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Union of India through the Commissioner, Central Excise, Jaipur Versus M/s Cairn Energy India Pvt. Ltd., The Custom, Excise and Service Tax Appellate Tribunal and Vice-Versa

2016 (10) TMI 829 - RAJASTHAN HIGH COURT

Levy of education cess and secondary and higher education cess - powers of the central government - business of exploration, development and production of crude oil and natural gas - production sharing contract - production of crude oil - Scope of Section 91 read with Section 93 of the Finance Act, 2004 and Section 136 read with Section 138 of the Finance Act, 2007, being the cess as per Section 15(1) of the Oil Industries (Development) Act, 1974, is said to be not levied and collected by the Mi .....

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pose of this Act. Under Section 16, a broad discretion is available with the Central Government for necessary allocation of excise. On the other hand, under the Sugar Cess Act, the entire duty shall mandatorily go to consolidated fund required to be maintained as per the Sugar Development Fund Act, 1982. Learned Tribunal without examining this aspect of the matter decided the appeal by applying the law laid down in the case of Commissioner v. Sahakari Khand Udyog Mandi Ltd., that is apparently e .....

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light of this provision also we do not find any wrong in applying the cess in question upon the excise duty referred under Section 15(1) of the Act of 1974. - No reason found to reason to escape the respondent from application of education/secondary and higher education cess under the Act of 2004 and the Act of 2007 respectively - Decided in favor of revenue. - D. B. Central Excise Appeal No. 33/2015, D. B. Civil Writ Petition No. 9656/2014 - Dated:- 19-10-2016 - Govind Mathur And Kailash C .....

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ng terms:- "WHETHER the Customs, Excise and Service Tax Appellate Tribunal is justified under the order dated July 24, 2014, by arriving at the conclusion that respondent Cairn India Limited is not liable to pay any cess in terms of Section 91 read with Section 93 of the Finance Act, 2004 and Section 136 read with Section 138 of the Finance Act, 2007, being the cess as per Section 15(1) of the Oil Industries (Development) Act, 1974, is said to be not levied and collected by the Ministry of .....

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ted May 8, 2013, passed by the Commissioner of Central Excise (Appeals), Jaipur-II, while arriving at the conclusion that in terms of the provisions of Section 91 read with Section 93 of the Finance Act, 2004 and Section 136 read with Section 138 of the Finance Act, 2007, for the purpose of charging education cess and secondary and higher education cess, the excise duty would include only those cess as duty of excise which are levied by the Ministry of Finance, Department of Revenue. Since the o .....

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production of crude oil and natural gas. The company and the Government of India entered into a production sharing contract on 15.5.1995. As per the terms of the production sharing contract, the company conducts petroleum operations at Rajasthan Block/RJ/OM/90/1 and produces crude oil falling under Chapter XXVII of first Schedule to the Central Excise Tariff Act, 1985. The production of crude oil does not attract excise duty, but national calamity contingent duty alongwith applicable cess on th .....

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8377; 21,80,957/-) not paid on Oil Cess should not be recovered from them under Section 11A(1) of the Central Excise Act, 1944 along with interest thereon under Section 11AB ibid. 2. Penalty should not be imposed upon them under Rule 25 of the Central Excise Rules, 2002 for contravention of Rule 4, 6 and 8 of the Central Excise Rules, 2002 read with provisions of Section 91 to 93 of the Finance (No.2) Act, 2004 and Section 136 to 138 of the Finance Act, 2007. The company was further directed to .....

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n of crude oil is with the Ministry of Petroleum derived from the provision of the Oil Industries (Development) Act, 1974; and 3. the mandate of the Department of Revenue is only with regard to collection of cess on production of crude oil from the subject parties and in the absence of power to levy and collect the cess on production of crude oil, the Department of Revenue cannot levy and collect education cess and secondary and higher education cess. The Additional Commissioner, Central Excise, .....

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assed by the Additional Commissioner, Central Excise, came to be rejected by the Commissioner (Appeals) vide order dated 8.5.2013 with a finding that the oil cess is levied and collected as excise duty as mentioned in Section 15 of Chapter- III of the Oil Industries (Development) Act, 1974 and all the provisions of Central Excise Act, 1944 and the Rules made thereunder are applicable. The authority to levy and collect oil cess being passed on to the Ministry of Finance, the education cess and se .....

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purpose of charging education cess and secondary and higher education cess, the excise duty would include only those cess levied as duty of excise which are levied by the Ministry of Finance, Department of Revenue. Since the oil cess is levied by the Ministry of Petroleum, even though it is collected by the Ministry of Finance as excise duty, the same cannot be included in the duty of excise for the purpose of education cess. Learned Tribunal, while accepting the appeal, heavily relied upon a Di .....

