Case: BAJAJ AUTO LIMITED Vs. UNION OF INDIA

was made clear that in respect of all the three taxes, the surcharge collected along with the tax will bear the same character of respective taxes to which surcharge was appended and was to be governed by the respective enactments under which education cess in the form of surcharge is levied and collected. 16. Apparently, when at the time of collection, surcharge has taken the character of parent levy, whatever may be the object behind it, it becomes subject to the provision relating to the excise duty applicable to it in the manner of collecting the same obligation of the tax payer in respect of its discharge as well as exemption concession by way of rebate attached with such levies. This aspect has been made clear by combined reading of sub-sections (1), (2) and (3) of Section 93. (emphasis supplied) This Court gave its imprimatur to the aforesaid judgment of the Rajasthan High Court, in para 24 of the judgment in SRD Nutrients Pvt. Ltd 2007 SCC OnLine Raj 365 :: (2007) 216 ELT 16. 16. The real bone of contention which survives for consideration is the NCCD. The reason for this is that while the two cesses discussed aforesaid were in the nature of levy on the excise duty payable, the NCCD is levied on the product itself, as per Section 136 of the Finance Act, 2001. It is this aspect, inter alia, which was canvassed by the Department to persuade this Court to take a different view from the one taken qua the other two cesses. 17. On behalf of the appellant, Mr. Mukul Rohatgi and Mr. Arvind Datar, learned Senior Advocates sought to persuade us to apply the same principles qua NCCD as the other two cesses and, thus, go along with the view taken in SRD Nutrients Pvt. Ltd., 2007 SCC OnLine Raj 365 :: (2007) 216 ELT 16 even insofar as NCCD is concerned. 18. On the other hand, on behalf of the Department, Ms. Nisha Bagchi, Advocate sought to contend otherwise by seeking to point out the difference in the nature of incidence, since NCCD was to be calculated on the value of the product and not on the value of the excise duty payable. 19. We may note that in terms of the impugned judgment, one principle which clearly emerges, and over which there is no dispute before us, also, is that exemption notifications, like the one in question must be read in a manner that give them a liberal interpretation, provided that no violence is done to the language employed. The rationale for the same is well enunciated in Novopan India Ltd., Hyderabad v. CCE and Customs, Hyderabad, 1994 Supp (3) SCC 606 apart from in other judicial pronouncements. In such cases, it is not as if the principle of strict interpretation of tax law has been given a complete go by, but that rule of interpretation would apply at a different stage, i.e., to determine whether the exemption is applicable to the assessee or not. Once such exemption is indeed found to be applicable to the assessee in question, a liberal approach is to be adopted by the Court in construing the language, such as to allow the benefit to be reaped by the beneficiary in question (Union of India v. Wood Papers ltd (1990) 4 SCC 256 20. We may notice that the primary reasoning contained in the impugned order is common for the three cesses, i.e., NCCD; Education Cess and Secondary & Higher Education Cess. These were in the nature of surcharges levied in other Acts, which have not been specifically excluded under the Notification in question. That reasoning does not prevail, more so because of the judgment in SRD Nutrients Pvt. Ltd. (1990) 4 SCC 256 The question, thus, is whether, even though the NCCD is in the nature of an excise duty, its incidence being on the product, rather than on the value of the excise duty, that itself would make any difference to the applicability of the NCCD to excise exempt units. 21. On a proper appreciation of the judicial pronouncement in SRD Nutrients Pvt. Ltd., (1990) 4 SCC 256 we are not inclined to take a different view from the one taken for Education Cess and Secondary & Higher Education Cess, even while considering the issue of NCCD. 22. We may notice that this Court, in SRD Nutrients Pvt. Ltd.(1990) 4 SCC 256 gave its imprimatur to the view expressed by the Rajasthan High Court in Banswara Syntex Ltd. (1990) 4 SCC 256 The rationale is that while there may be surcharges under different financial enactments to provide the Government with revenue for specified purposes, the same have been notified as leviable in the nature of a particular kind of duty. In the case of NCCD, it is in the nature of an excise duty. It has to bear the same character as those respective taxes to which the surcharge is appended. NCCD will not cease to be an excise duty, but is the same as an excise duty, even if it is levied on the product. Thus, when NCCD, at the time of collection, takes the character of a duty on the product, whatever may be the rationale behind it, it is also subject to the provisions relating to excise duty, applicable to it in the manner of collection as well as the obligation of the taxpayer to discharge the duty. 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. We may also note that the exemption itself is for a period of ten years from the date of commercial production of the unit. 23. We are, thus, of the view that the appellant would not be liable to pay the NCCD.