CX - Duty demanded on Cigarettes at higher rates by retro application of FA, 2012 - Provisional Collection of Taxes Act does not provide for recovery of any dues when rates are amended upwards subsequent to introduction of bill - Stay granted: CESTAT
By TIOL News Service
MUMBAI, JULY 04, 2014: IN the Budget 2012-13 introduced in the Lok Sabha on 16.03.2012, through clause 141 of the Finance Bill read with the Seventh Schedule, the basic excise duty rate was increased on cigarettes by imposing an ad valorem component of 10% in addition to the specific duty.
By a declaration under the Provisional Collection of Taxes Act, 1931 (PCT Act), the above increase in the excise duty was made effective immediately on the expiry of the day on which the Finance Bill, 2012 was introduced i.e. with effect from 17.03.2012.
Subsequently, by virtue of Government amendment to the Finance Bill, 2012 as introduced, the ad valorem component of 10% was converted to a specific rate. Consequently, the basic excise duty on cigarettes was levied at specific rates which were higher than the excise duty rates proposed in the Finance Bill as introduced. The Finance Bill, 2012 received the assent of the President on 28.05.2012. Thus, the provisions of the Finance Act, 2012 came into effect from 28.05.2012.
The issue that arises for consideration is whether the excise duty levied on cigarettes at higher specific rates by virtue of the Government amendments to the Finance Bill, 2012 would be applicable with effect from 17.03.2012, immediately on the expiry of the day on which the Finance Bill, 2012 was introduced or w.e.f. 28.05.2012, when the Finance Bill, 2012 received the assent of the President.
While explaining the Budgetary changes after enactment of the Finance Bill, 2012 the TRU in its letter F.No. 334/1/2012-TRU dated 01.06.2012 clarified in paragraph I (1.4) that since clause 141 of the Finance Bill, 2012 read with the Seventh Schedule, by virtue of which the excise duty on cigarettes was increased, was declared under PCT Act, therefore, the rates proposed in the Finance Bill came into effect from 17.03.2012. And, since the rates proposed in the Finance Bill have been revised through Government amendments, the revised rates will apply with effect from 17.03.2012.
Happy with this communication, the Jurisdictional authorities issued a SCN to the Four Square cigarette maker and the CCE, Belapur completed the ritual of confirming the duty demand of Rs.71,87,380/- by applying the enhanced rates retrospectively.
Aggrieved with this ‘retrospective' duty collection order, the appellant is before the CESTAT.
The appellant submitted that the amendments made to Finance Bill becomes operational only on the assent of the Finance Bill and, therefore, the enhanced rate of duty on cigarettes would become applicable only w.e.f. 28.5.2012. Reliance is also placed on the decision of High Court of Calcutta in the case of Ultra Tech Cement Ltd. in Central Excise Appeal No. 5 of 2013 passed on 13.5.2014. Therefore, the appellant pleads for grant of stay.
The Revenue representative pointed his finger to the TRU letter dated 01.06.2012 referred above.
The Bench referred to the provisions of the Provisional Collection of Taxes Act, 1931 and observed -
++ It is significant to note that the PCTA does not provide for recovery of any dues when the rates are amended upwards subsequent to the introduction of the bill. Therefore, prima facie, it can be viewed that any amendment resulting in increase in the rate of excise duty will not have any retrospective effect.
The CESTAT also noted that the Board had reviewed the clarification given earlier and has issued a Circular No. 981/5/2014-CX dated 11.2.2014 and as per the revised clarification given in para 9 of the said circular "the tariff rate of duty on cigarettes levied vide amendments in the Finance Act, 2012, shall be applicable from the date of enactment of the said Finance Act, i.e. 28.5.2012 and not from 17.3.2012."
Holding that in view of the Circular the appellant had made out a prima facie case in favour, the Bench granted unconditional waiver from pre deposit of the dues adjudged and granted a stay in the matter.
Gone up in smoke: Incidentally, in the order passed by the Tribunal, the demand amount in paragraph 1 is mentioned as Rs.71,87,380/- whereas the second paragraph indicates it as Rs.5,09,78,534/-, not that the amounts are going to matter. Be that as it may, we had covered the subject issue exhaustively in DDT 1935/05.09.2012, DDT 2293 / 13.02.2014 &a similar issue in DDT 856 / 01.05.2008 & DDT 2096 / 02.05.2013 [while reporting the Tribunal decision in Ultratech Cement - 2013-TIOL-677-CESTAT-KOL.
(See 2014-TIOL-1201-CESTAT-MUM)