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Public Distribution rather than by the Ministry of Finance, Government of India? (B) Whether the Learned Tribunal is justified in the eyes of law in holding that the Sugar Cess is not the duty of excise, though collected by the Department of revenue, so as to attract the Education cess thereupon? (C) Whether the Education Cess is leviable upon the Sugar Cess in view of Section 3 of the Sugar Cess Act, 1982." The Division Bench, while negativating the argument advanced on behalf of the reven .....

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vy and collection is of a cess for the purposes of the Sugar Development Fund Act, 1982. Thereafter, the provision goes on to state, what should be the rate at which the cess is to be levied and for sake of convenience, the same is described as duty of excise. In the event it was a central excise duty, as contended, the rate would have been provided in the Tariff Act and not in this provision. 7. Similarly, when one reads sub-section (2) of Section 3 of the Cess Act, it becomes clear that what i .....

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dural provisions relatable to levy and collection of the duty of excise, provisions relating to refund and exemption from duty, etc., are made applicable by invoking principle of incorporation. In other words, instead of bodily repeating the provisions of levy and collection of cess by this provision, the provisions under the Central Excise Act and the Rules thereunder have been incorporated and are to be read as part and parcel of the Cess Act. By adopting this legislative procedure, the legisl .....

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f India. For the purposes of utilization of the said fund, one has to consider provisions of Sugar Development Fund Act, 1982 simultaneously to ascertain as to whether the sugar cess is in fact and in law only a cess or is a duty of central excise. 9. Under the Sugar Development Fund Act, 1982, 'fund' means sugar development fund formed under Section 3 of the said Act, Under sub-section (2) of Section 3 of the Sugar Development Fund Act, 1982, it is provided that an amount equivalent to .....

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ment by law credited to the sugar de- 10. For the present, it is not necessary to consider other provisions of the Sugar Development Fund Act, 1982 relating to application of the sugar development fund etc. Suffice it to state that the Cess Act and the Sugar Development Fund Act both have been brought on the statute book simultaneously on the same day and operate as a consolidated scheme and the provisions of both the Acts have to be read together. On such conjoint reading, it is apparent that a .....

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Udyog Mandi Ltd., as in the case aforesaid the Gujarat High Court was dealing with the provisions of Sugar Cess Act, 1982, whereas in the case in hand the oil cess is made applicable as per Section 15 of the Oil Industries (Development) Act, 1974. The provisions of the Act of 1974 are quite different than the provision of the Sugar Cess Act, 1982. 2. by virtue of deeming provisions as provided under Section 15(4) of the Oil Industries (Development) Act, 1974, it is to be legally construed that .....

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urpose the education cess and secondary and higher education cess was introduced. The relevant portion of the National Common Minimum Programme, as cited on behalf of the appellant, reads as under:- "The UPA government pledges to raise public spending in education to least 6% of GDP with at least half this amount being spent of primary and secondary sectors. This will be done in a phased manner, The UPA government will introduce a cess on all central taxes to finance the commitment to unive .....

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ss. I propose to levy a cess of 2 per cent. The new cess will yield about ₹ 4000 - 5000 crore in a full year. The whole of the amount collected as cess will be earmarked for education, which will naturally include providing a nutritious cooked midday meal. If primary education and the nutritious cooked meal scheme can work hand in hand, I believe there will be a new dawn for the poor children of India. 23. I am concerned about the quality of technical education in the country. Lest I be mi .....

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s a year. Appropriate infrastructure and equipment will be provided, the syllabi will be upgraded and new trades will be introduced. This is an area where I welcome Chambers of Commerce and Industry to join hands with the Government and create a public-private partnership model for designing and implementing the scheme. The selection of the ITIs will be cone in consultation with the State Governments. 24. An education loan scheme has been in operation since April 2001 under which loans up to  .....

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l be deprived of the opportunity to study because of lack of funds. With this factual background, the education cess was introduced under the Act of 2004 as per Sections 91 and 93, which are as under:- "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 .....

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he 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 provi .....

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, as far as may be, apply in relation to the levy and collection of 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, s the case may be." Under the Finance Act, 2007, this legislature introduced secondary and higher education cess as per Sections 136 and 138, which are as under:- "136. Secondary and Higher Education Cess.- (1)Without prejudice to the provisions of .....

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b-section(12) of section 2 and this Chapter for the purposes specified in sub-section(1) as it may consider necessary." "138. Secondary and Higher Education Cess on excisable goods.- (1)The Secondary and Higher Education Cess levied under Section 136, in the case of goods specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1985), being goods manufactured or produced, shall be a duty of excise (in this section referred to as the Secondary and Higher Education Ce .....

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) or under any other law for the time being in force. (2)The Secondary and Higher 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 and the Education Cess chargeable under section 93 of the Finance (No.2) Act, 2004 (23 of 2004). (3)The provisions of the Central Excise Act, 1944 (1 of 1944) and the rules made thereunder, including those relating .....

