NCCD, Education Cess and SHEC are not payable by Manufacturer who is availing area-based excise exemption: Supreme Court

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Facts: M/s. Bajaj Auto Limited (“the Appellant”) established a manufacturing unit of two-wheeler vehicles in the year 2007. By virtue of its manufactured products falling under the Second Schedule of the Central Excise Tariff Act, 1985, the Appellant was exempted. The Appellant was paying an automobile cess but the NCCD, Education Cess and Secondary & Higher Education Cess were not being paid. The dispute arose on account of an audit conducted wherein Revenue Department took a view that Appellant was liable to pay NCCD, Education Cess as well as Secondary & Higher Education Cess.

Issue Involved: Whether exemption from payment of NCCD, Education Cess and Secondary & Higher Education Cess is applicable to the Appellant?

Held: The Supreme Court in Civil Appeal No. 3239 of 2019 dated March 27, 2019 observed that National Calamity Contingent Duty (NCCD), Education Cess, Secondary & Higher Education Cess were not payable by manufacturer of two-wheeler vehicles, availing area-based exemption in terms of Notification No. 50/2003-Central Excise dated June 10, 2003 issued under Central Excise Act, 1944. In view of the case of SRD Nutrients Pvt. Ltd. v. Commissioner of Central Excise, Guwahati [(2018) 1 SCC 105] opined that since (NCCD), Education Cess, Secondary & Higher Education Cess are a surcharge levied and collected on the total value of the excise duty, and the excise duty itself is exempted, there cannot be any question of any recovery of these cesses, as the substratum does not exist.

Further, SC held that once the excise duty is exempted, NCCD, levied as an excise duty cannot partake a different character and, thus, would be entitled to the benefit of the exemption notification. The exemption notification also states that the exemption is from the “whole of the duty of excise or additional duty of excise.” SC noted that that the exemption itself is for a period of ten years from the date of commercial production of the unit. Thus, SC held that the assessee would not be liable to pay NCCD.

Citation: TS-182-SC-2019-EXC