Judgement Update | NCCD qualifies for area-based excise duty exemption
This is to update you regarding a recent decision of the Supreme Court in the case of Bajaj Auto Limited v. UOI, 2019-VIL-11-SC. In this case, the Supreme Court held that no NCCD (‘National Calamity Contingent Duty’) is payable on goods manufactured by units availing benefit of area-based excise duty exemption in the States of Uttarakhand and Himachal Pradesh.
In this case, the taxpayer was availing benefit of Notification No.50/2003-CE dated June 10, 2003 (‘Notification’). The Notification exempted excise duty and certain other additional duties of excise. It did not specifically exempted NCCD.
The department contended that the Notification did not specifically exempt NCCD or education cess, hence, the taxpayer is required to pay such duty or cess. In respect of NCCD, the department raised an additional point that unlike education cess, NCCD is an independent levy on value of goods and not levied as a percentage of excise duty.
In respect of exemption for education cess under area based excise duty exemption in North-eastern States, J&K etc., the issue recently came before the Supreme Court in the case of SRD Nutrients Private Limited v. CCE, 2017-VIL-43-SC-CE. The Court held that education cess is a piggy back duty (as it is applied on amount of excise duty) and the same shall also be exempt even if the relevant Notification does not specifically mention the same.
In the instant case, the Supreme Court observed that while NCCD is in the nature of surcharge levied under the Finance Act, it is in the nature of duty of excise. The Court held that the method of computation of NCCD will not alter the character of NCCD and the principles laid down in the case of SRD Nutrients will apply to NCCD as well. The Court concluded that where excise duty is exempt under Notification, NCCD shall also be exempt even though the Notification does not specifically exempt the same.
With due respect to the Supreme Court, the judgment has incorrectly granted NCCD exemption when the Exemption Notification exempts various specified duties. NCCD is levied under Section 136 of the Finance Act, 2001 and Exemption Notification does not exempt NCCD. Therefore, the exemption should not be granted for levies under various enactments unless and until the same is specifically covered in the Exemption Notification.
Despite the correctness of the judgment being questionable, this will provide a relief to variety of taxpayers in particular the following:
- The taxpayers who claimed outright exemption or refund of additional duties or cesses or surcharges under area based or other exemption;
- The taxpayers who took credit of various cesses like Clean Energy cess, Sugar cess etc. that were not expressly eligible for credit under the Cenvat Credit Rules, 2004; and
- The taxpayers who transitioned credits of education cess, clean energy cess and other additional duties of excise that are being sought to be barred by retrospective amendment under Section 140 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’).