TMI Blog2014 (1) TMI 1469X X X X Extracts X X X X X X X X Extracts X X X X ..... ses and in the manner provided in the Constitution - Any cess levied and collected in order to constitute a fee after such collection should go into a special fund earmarked for carrying out the purpose of the Act. The said fund so set apart should be appropriated specifically for the performance of the specified purpose and it should not be merged in the public revenues. In other words, the cess levied by way of fee is not intended to be and does not become a part of the Consolidated Fund. It should be earmarked and set apart for the purpose of services for which it is levied. Then only it should be described as a fee and not tax. If the cess levied and collected is credited to the Consolidated Fund of India and it has to be appropriated by the Parliament by law and then only the said amount could be credited to the Fund; it ceases to be a fee and partakes the character of a duty or a tax. Section 4 of the Act explicitly provides that the proceeds of the duty of excise levied under Section 3 shall be credited to the Consolidated Fund of India. Sub-Section (2) of Section 3 of the Sugar Development Fund Act, 1982, provides that the amount so credited, shall after due appropriatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time of import by the assessee, apart from the Basic Customs Duty, he is entitled to the CENVAT Credit in terms of clause (vii) of Rule 3 of CENVAT Credit Rules, 2004. Assessee was entitled to claim CENVAT credit in respect of the cess paid as additional duty (CVD) on raw sugar imported under the Sugar Cess Act of 1982 read with Section 3 of the Customs Tariff Act, 1975 - Decided against Revenue. - CEA No.14 of 2008 - - - Dated:- 6-8-2013 - N Kumar And H S Kempanna, JJ . For the Appellant : Sri S.N. Rajendra, Advocate For the Respondent : Sri K.S. Ravishankar, Advocate and Sri N. Anand, Advocate JUDGEMENT :- This appeal is preferred against the order passed by the CESTAT holding that Sugar Cess being a duty of excise in terms of Section 3(4) of the Sugar Cess Act, CENVAT Credit Rules are also applicable to Sugar Cess and therefore CENVAT credit taken on Sugar Cess paid as countervailing duty or CVD is proper and the assessee is entitled to the said benefit of CENVAT Credit. FACTUAL MATRIX 2. The assessee M/s Renuka Sugars Ltd. imported 260450 quintals of raw sugar during October 2003 to Feb 2004. They paid Rs. 36,46,300/- as cess leviable under Sugar C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2004 respectively. It is only those duties and additional duties which are eligible for availment of credit. The cess leviable under the provisions of the Act is not at all specified under Rule 3(1)(vii) of the said Rules as eligible for taking Cenvat Credit. Therefore, he did not find any merit in the assessee's contention and upheld the demand raised in the show cause notice. 5. Aggrieved by the said order the assessee preferred an appeal before the Commissioner (Appeals), Mangalore. The appeal came to be rejected by an order dated 03.01.2007 upholding the demand of the Additional Commissioner. Aggrieved by the said order the assessee preferred an appeal to the CESTAT. The Tribunal held that, when the provisions of the Central Excise Act and the Rules made there under are made applicable to the Sugar Cess Act in terms of section 3(4) thereof, then it goes without saying that the provisions of CENVAT Credit Rules would also be applicable. The CENVAT Credit Rules are framed by virtue of the powers derived from the Central Excise Act. Therefore, there is nothing wrong in taking credit of the sugar cess paid as countervailing duty on imported sugar and when such credit is utilize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it is necessary to find out whether the cess paid under the Act is a fee or a tax. The Act was enacted to provide for imposition of cess on sugar for the development of sugar industry and for matters connected therewith. Section 3 is the charging Section. It reads as under:- "3. Imposition of cess. - (1) There shall be levied and collected as a cess, for the purposes of the Sugar Development Fund Act, 1982, a duty of excise on all sugar produced by any sugar factory in India, at such rate not exceeding fifteen rupees per quintal of sugar, as the Central Government may, by notification in the Official Gazette, specify from time to time: Provided that until such rate is specified by the Central Government, the duty of excise shall be levied and collected at the rate of fourteen rupees per quintal of sugar. (2) The duty of excise levied under sub-section (1) shall be in addition to the duty of excise leviable on sugar under the Central Excises and Salt Act, 1944 (1 of 1944) or any other law for the time being in force. (3) The duty of excise levied under sub-section (J) shall be payable by the occupier of the sugar factory in which sugar is produced. (4) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r from sub-Section (2). The way sub-Section (2) is worded makes it clear that what is levied and collected as a cess under sub-Section (1) of Section 3 is characterized as a "duty of excise" levied under "the Central Excise