Paper Cess Is Not Includible In The Calculation Of Education Cess And Secondary & Higher Education Cess: CESTAT

The Bench of P.K. Choudhary (Judicial Member) held that though Cess on Paper is an excise duty, however, it is levied under the Industries (Development and Regulation) Act, 1951, and not under the Central Excise Act, 1944.

Holding that Paper Cess is only collected and not levied by the revenue department, the CESTAT ruled that Education Cess is not leviable on Paper Cess. The Bench added that the provisions of Section 11B of the Central Excise Act, which deals with the issue of limitation and unjust enrichment, would not apply to an application for refund of Education Cess on Paper Cess, paid erroneously by the assessee.

A show cause notice was issued to the appellant- M/s. Uniglobal Paper Private Limited, for payment of Education Cess and Secondary & Higher Education Cess on Paper Cess. Subsequently, adjudication orders were passed against the appellant, confirming the demand of Education Cess and Secondary & Higher Education Cess on Paper Cess, along with interest and penalty. Accordingly, the appellant paid the amounts covered by the adjudication order. Thereafter, the appellant continued to pay the Education Cess on Paper Cess.

After the Central Board of Indirect Taxes and Customs (CBIC) issued the Circular No. 978/2/20214-CX dated 07.01.2014, stating that Education Cess and Secondary & Higher Education Cess is not to be calculated on Cesses not levied by the Ministry of Finance, Department of Revenue, the appellant realized that the payments were made by it erroneously. Thus, the appellant filed an application for refund of the Education Cess and Secondary & Higher Education Cess on the Paper Cess, as paid by the appellant. The Adjudicating Authority rejected the application for refund on the ground that the amounts were paid by the appellant in pursuance of the adjudication orders passed against it, which were not challenged by it by filing an appeal.

Against this, the appellant filed an appeal before the Commissioner (Appeals), who upheld the rejection of the refund claim in part. The Commissioner (Appeals) remanded the issue to the lower authorities with respect to the balance claim, which was not covered by the adjudication order passed against the appellant, to be decide by the authorities in accordance with Section 11B of the Central Excise Act, 1944.

Against the order passed by the Commissioner (Appeals), the appellant filed an appeal before the CESTAT.

The appellant M/s. Uniglobal Paper submitted before the CESTAT that in view of the Circular No. 978/2/2014-CX dated 7th January 2014, Education Cess and Secondary & Higher Education Cess cannot be levied on Cesses which are levied under Acts which are administered by the Department or Ministries other than the Ministry of Finance. The appellant averred that Cess is recoverable only on duty, and that the Cess recovered under Acts not administered by the Ministry of Finance are not duty.

Hence, the appellant argued that since Paper Cess is not levied by the Ministry of Finance, Department of Revenue, therefore, the Education Cess on Paper Cess could not be recovered by the revenue authorities.

The appellant contended that the said Circular is clarificatory in nature and hence, it has a retrospective operation. Therefore, the appellant averred that the payments made by it, before the issue of the said Circular, in compliance of the adjudication order passed against it, was refundable to the appellant since the government had no authority under law to collect and keep the said Cess amount.

The revenue department submitted that Education Cess is levied on the excise duty, and that Cess on paper is also a duty of excise; therefore, Paper Cess should be included in the calculation of Education Cess and Secondary & Higher Education Cess.

The department argued that since the adjudication orders passed against the appellant were not challenged, the proceedings before the lower authorities had reached finality.

Also, the department averred that the remand order passed by the Commissioner (Appeals) should not be interfered with, and that the question of limitation under Section 11B of the Central Excise Act shall apply to the refund claim made by the appellant since there was no 'unconstitutional levy' involved in the case.

While holding that Cess on Paper is an excise duty which is levied under the Industries (Development and Regulation) Act, 1951, and that it is only collected and not levied by the revenue department, the CESTAT ruled that Paper Cess is not includible in the calculation of Education Cess and Secondary & Higher Education Cess.

"In the present case even though the Cess on Paper is a duty of excise, it is not levied by the Department of Revenue, Ministry of Finance. It is levied under a different enactment namely Industries (Development & Regulation) Act, 1951, though it is collected by the Department of Revenue. Paper Cess is not levied by the Department of Revenue, it is levied by the Industrial Development, Ministry of Commerce and Industry. No doubt it is collected by the Department of Revenue, but not levied by it. Hence Paper Cess is not includible. I note that the lower authorities were proceeding on an erroneous premise when they considered the Paper Cess as a levy by the Central Government in the Ministry of Finance, Department of Revenue. They obviously lost sight of the Circular No. 978/2/2014-CX, dated 7-1-2014 where it has been clarified that the Education Cess and the Secondary and Higher Education Cess are not to be calculated on cesses which are levied under Acts administered by Department/Ministries other than Ministry of Finance (Department of Revenue), but rather only collected by the Department of Revenue in terms of those Acts."

Referring to the decision of the Gujarat High Court in Joshi Technologies International versus Union of India (2016), the CESTAT observed that in cases where the money is paid by mistake, the period of limitation would run from the date when the applicant comes to know of the mistake.

The Tribunal held that since the Cess on Paper is not a duty of excise levied under the Central Excise Act, 1944, therefore, the provisions of Section 11B of the Central Excise Act, dealing with the limitation period for filing a refund claim as well as unjust enrichment, would not apply.

Hence, the CESTAT allowed the appeal.

Case Title: M/s. Uniglobal Paper Private Limited versus Commissioner of CGST & CX, Haldia Commissionerate

Dated: 02.09.2022 (CESTAT Kolkata)

Representative for the Appellant: N.K. Chowdhury, Advocate

Representative for the Respondent: K. Chowdhury

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