Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise& Customs
Tax Research Unit
Circular No. 134 /3 / 2011 – ST
North Block, New Delhi
8th April, 2011
To
Chief Commissioners of Central Excise and Service Tax (All),
Director General (Service Tax),
Director General (Central Excise Intelligence),
Director General (Audit),
Commissioners of Service Tax (All),
Commissioners of Central Excise and Service Tax (All).
Madam/Sir,
Subject: - Education Cess and Secondary and Higher Education Cess – reg.
Representations have been received from the field formations, seeking
clarification regarding the applicability of service tax exemption to Education
Cess (refers to both Education Cess leviable under Finance (No.2) Act, 2004 and
Secondary and Higher Education Cess leviable under Finance Act, 2007), under
notifications where ‘whole of service tax' stands exempted. Apparently the doubt
arises in the context of Tribunal’s Order in the matter of M/s. Balasore Alloys
Ltd. Vs CCE, Customs and Service Tax, BBSR-I (2010-TIOL-1659-CESTAT-KOL).
- The issue has been examined. Though Tribunal’s Order referred above is in
favor of revenue, it is inconsistent with the policy intention of the Government
to exempt education cess in addition to service tax, where ‘whole of service
tax’ stands exempted. According to section 95(1) of Finance (No.2) Act, 2004 and
section 140(1) of Finance Act, 2007, Education Cess and Secondary and Higher
Education Cess are leviable and collected as service tax, and when whole of
service tax is exempt, the same applies to education cess as well. Since
Education Cess is levied and collected as percentage of service tax, when and
wherever service tax is NIL by virtue of exemption, Education Cess would also be
NIL.
- This being the principle, field formations are directed not to initiate
proceedings to recover the education cess, where ‘whole of service tax’ stands
exempted under the notification. Extending the same principle, where education
cess has been refunded to exporters along with service tax, by virtue of
exemption notifications where ‘whole of service tax’ is exempt, the same need
not be recovered.
- Field formations may be instructed accordingly.
- Please acknowledge the receipt of this circular. Hindi version to follow.
(J. M. Kennedy)
Director, TRU
Tel: 011-23092634
F.No.354/42/2011-TRU