2020 (8) TMI 738 - HC - Central Excise

Exemption on Education Cess and Secondary and Higher Education Cess - area based exemption availed - whether in view of the exemption granted to the excise duty the petitioner would also be entitled to an exemption to the payment of education cess secondary and higher education cess? - HELD THAT - The said question was decided by the Supreme Court in its pronouncement in M/S. SRD NUTRIENTS PRIVATE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE GUWAHATI 2017 (11) TMI 655 - SUPREME COURT wherein in paragraph 27 it was held that the appellants therein were entitled to refund of education cess and higher education cess which was paid along with the excise duty once the excise duty itself was exempted from levy. The demand cum show-cause notice dated 02.06.2020 is assailed in this writ petition on the ground that the condition precedent to invoke the power under section 11(A-1) is that the refund made must be erroneous. It is contended when the refund was given effect during the period prior to the judgment of the Supreme Court in M/S. UNICORN INDUSTRIES VERSUS UNION OF INDIA OTHERS 2019 (12) TMI 286 - SUPREME COURT at that point of time the proposition laid down in SRD Nutrients Private Limited was in force which had decided in favour of such refunds. Accordingly it is contended that when the refunds were made the law in force was that such refunds were justified under law and therefore the refunds made were not erroneous - It being so condition precedent of section 11(A-1) of the Excise Central Act 1944 is not satisfied. A question for determination would be as to whether the proposition of law laid down in Unicorn Industries (supra) would render the refunds made to the petitioners to be erroneous - until further orders we stay the operation of the demand cum show- cause notice dated 02.06.2020. List on 08.09.2020.

Summary

Issues involved:
1. Entitlement to exemption from payment of education cess & secondary and higher education cess under Northeast Industrial Policy, 2007.
2. Interpretation of Supreme Court judgments regarding refunds of education cess & higher education cess.
3. Validity of demand cum show cause notice for recovery under section 11(A-1) of the Central Excise Act, 1944.

Analysis:

1. The petitioners, under the Northeast Industrial Policy, 2007, were entitled to exemption from excise duty but were required to pay education cess & secondary and higher education cess based on the excise duty payable. The issue arose whether the exemption from excise duty extended to the payment of education cess & higher education cess. The Supreme Court in SRD Nutrients Pvt. Ltd. case held that once excise duty was exempted, the petitioners were entitled to a refund of education cess and higher education cess paid along with the excise duty.

2. Subsequently, in Unicorn Industries case, the Supreme Court clarified that the exemption of one duty does not automatically exempt other duties like education cess. The court emphasized that duties like NCCD, education cess, and higher education cess can be determined separately, and exemption from one duty does not exempt others unless specifically covered by statutory notification. The court upheld the decisions in SRD Nutrients Pvt. Ltd. and Rita Textiles Pvt. Ltd., stating that previous binding decisions were not considered by the Division Bench.

3. Following the Unicorn Industries judgment, the respondent authorities issued a demand cum show cause notice to the petitioners, claiming the earlier refunds of education cess & higher education cess were erroneous and sought recovery under section 11(A-1) of the Central Excise Act, 1944. The petition challenged this notice, arguing that the refunds were not erroneous when made as they were in line with the law in force at that time, as per the SRD Nutrients Pvt. Ltd. judgment. The petitioners contended that the conditions under section 11(A-1) were not met as the refunds were justified under the law prevailing then.

In conclusion, the court stayed the operation of the demand cum show cause notice dated 02.06.2020 until further orders, pending a determination of whether the refunds made to the petitioners were erroneous in light of the Unicorn Industries judgment. The case was listed for further hearing on 08.09.2020.