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]12. The controversy before us is now in a narrow compass, on account of the subsequent judicial pronouncement in SRD Nutrients Pvt. Ltd. v. Commissioner of Central Excise, Guwahati (2018) 1 SCC. The issue of the Education Cess and the Secondary & Higher Education Cess, in our view, is covered against the Department in view of this judgment and that is how, also, the Department appears to have understood now, in view of the written synopsis placed before us13. In the facts of that case, there was an initiative for development of industries in the North-Eastern States of Assam, Tripura, Meghalaya, Mizoram, Manipur, Nagaland, Arunachal Pradesh, etc. A Notification exempting goods from payment of excise duties was issued in respect of those States. Education Cess and Secondary & Higher Education Cess, as imposed under the Finance Acts of 2004 and 2007, respectively were also sought to be levied on the appellant therein. The gravamen of the reasoning of this Court is that since these cesses 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. Not only that, this Court also took into account how the Department itself had viewed the situation regarding Education Cess and Secondary & Higher Education Cess, which are payable as surcharge on the excise duty, once the excise duty is exempted16. The real bone of contention which survives for consideration is the NCCD. The reason for this is that while the two cesses discussed aforesaid were in the nature of levy on the excise duty payable, the NCCD is levied on the product itself, as per Section 136 of the Finance Act, 2001. It is this aspect, inter alia, which was canvassed by the Department to persuade this Court to take a different view from the one taken qua the other two cesses17. On behalf of the appellant, Mr. Mukul Rohatgi and Mr. Arvind Datar, learned Senior Advocates sought to persuade us to apply the same principles qua NCCD as the other two cesses and, thus, go along with the view taken in SRD Nutrients Pvt. Ltd., 2007 SCC OnLine Raj 365 :: (2007) 216 ELT16 even insofar as NCCD is concerned18. On the other hand, on behalf of the Department, Ms. Nisha Bagchi, Advocate sought to contend otherwise by seeking to point out the difference in the nature of incidence, since NCCD was to be calculated on the value of the product and not on the value of the excise duty payable19. We may note that in terms of the impugned judgment, one principle which clearly emerges, and over which there is no dispute before us, also, is that exemption notifications, like the one in question must be read in a manner that give them a liberal interpretation, provided that no violence is done to the language employed. The rationale for the same is well enunciated in Novopan India Ltd., Hyderabad v. CCE and Customs, Hyderabad, 1994 Supp (3) SCC 606apart from in other judicial pronouncements. In such cases, it is not as if the principle of strict interpretation of tax law has been given a complete go by, but that rule of interpretation would apply at a different stage, i.e., to determine whether the exemption is applicable to the assessee or not. Once such exemption is indeed found to be applicable to the assessee in question, a liberal approach is to be adopted by the Court in construing the language, such as to allow the benefit to be reaped by the beneficiary in question (Union of India v. Wood Papers ltd (1990) 4 SCC 256 20. We may notice that the primary reasoning contained in the impugned order is common for the three cesses, i.e., NCCD; Education Cess and Secondary & Higher Education Cess. These were in the nature of surcharges levied in other Acts, which have not been specifically excluded under the Notification in question. That reasoning does not prevail, more so because of the judgment in SRD Nutrients Pvt. Ltd. (1990) 4 SCC 256 21. On a proper appreciation of the judicial pronouncement in SRD Nutrients Pvt. Ltd., (1990) 4 SCC 256 we are not inclined to take a different view from the one taken for Education Cess and Secondary & Higher Education Cess, even while considering the issue of NCCD22. We may notice that this Court, in SRD Nutrients Pvt. Ltd.(1990) 4 SCC 256 gave its imprimatur to the view expressed by the Rajasthan High Court in Banswara Syntex Ltd. (1990) 4 SCC 256 The rationale is that while there may be surcharges underdifferent financial enactments to provide the Government with revenue for specified purposes, the same have been notified as leviable in the nature of a particular kind of duty. In the case of NCCD, it is in the nature of an excise duty. It has to bear the same character as those respective taxes to which the surcharge is appended. NCCD will not cease to be an excise duty, but is the same as an excise duty, even if it is levied on the product. Thus, when NCCD, at the time of collection, takes the character of a duty on the product, whatever may be the rationale behind it, it is also subject to the provisions relating to excise duty, applicable to it in the manner of collection as well as the obligation of the taxpayer to discharge the duty. 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. We may also note that the exemption itself is for a period of ten years from the date of commercial production of the unit23. We are, thus, of the view that the appellant would not be liable to pay the NCCD.