Act". Further, sub-Section (4) makes it clear that the provisions of the Central Excise Act and the Rules made thereunder including those relating to refunds and exemptions from duty shall, so far as may be, apply in relation to the levy and collection of the said duty of excise as they apply in relation to the levy and collection of the duty of excise on sugar under that Act. In other words, the provisions of the Central Excise Act and the Rules made there under are read into the Act. Levy and collection of cess under the Act is treated as levy and collection of a duty of excise on sugar under the Central Excise Act. 13. The effect of such incorporation is clear from the judgment of the Supreme Court in Bangalore Jute Factory Co vs. Inspector of Central Excise, 1992 (57) ELT 3 (S.C.), wherein the observations made by Lord Esher M.R. in 1886 31. Chancellary Division 607/615 were referred to in para 18 of the judgment which reads as under: If a subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another V. State of Punjab another reported in (1980) 1 SCC 416 in which it was held, the quid pro quo must exist between the payer of the fee and the special services rendered. It was observed: "that a fee is a charge for special services rendered to individuals by the Governmental Agency and therefore for a levy of fee an element of quid pro quo for the service rendered was necessary; service rendered does not mean any personal or domestic service and it meant service in relation to the transaction, property or the institution in respect of which the fee is paid. The element of quid pro quo may not be possible or even necessary to be established with arithmetical exactitude but even broadly and reasonably it must be established, with some amount of certainity, reasonableness or preponderence of probability that quite a substantial portion of the amount of fee realized is spent for the special benefit of its payers. Each case has to be judged from a reasonable and practical point of view for finding an element of quid pro quo. 18. The Constitution Bench of the Apex Court in the case of Hingir Rampur Coal Co. Ltd., Vs. State of Orissa reported in 1961 (2) SCR 537 explain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arise. In such a case it is necessary to enquire, what, is the primary object of the levy and the essential purpose which it is intended to achieve. Its primary object and the essential purpose must be distinguished from its ultimate or incidental results or consequences. That is the true test in determining the character of the levy." 19. Again, yet another Constitution Bench of the Apex Court in the case of State of W.B. v. Kesoram Industries Ltd. Ors. - 2004 (10) SCC 201 explained the distinction between the terms tax and fee' in the following words: The term cess is commonly employed to connote a Tax with a purpose or a tax allocated to a particular thing. However, it also means an assessment or levy. 3 (2004) 10 SCC 201. Depending on the context and purpose of levy, cess may not be a tax; it may be a fee or fee as well. It is not necessary that the services rendered from out of the fee collected should be directly in proportion with the amount of Fee collected. It is equally not necessary that the services rendered by the Fee collected should remain confined to the person from whom the fee has been collected. Availability of indirect benefit and a general nexus betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he whole or part of the net proceeds of certain taxes and duties to States, all revenues received by the Government of India, all loans raised by that Government by the issue of treasury bills, loans or ways and means advances and all moneys received by that Government in repayment of loans shall form one consolidated fund to be entitled "the Consolidated Fund of India" and all revenues received by the Government of a State, all loans raised by that Government by the issue of treasury bills, loans or ways and means advances and all moneys received by that Government in repayment of loans shall form one consolidated fund to be entitled "the Consolidated Fund of the State" (2) All other public moneys received by or on behalf of the Government of India or the Government of a State shall be credited to the public account of India or the public account of the State, as the case may be (3) No moneys out of the Consolidated Fund of India or the Consolidated Fund of a State shall be appropriated except in accordance with law and for the purposes and in the manner provided in this Constitution." 