The issue as to whether cesses (education cess, Secondary and higher education cess, automobile cess and National calamity contingent duty (NCCD)) are also exempted when a notification exempts basic excise duty, has been under litigation for several years now. Especially in light of the area-based exemption notifications which specifically exempted basic excise duty without any reference to other cesses levied on the products.
Two Division Benches of the Supreme Court settled this disputed area in the matters of SRD Nutrients (decision dated 10-11-2017) and Bajaj Auto (decision dated 27-3-2019) by holding that since the cesses are piggyback duties, exemption to basic excise duty would result in an exemption to the cesses also. These two decisions have been followed by the authorities across India at all levels granting relief to the assessees.
However, the joy was short-lived as a 3-judge Bench of the Apex Court on 06th of December 2019 has held that the decisions in SRD Nutrients and Bajaj Auto are per incuriam and that the cesses shall not be exempted under the area-based exemption Notifications.
This decision has far reaching implications as there are several notifications (other than the area-based exemption notifications) that grant exemption only to the basic excise duty or service tax and not to the piggyback cesses. This judgment has implication in respect of customs duty exemptions also.
Lakshmikumaran & Sridharan (L&S), in its endeavour to keep all its clients updated, is organizing a conference call to discuss the impact of this recent judgment on other similarly placed assesses as well.
Mr. B.L. Narasimhan
Principal Partner, L&S