AUGUST 25, 2015

By M K Gupta, IRS (Retd)

THE Supreme Court in the recent decision in the case of M/s JASWAL NECO LTD Vs COMMISSIONER OF CUSTOMS, VISAKHAPATNAM - 2015-TIOL-173-SC-CUS has interpreted the meaning of words "an addition to" in the context whether Anti-dumping duty can be included in calculating special customs duty under Section 68 of the Finance Act No.2 of 1996 and special additional duty under Section 3A of the Customs Tariff Act inserted by the Finance Act of 1998. The Supreme Court has held that the words "an addition to" are meant to refer only to a surcharge provision and not to a provision which levies in dependent duty.

2. These issues have already been clarified both by way of circular and subsequent amendments in the law. However, by-product of this judgment has far reaching consequences on the calculation of the value on which the education cesses are being presently levied.

3. In the Finance Act 2004, Education cess @ 2% and in the Finance Act 2007 Secondary and Higher education cess @ 1% were imposed on goods imported into India. These cesses are required to be calculated on the aggregate of duties of customs which are levied and collected by the Central Government in the Ministry of Finance (Department of Revenue), under section 12 of the Customs Act, 1962 and any sum chargeable on such goods under any other law for the time being in force, as an addition to, and in the same manner as, a duty of customs, but not including -

(a) the additional duty referred to in sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of 1975);

(b) the safeguard duty referred to in sections 8B and 8C of the Customs Tariff Act, 1975 (51 of 1975);

(c) the countervailing duty referred to in section 9 of the Customs Tariff Act, 1975 (51 of 1975);

(d) the anti-dumping duty referred to in section 9A of the Customs Tariff Act, 1975 (51 of 1975);

4. Additional duty popularly called CVD is chargeable under Section 3(1) of the Customs Tariff Act, 1975. The Supreme Court in the case of HYDERABAD INDUSTRIES LTD. Versus UNION OF INDIA - 2002-TIOL-369-SC-CUS-CB has held that for the purpose of determining the levy of customs duty on goods imported into India what is relevant is Section 12 of the Customs Act, 1962 read with Section 2 of the Customs Tariff Act, 1975 but the charging section for the levy of additional duty equal to Central Excise duty on like articles is not Section 12 ibid but Section 3 of the C.T.A., 1975. Customs Act, 1962 and Customs Tariff Act, 1975 are two separate independent statutes.

5. The question arises whether Additional duty levied under Section 3(1) of the Customs Tariff Act, 1975 is covered under the expression "any sum chargeable on such goods under any other law for the time being in force, as an addition to, and in the same manner as, a duty of customs" used in the provisions of the Finance Acts relating to subject cesses.

6. In the case of TONIRA PHARMA LTD. Versus COMMISSIONER OF C. EX., SURAT - 2006-TIOL-1532-CESTAT-MUM, the Tribunal in the context of calculation of additional duty (CVD) explained the provisions as below:

"10. As regards the contention that the anti-dumping additional duty could not have been included for calculating the additional duty under Section 3 of the Customs Tariff Act, 1975, it appears that the aggregate value of the imported article, duty of customs chargeable under Section 12 of the Customs Act, and any sum chargeable on the article imported under any law for the time being in force, "as an addition to" and in the same manner as a duty of customs, were includible in the value of imported article for calculating the additional duty payable under Section 3 of the Tariff Act. The words "as an addition to" a duty of customs apply to a situation where duty of customs stands enhanced by such addition without changing the nature of such duty. The anti-dumping duty chargeable under Section 9A, though in the nature of customs duty is not the basic customs duty chargeable under Section 12 of the Customs Act. Therefore, it could not be considered "as an addition to" the basic duty of customs and would be chargeable "in addition to" any other duty of customs imposed under the Tariff Act, as specifically stated in sub-section (4) of Section 9A of the Act. In cases where any sum is chargeable "as an addition to" any duty of customs chargeable on that article under Section 12, then it would be included in the value of the imported article for calculating the additional duty. Therefore, since anti-dumping duty is not imposed as an addition to the existing customs duty under Section 12 of the Customs Act, but is imposed over and above such basic customs duty as is clarified by the expression "in addition to" occurring in sub-section (4) of Section 9A of the Tariff Act, it would not be includible in the aggregates indicated in Section 3 of the Tariff Act for the purpose of computing additional duty imposed thereunder. It, therefore follows that the demand of Rs. 94,67,767/- CVD and Rs. 12,39,020/- SAD (total Rs. 1,07,06,787/-), by including the amount of anti-dumping duty in the aggregate was not sustainable.''

7. Similar question has recently been examined by the Apex court in the case of M/s JASWAL NECO LTD (supra) in the context whether Anti-dumping duty can be included in calculating special customs duty under Section 68 of the Finance Act No.2 of 1996 and special additional duty under Section 3A of the Customs Tariff Act inserted by the Finance Act of 1998. Both these Acts provided determination of value on the basis of aggregate of value determined under Section 14 of the Customs Act,1962 and "any duty of customs chargeable on that article under section 12 of the Customs Act, 1962 (52 of 1962), and any sum chargeable on that article under any law for the time being in force as an addition to, and in the same manner as, a duty of customs." It has been held as below:

"33. It will be noticed that the very words "as an addition to, and in the same manner as" used in Section 3(2) and 3A(2) of the Customs Tariff Act have been used in Section 23 of the Finance Act of 1963 when what was sought to be levied was only a surcharge. By way of contrast, Section 24(3) when it levies a different duty - a regulatory duty of customs - uses the expression "in addition". It is clear, therefore, that what is referred to in Section 3(2) and 3A(2) is only a surcharge or an additional duty of customs. The words "in the same manner" also point to the same conclusion. It is clear on a reading of the Customs Tariff (Identification, Assessment And Collection of Antidumping Duty on Dumped Articles and For Determination of Injury) Rules, 1995, that Anti-dumping duty apart from being a separate levy from a levy of customs duty is also levied in a completely different manner from that of customs duty."

7. From the above it is clear that Additional Duty (CVD) is an independent duty. It is neither chargeable under Section 12 of the Customs Act, 1962 and nor under the expression "any sum chargeable on that article under any law for the time being in force as an addition to, and in the same manner as, a duty of customs". Thus education cesses charged by the department on Additional Duty (CVD) are beyond the four corners of law. Will the department take note of constitutional guarantee granted under Article 265 that no tax shall be levied and collected without the authority of law?

8. At the present numbers it seems an amount of Rs. 3000 crore is jeopardised as Budget Estimates for Additional Duty(CVD) for the financial year 2015-16 are over Rs one lakh crore. The department is collecting the education cess@2% from 2004 and @3% from 2007 on the Additional Duty (CVD). It seems an amount of Rs. 17000 crore approximately has been collected by the Government from 2004 to 2014-15 as per the details given below:

(Source Budget Papers)

9. It is a matter of speculation whether the tax collected without the authority of law can be refunded in terms of law laid down in the case of Mafatlal Industries Ltd. Vs. UOI - 2002-TIOL-54-SC-CX-LB.

10. I end this by only hoping that the Government does not do a Voda Phone on this issue.