Automobile Cess is also duty of excise - Rebate under Notification No 19/2004 CE (NT) is admissible - Order of Revision Authority denying benefit is quashed - High Court

BANGALORE : THE Petitioner is engaged in manufacture of motor cycles / two wheelers. They manufactured the vehicles at their Mysore plant and cleared them on payment of duty to their Hosur plant from where they were exported. The petitioner's Hosur plant had not availed CENVAT credit against the consignments which were removed to the Hosur plant and exported. The Hosur unit had issued the disclaimer certificate to enable the petitioner to claim rebate of duty paid on

two wheelers in respect of which petitioner had paid duty at the time of removal of the goods. Hence, petitioner filed a rebate claim under Rule 18 of the Central Excise Rules, 2002 in respect of the duty paid on clearance of the goods which came to be exported from Hosur plant. The dispute is about the admissibility of rebate of Automobile Cess and the Education Cess and Secondary and Higher Education Cess paid by the petitioner. It is the case of revenue that Automobile Cess and ED Cess and SHE Cess on Automobile Cess are not specified duties under the Explanation I to the Notification No 19/2004 CE(NT) and hence, the petitioner is not entitled for rebate of the same. The Petitioner challenge the order passed by the Revision Authority.

After hearing both sides, the High Court held:

The levy of "Automobile Cess" is traceable to the charging Section namely, Section 9 of The Industries (Development and Regulation), Act, 1951. Pursuant to above said power, Central Government by notification No.247(E) (Ministry of Finance) dated 22.03.1990 issued notification specifying the classes of goods manufactured on which a duty of excise shall be levied and collected as a Cess for the purposes of said Act, except those exported in accordance with the procedure prescribed under Chapter IX of Central Excise Rules, 1944.

A bare reading of Rule 3 of Automobile Cess Rules would indicate that provisions relating to collection of duty are indeed applicable to the Automobile Cess levied under the notification dated 28.12.1983 which notification came to be superseded by notification dated 22.03.1990 and as such, the Automobile Cess has been collected as a duty of excise in terms of the provisions of Central Excise Act. Thus, reference to Central Excise Act, 1944 in the notification dated 06.09.2004 would also include Cess collected as a duty of exercise. That apart, automobile Cess cannot be levied on the goods exported or in other words, when it is levied and rebate is claimed are required to be refunded when the goods are so exported.

The expression "duty" used in Rule 18 of the Central Excise Rules, 2002 would include such of those duties levied under Section 3 of the Central Excise Act, 1944 which includes the Cess defined under Rule 2(c) of Automobile Cess Rules, 1984. To put it in a different manner, Rule 18 does not indicate that rebate can be granted in respect of any duty other than duty levied under Section 3 of the Central Excise Act, 1944. As such, the Automobile Cess, Education Cess on Automobile Cess and SHE Cess on Automobile Cess though not expressly specified under notification dated 06.09.2004 would encompass within its sweep to include these Cess within the definition of phrase 'duty'.

Yet another factor which requires to be noticed is, Section 9 of The Industries (Development & Regulation) Act, 1951 provides for levy and collection of Automobile Cess and the manner of collection is required to be determined by the Rules made in that regard. Further, Section 30 of the above said Act empowers the legislature to make Rules and pursuant to the same, Automobile Cess Rules, 1984 has been enacted and Rule 3 of the said Rules at the cost of repetition has to be noted and plain reading of said rule indicate that provisions of Central Excise Act, 1944 is applicable for the collection of Cess as a duty of excise. Thereby, 'Cess' is a duty of excise collected in terms of Central Excise Act, 1944. Hence, this Court is in respectful agreement with the view expressed by Rajasthan High Court in Banswara Syntex Limited.

The High Court of Rajasthan in the case of Banswara Syntex Limited 2007-TIOL-553-HC-RAJ-CXwhile examining as to whether Education Cess levied on excisable goods would bear the same character as excise duty has held in the affirmative.

In view of the above, the High Court held that the order passed by the Revision Authority is not sustainable and quashed the same to the extent of holding that rebate of Automobile Cess claimed by the petitioner held inadmissible.