This clarity on the calamity levy is likely to affect the ongoing disputes on these additional levies. Tobacco and petroleum companies, which were addressed through a special notification after the GST roll-out, may be affected by this decision.
Armed with a favourable Supreme Court judgment in the Unicorn Industries case that overturned an earlier judgment, the Revenue Department has instructed the customs and GST tax commissioners last week to initiate the recovery of duties such as National Calamity Contingent Duty (NCCD), education cess etc from taxpayers who come under some exempt categories.
"Field formations under your jurisdiction may be directed to initiate recovery of duties, including NCCD, in cases where assessees were not paying the same on strength of previous judgments," wrote Anish Gupta, Officer on Special Duty, Legal at the Central Board of Indirect Taxes and Customs (CBIC) to all Principal Chief Commissioners and Chief Commissioners of Customs and GST in a mail on January 9.
"The issue has implications for GST revenue also, as NCCD forms part the Economy of value on which GST is calculated," Gupta wrote while urging officers to bring the favourable judgment to the notice of the courts in pending cases. The mail also suggests that adverse interim or final orders may be contested.
Companies were earlier relying on earlier judgments like Bajaj Auto v. Union of India to avoid paying these additional duties. In this judgment, the Supreme Court had stated that once excise was exempted, the NCCD levied as excise cannot partake a different character.
As a result, Hero Motocorp, in the quarter that ended on June 2019, stated that while it had deposited and created a provision for NCCD for its Haridwar plant, it believed that NCCD is in the nature of an excise duty and hence should be covered under the area-based exemption. Relying on the earlier judgments, the company had reversed this provision as an exceptional item to the tune of Rs 737 crore in the April-June quarter results, while seeking a refund from the tax department.
In its decision in the Unicorn Industries v. Union of India case on December 6, 2019, the Supreme Court has put the matter to rest by holding that NCCD, education cess, and secondary and higher education cess would be leviable even if Central Excise Duty or Customs Duty was exempt. In summary, the judgment states the following:
- There needs to be a specific notification "containing an exemption to such additional duties."
- "The proposition urged that simply because one kind of duty is exempted, other kinds of duties automatically fall, cannot be accepted."
- "Decisions in SRD Nutrients Private Limited and Bajaj Auto Limited are clearly per incuriam". Simply put, they cannot be used as a defence to avoid the payment of these additional duties in cases of exemptions
- This clarity on the calamity levy is likely to affect the ongoing disputes on these additional levies. Tobacco and petroleum companies, which were addressed through a special notification after the GST roll-out, may be affected by this decision.(The writer is a contributing author with Moneycontrol.)Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.