CESTAT Ahmedabad Bars Sugar Cess On Exported Sugar, Sets Aside ₹77.5 Lakh Demand

The Ahmedabad Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) on 17 June held that authorities cannot levy sugar cess on sugar exported outside India, observing that statutory notifications expressly exempt exported sugar from such levy.

Judicial Member Dr. Ajaya Krishna Vishvesha and Technical Member Satendra Vikram Singh allowed the appeal filed by Shree Chalthan Vibhag Khand Udyog Sahakari Mandli Ltd. and set aside the demand of Rs.77.50 lakh along with interest and penalty. The Bench held:

“sugar cess was exempt for that quantity of sugar which is produced in India but exported out of country”

The appellant, a sugar manufacturer based in Surat, cleared 62,500 quintals of sugar between October 2016 and June 2017 to merchant exporters under CT-1 certificates without paying central excise duty and sugar cess.

Following an inquiry, the Department issued a show cause notice demanding sugar cess at Rs.124 per quintal on the exported quantity, along with interest and penalty.

The taxpayer argued that Notification No. S.O. 585(E) dated 30 July 1993 issued by the Ministry of Food specifically exempts exported sugar from sugar cess. It also submitted that authorities recognise sugar cess as a form of excise duty and therefore cannot impose it on exported goods in light of settled legal position.

The Revenue contended that Notification No. 42/2001-CE (NT) covers only specified duties and cesses and does not extend to sugar cess. It further relied on a CBIC circular stating that cess on exported goods remains payable unless a specific exemption applies.

The Tribunal rejected the Revenue's stand and held that statutory notifications and the governing legal framework exempt sugar exported out of India from sugar cess. It also relied on CBIC Circular No. 10/93-CX.8, which clarifies that exported sugar does not attract sugar cess.

It recorded that the Department did not dispute the actual export of 62,500 quintals and treated the issue as settled by earlier Tribunal rulings. The Bench held:

“...neither the show cause notice nor the impugned order disputes the fact of export of 62500 Qtls. out of India and therefore, by virtue of above Notifications, we are of the view that sugar cess is not payable on above quantity.”

Accordingly, the CESTAT set aside the demand of Rs.77.50 lakh along with interest and penalty and granted consequential relief to the taxpayer.

For Appellant: Shri Devashish K Trivedi, Advocate

For Respondent: Shri Rajesh K Agarwal, Superintendent (AR)