2023 (9) TMI 962 - AT - Central Excise

Refund of education cess and secondary and higher education cess paid along with excise duty - N/N. 56/2002-CE dated 14.11.2002 as amended - HELD THAT - The issue is no more res-integra and stands finally decided by the decision of the Hon ble Supreme Court in the case of M/S. UNICORN INDUSTRIES VERSUS UNION OF INDIA OTHERS 2019 (12) TMI 286 - SUPREME COURT wherein the Hon ble Apex Court after considering the provisions of Notification No. 71/2003-CE dated 09.09.2003 has held that a notification has to be issued for providing exemption under the said source of power and that in the absence of notification containing an exemption to such additional duties in the nature of education cess and secondary and higher education cess they cannot be said to have been exempted. Further the provisions of Notification No. 56/2002- CE dated 14.11.2002 are pari-materia to the provisions of Notification No. 71/2003-CE dated 09.09.2003. By following the ratio of the decision in the case of M/s Unicorn Industries there is no infirmity in the impugned order vide which the refund of the education cess and higher secondary education cess has been denied. Impugned order upheld - appeal dismissed.

Summary

The primary legal issue considered by the Tribunal in these consolidated appeals is whether the refund of education cess and secondary and higher education cess paid along with central excise duty under Notification No. 56/2002-CE dated 14.11.2002 (as amended) is admissible.

The appellants, manufacturers registered in Jammu & Kashmir, claimed refunds of education cess and secondary and higher education cess paid in cash after availing area-based exemption under the said notification. The adjudicating authorities and the Commissioner (Appeals) rejected these refund claims, leading to the present appeals.

The Tribunal examined the matter in light of the binding precedent set by the Supreme Court in M/s Unicorn Industries vs. Union of India, which dealt with a similar issue under Notification No. 71/2003-CE dated 09.09.2003. The Tribunal noted that the provisions of Notification No. 56/2002-CE are pari materia to those of Notification No. 71/2003-CE and hence the ratio of the Supreme Court decision applies.

The Supreme Court in Unicorn Industries clarified that exemption notifications must explicitly cover the specific duties or cesses sought to be exempted. The relevant legal framework includes Rule 8 of the Central Excise Rules, 1944, which empowers the Central Government to exempt excisable goods from whole or part of the duty leviable by issuing notifications. The term 'duty' is defined under Rule 2(v) as the duty levied under the Act.

The Supreme Court emphasized that the exemption notification dated 9-9-2003 granted exemption under Section 5A of the Central Excise Act, 1944, for additional duties under the Central Excise Act, 1957, and the Additional Duties of Excise (Goods of Special Importance) Act, 1978. However, there was no reference to the Finance Act, 2001, or subsequent Finance Acts imposing the education cess and secondary and higher education cess. Consequently, these cesses, being additional duties imposed by separate legislation, were not covered by the exemption notification.

The Court rejected the argument that exemption of one type of duty automatically exempts other duties or cesses. It held that each duty or cess imposed by different legislation for different purposes requires specific exemption notification. The Court further held that circulars issued by Customs or Central Board of Excise and Customs do not have the force of law and cannot override statutory provisions or binding judicial precedents.

The Supreme Court also clarified the binding nature of larger bench decisions over smaller benches and held that decisions rendered without considering binding precedents are per incuriam and not binding. It followed the binding precedents laid down in Modi Rubber Limited and Rita Textiles Private Limited, which held that education cess and secondary and higher education cess are not exempted unless explicitly stated in the notification.

Applying this legal framework and precedent to the facts, the Tribunal found no infirmity in the impugned orders rejecting the refund claims of education cess and secondary and higher education cess. Since the Notification No. 56/2002-CE did not explicitly exempt these cesses, the appellants were not entitled to refund of these amounts paid in cash along with excise duty.

The Tribunal dismissed all appeals, upholding the orders of the adjudicating authorities and Commissioner (Appeals), relying on the binding Supreme Court decision in Unicorn Industries and related precedents.

Significant holdings of the Tribunal include the following verbatim excerpt from the Supreme Court decision:

"A notification has to be issued for providing exemption under the said source of power and that in the absence of notification containing an exemption to such additional duties in the nature of education cess and secondary and higher education cess, they cannot be said to have been exempted."

Further, the Tribunal endorsed the principle that exemption of one type of duty does not automatically extend to other duties or cesses imposed by different legislation, and that circulars issued by authorities cannot override statutory provisions or binding judicial precedents.

In conclusion, the Tribunal held that refund of education cess and secondary and higher education cess paid along with excise duty under the area-based exemption notification is not admissible in the absence of explicit exemption by notification. The appeals were dismissed accordingly.