In case of revenue collected from cess it is first credited to the Consolidated Fund of India and the Central Government may after due appropriation from the Parliament utilize the fund for the specified purpose or credited to the specific fund.
The central government is not required to share the revenue from cess with state governments. On the other hand, a surcharge is a tax on any tax.
It is a tax on tax. The objective of imposing of levying surcharge is to put high tax burden on rich persons who can bear or have the capacity to pay high tax. Like Cess, the central government is not required to share the revenue from the surcharge with state governments. But it becomes a part of Consolidated Fund of India and goes directly to the fund.
Thus it can be utilized for any purpose of the government. Tax is a source of revenue of any government. But the government in addition to tax also imposes Surcharge and Cess. Goes directly to CFI. Though Goes directly to CFI but its utilization is restricted. Hence, it can be seen that the Constitution makes a distinction between a cess and a surcharge and the two cannot be used interchangeably. The title of the levy uses the terminology of cess.
Moreover, the title indicating the purpose shows the ingredient of a cess. However, the section of the Finance Act, which imposes education cess employs confusing language. Section 81 states that. The section refers to both cess and surcharge in the same sentence without realising that there exists a difference between the two categories of levies under the Constitution.
Similar language also occurs in Section of the Finance Act, which imposes secondary and higher education cess. These legislations are not the only ones that have this usage. Considering that the difference between cess and surcharge is whether the proceeds will be utilised for any purpose of the union or for a dedicated pre-identified public purpose, the text of the statutes must be drafted with utmost care and caution. That said, as the cesses at hand are stipulated to be for the purposes of the union while also identifying a specific purpose that is, provision of quality basic education , the levies must be interpreted to be cess taxes using the rule of harmonious construction.
This would avoid absurdity and not render the constitutional distinction between cess and surcharge redundant. This also appears to be the understanding of the union government which has classified education and higher education cess under different accounting heads, separate from the one used for surcharge. The minor accounting heads for education cess and higher education cess on income tax are and respectively, while the one for surcharge on income tax is The issue of refund could have been decided simply by interpreting the applicable sections of the Finance Act, which say that the education cess is payable on aggregate duties of excise.
If no duties of excise are payable, the cess amount would also be nil. No wonder, arguments from the counsels have also not been recorded in the judgment.
Hence, the judges went on to make observations which were not needed in the first place. The remarks are made in a very matter-of-fact manner without quoting any reasons or precedents. For example, paragraph three of the judgment states. It so happened that vide Finance Act, , the Education Cess and Higher Education Cess were also imposed, which are surcharge on the excise duty.
The statement itself is factually incorrect as secondary and higher education cess came in only through the Finance Act, It also shows how the Court never conducted any independent analysis of the nature of secondary and higher education cess. While it may be possible to do, it is just counterproductive. Labelling the levy as a surcharge implies that word cess in the title is a misnomer.
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