23. Similarly, Article 270 deals with taxes levied and distributed between the Union ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fee and not tax. If the cess levied and collected is credited to the Consolidated Fund of India and it has to be appropriated by the Parliament by law and then only the said amount could be credited to the Fund; it ceases to be a fee and partakes the character of a duty or a tax. 27. In the instant case, Section 4 of the Act explicitly provides that the proceeds of the duty of excise levied under Section 3 shall be credited to the Consolidated Fund of India. Sub-Section (2) of Section 3 of the Sugar Development Fund Act, 1982, provides that the amount so credited, shall after due appropriation made by Parliament by law be credited to the Sugar Development Fund. Thus the cess collected under the Act invariably goes to the Consolidated Fund, which ultimately is utilized for all public purposes. Therefore, there is no quid pro quo between the cess levied and collected and the services rendered for such payment. On the contrary, the proceeds are credited to the Consolidated Fund of India which is meant to be utilized for all public purposes, may be including the purpose contemplated under the Sugar Development Fund Act, 1982. In the light of the aforesaid statutory provisions, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded and unless the context otherwise requires, references to the expressions "duty", "duties", "duty of excise" and "duties of excise" shall be construed to include a reference to "Central Value Added Tax (CENVAT)" 31. Therefore, it is clear from the aforesaid provision that, the expression, duty, duties, duty of excise, and duties of excise' shall be construed to include a reference to CENVAT, i.e., Central Value Added Tax. 32. It is to give effect to the aforesaid object that the CENVAT Credit Rules are framed. The CENVAT Credit Rules of 2004 were framed in exercise of powers conferred by Section 37 of the Central Excise Act, 1944 in supersession of the CENVAT Credit Rules 2002 except as things done or omitted to be done before such supersession. Rule 3 of the CENVAT Credit Rules, 2004 deals with CENVAT Credit, and reads as under: RULE 3. CENVAT Credit - (1) A manufacturer or producer of final products shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of-, (i) the duty of excise specified in the First Schedule to the Tariff Act, leviable under the Act; (ii) the duty of excise specified in the Second Schedule to the Tariff Act, lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 3. Levy of additional duty equal to excise duty, sales tax, local taxes and other charges. - (1) Any article which is imported into India shall, in addition, be liable to a duty (hereafter in this section referred to as the additional duty) equal to the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at the percentage of the value of the imported article." 35. In view of the aforesaid provisions, when an assessee imports goods into India in addition to payment of basic Customs Duty, he shall able be liable to pay additional duty of customs equal to the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article. Therefore, on imported goods or articles, in addition to basic Customs Duty, an asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1988 (1) SCR 700, a decision rendered under the Central Excise and Salt Act .." 18. But the language of Rule 3 of Jute Cess Rules is altogether different. It indicates a continuing applicability of the provisions of the Central Excise Act and the Rules. What was levied was a 'duty of excise' and it was to be levied and collected in accordance with the provisions of the Central Excise Act and the Rules. The effect is as if the words "for the time being in force" were there after the words "the provisions of Central Excise and Salt Act, 1944 (1 of 1944) and the Rules made thereunder" in Rule 3. We are, therefore, of the opinion that the amendment of Rules 9 and 49 made in 1982 (with retrospective effect from 1944) is equally applicable in the matter of levy and collection of cess under the Act. The contentions urged by Sri Ganesan are accordingly rejected. In this view of the matter, it is not necessary to dwell upon the difference between cases where the provisions of another Act are incorporated by reference and cases where a mere reference is made to another Act a distinction pointed out in a recent decision of this Court in Bhatinaa Improvement Trust v. Balwant Singh. (1991 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot also in dispute that it is also collected at the time of importing raw sugar. At the time of importing raw sugar the assessee has paid the additional Customs duty or CVD (countervailing duty) as prescribed under Section 3 of the Customs Tariff Act of 1975. If the Article imported is a like article produced or manufactured in India and if excise duty on such like article is leviable, the assessee is liable to pay the additional duty. The Excise Duty on sugar is payable under two enactments, i.e., [1] Section 3 of Central Excise Act of 1944, at the rate prescribed in the Central Tariff Act, 1985. In addition, the assessee is also liable to pay cess as a duty of excise under the Sugar Cess Act of 1982. On such additional duty or CVD paid at the time of import by the assessee, apart from the Basic Customs Duty, he is entitled to the CENVAT Credit in terms of clause (vii) of Rule 3 of CENVAT Credit Rules, 2004. 41. Therefore, in the light of the above discussion, we are of the view that the assessee was entitled to claim CENVAT credit in respect of the cess paid as additional duty (CVD) on raw sugar imported under the Sugar Cess Act of 1982 read with Section 3 of the Customs Tariff ..... X X X X Extracts X X X X X X X X Extracts X X X X
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