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ies of excise as per Section 15 of the Act of 1974 are neither levied nor collected in accordance with the Act of 2004, shall be highly technical and against the legislative intent to introduce the education cess. Per contra, as per the respondent, the education cess is applicable only, if levied and collected in accordance with the Central Excise Act, 1944, the Customs Act, 1962 or Chapter V of the Finance Act, 1994. The excise duty under Section 15 of the Act of 1974 is not levied in any of th .....

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g the Central Excise Act, 1944, the Customs Act, 1962 or Chapter V of the Finance Act, 1994, shall have the meaning respectively assigned to them in those Act or Chapter, as the case may be. The legislature, if was intending to include the Act of 1974 also in it, then a specific reference of that should have been given, but that is absent, which clearly indicates the intent of legislature to exclude the application of education cess on the excise duties referred under Section 15 of the Act of 19 .....

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artment of Revenue) under the provisions of the Central Excise Act, 1944 or under any other law for the time being in force. The purpose of the cess in question is to yield about ₹ 4000 - 5000 crores per year, which is to be earmarked for education. The education, as per the policy applicable, is not simple teaching, but includes nutritious meals in primary school sector and further for establishing skill and employment oriented educational institutions. The cess under the Act of 2004 as w .....

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able upon the liability created under Section 15 of the Act of 1974 being not levied by the Ministry of Finance (Department of Revenue), Government of India. The Tribunal, while arriving at the conclusion as above, did not examine the scope of levying cess under the Act of 2004 and under the Act of 2007. The Tribunal simply arrived at the conclusion by relying the judgment of Gujarat High Court with total discussions as under:- "5. We have considered the submissions from both the sides and .....

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f Finance as excise duty, the same can not be included in the duty of excise for the purpose of education cess. Same view has been taken by the Gujarat High Court in the case of Sahakari Khand Udyog Mandi Ltd. (supra). In view of this, the impugned order is not sustainable. The same is set aside. The appeal is allowed." It is pertinent to notice that in the case of Commissioner v. Sahakari Khand Udyog Mandi Ltd., the Division Bench of Gujarat High Court was dealing with the provisions of Su .....

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al, that appears to be para-materia to Section 3 of the Sugar Cess Act, but it is not so. The Sugar Cess Act, 1982 provides for cess with a purpose of the Sugar Development Fund Act, 1982, as a duty of excise on all sugar produced at any sugar factory in India and further Section 4 of the Sugar Cess Act, 1982 pertains to crediting of sugar cess proceeds to consolidated fund of India. There is no provision akin to Section 4 of the Sugar Cess Act, 1982 and absence of such a provision changes the c .....

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of this Act. Under Section 16, a broad discretion is available with the Central Government for necessary allocation of excise. On the other hand, under the Sugar Cess Act, the entire duty shall mandatorily go to consolidated fund required to be maintained as per the Sugar Development Fund Act, 1982. Learned Tribunal without examining this aspect of the matter decided the appeal by applying the law laid down in the case of Commissioner v. Sahakari Khand Udyog Mandi Ltd., that is apparently errone .....

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sed if that is levied and collected by the Department of Finance. Learned counsel has also placed reliance upon the Government of India, Ministry of Finance (Department of Revenue) Letter F.No.345/2/2004-TRU (Pt.), dated 10.8.2004, clarifying that the education cess is calculated on the aggregate duties of excise/customs (excluding certain duties of customs like anti-dumping duty, safeguard duty etc.) levied and collected by the Department of Revenue, only such duties which are (a)levied and col .....

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. According to learned counsel, the cess levied under Section 15(1) of the Act of 1974 is administered by the Ministry of Petroleum and Ministry of Finance (Department of Revenue) is only a collecting agency, as such, the same cannot be a subject for education and secondary and higher education cess. We do not find any merit in the arguments advanced. A plain reading of the provisions of Section 93 of the Act of 2004 and Section 138 of the Act of 2007 makes it abundantly clear that education ces .....

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hile examining provisions of the Sugar Cess Act, observed that a legislature adopted the legislative procedure given under the Central Excise Act, 1944 to collect levy as per Sugar Cess Act, but due to that it cannot be inferred or stated that the Sugar Cess imposed under the provisions of the Sugar Cess Act assumed the characteristic of central excise duty so as to warrant calculation of education cess on the amount of cess so collected. No doubt, under the Act of 1974 also the procedure given .....

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and 2007 respectively provide the application of cess and procedure to quantify and recover it. As per Section 93 and 138 of the Acts aforesaid, the cess is a duty of excise which is to be levied and collected by the Central Government in the Ministry of Finance under provisions of the Central Excise Act, 1944 or under any other law for time being in force. The scope of the provisions referred above is quite wide and that covers levy and collection of all excisable goods under provisions of the .....

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