoy benefit of exemption from basic customs duty.

In case of EOU selling finished goods in DTA, BCD exempted on import of inputs used in such finished goods is to be paid vide Notification No. 59/2017- Customs, dated 30.06.2017 [amending by Notification No. 52/2003 - Customs, dated 31.03.2003]. On payment of such BCD by EOU at the time of clearance of finished goods it is treated as if no exemption of BCD was allowed to the EOU under Notification No. 52/2003 – Customs, dated 31.03.2003. Once it is deemed that no exemption of BCD on inputs is allowed which were imported under exemption Notification No. 52/2003 – Customs, dated 31.03.2003, the Cess exemption under Notification no. 11/2021-Customs dated 01.2.2021 also gets denied on such inputs and same is also required to be paid by EOU.

 In addition to clearance of goods in DTA there are many situations like clearance of inputs; capital goods; packing material suitable for repeated use such empty cones, bobbins, containers; left over textile fabric or textile material etc. or exit from EOU scheme. In such cases duty/tax of which exemption under Notification No. 52/2003 – Customs, dated 31.03.2003 was availed at the time of import is required to be paid at the time of clearance. In case of clearance of capital goods, applicable depreciation is allowed for denial of exemption. Unutilized left over textile fabric or textile material is allowed to be cleared into DTA on payment of duty leviable at the time of import but for the exemption on transaction value as if the goods have been manufactured in that unit. Exemption of duty/tax on goods imported under Notification No. 52/2003-Customs,  dated 31.03.2003 is also denied on account of breach of various conditions of EOU scheme. Once EOU is required to pay back BCD for which exemption was claimed and allowed under Notification No. 52/2003 – Customs, dated 31.03.2003 at the time of import then exemption of AIDC, if availed, in all such situations shall also be denied. Thus, EOU shall be required to pay AIDC in the manner of payment of BCD against the goods imported under exemption Notification No. 52/2003 - Customs dated 31.03.2003 under various situations.

           EOU/STP/EHTP are required to maintain and also submit digital copy of Form – A to Circular no. 35/2016-Customs dated 29.07.2016, by 10^th  of month to proper officer, which captures the summary of receipt, removal, returns and balance of imported goods under Notification No. 52/2003 – Customs, dated 31.03.2003. Copy of Quarterly Performance Report and Annual Performance Reports [QPR/APR] are also required to be submitted to jurisdictional AC/DC of Customs as mandated by DGFT Public Notice no. 36/2015-2020, dated 04.09.2018. Though QPR/APR contain details of various activities including revenue contribution by EOUs but these are reflected in consolidated manner and these reports may be a monitoring tool for departmental officers with limitations. However, for effective and monthly monitoring of exemption of duty/taxes availed under Notification No. 52/2003-Customs, dated 31.03.2003, the said Form ‘A’ is amended and revised. Circular no. 35/2016-Customs, dated 29.07.2016 may be treated as amended to above extent.