TMI Blog2019 (12) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... cation cess and secondary and higher education cess, which came to be imposed by Finance Acts of 2004 and 2007, were not in vogue. A Division Bench of this Court in SRD Nutrients Private Limited [ 2017 (11) TMI 655 - SUPREME COURT ] has considered the Finance Acts of 2004 and 2007, by which education and secondary and higher education cess were imposed. Under the Industrial Policy dated 1.4.2007 for the North Eastern States, the notification dated 25.4.2007, issued by the Central Government, came up for consideration before this Court. In Bajaj Auto Limited [ 2019 (3) TMI 1427 - SUPREME COURT] a Division Bench of this Court considered the question of liability towards NCCD, education cess and secondary and higher education cess on manufacturing establishment which is exempted from payment of central excise duty under the Act of 1944. - The most unfortunate part is that the binding decision of larger bench consisting of three Judges of this Court in Union of India v. Modi Rubber Limited, [ 1986 (8) TMI 60 - SUPREME COURT] , dealing with the similar issue, was not placed for consideration before this Court when the abovementioned decisions came to be rendered. This Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation of the provisions by the courts. Appeal dismissed - decided against appellant. - CIVIL APPEAL NO. 9237 OF 2019 [ARISING OUT OF S.L.P. (CIVIL) NO.21622 OF 2012], CIVIL APPEAL NO. 9238 OF 2019 [ ARISING OUT OF S.L.P. (CIVIL) NO. 28966 OF 2012 ] - - - Dated:- 6-12-2019 - Justice Arun Mishra, Justice M.R. Shah And Justice B.R. Gavai For the Petitioner : Mr. Vishal Gupta, AOR M/S. Ap J Chambers, AOR For the Respondent : Mr. B. Krishna Prasad, AOR M/S. Arputham Aruna And Co. JUDGMENT Arun Mishra, J. 1. Leave granted. 2. The question involved in the appeals is with respect to the levy of education cess, higher education cess, and National Calamity Contingent Duty (NCCD) on it. The appeals arise out of common judgment. The High Court has held that duties in question are not part of the exemption notification. The writ petitions have been dismissed. Hence, the appeals have been preferred. 3. The Government of India in order to promote industrial development in the North Eastern Region, announced vide Office Memorandum dated 24.12.1997, specific fiscal inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d benefits and used to grant refund to the appellant as per the abovementioned notification. The Excise Authorities used to issue a certificate of reutilization of excise duty for the particular month. The appellant used to re-credit the amount of excise duty. 8. The Deputy Commissioner of Central Excise issued a show cause notice dated 2.1.2007, requiring the appellant to repay the amount of NCCD for the period July, 2006 to December, 2006, on the ground that exemption was not permissible under the notification for the units located in the State of Sikkim. The appellant filed a writ petition before the High Court for quashing the abovementioned communication dated 2.1.2007. The High Court disposed of the same with liberty to show cause to the said communication. The appellant filed its reply. On 4.7.2007, the Commissioner, Central Excise issued show cause notice, it was submitted that grounds phrased in the response were unsustainable. The appellant was asked to show cause why amount should not be recovered under Section 11A of the Central Excise Act along with the interest and penalty. 9. Notification No.71/2003CE came to be amended on 25.4.2007 by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise, sent a communication directing the appellant to pay the education cess with interest and penalty for August, 2006. The appellant submitted its reply. After that, show cause notice dated 31.10.2006, was issued to the appellant regarding default in payment of education cess for August, 2006 and September, 2006 and proceedings were initiated for infringement under Section 91(3) of the Finance Act, 2004. The appellant sent a reply; however, on 6.12.2006, another show cause notice was issued. The appellant after that claimed on 19.12.2006 repayment of education cess for the period August, 2004 to March, 2006. In March 2007, the Government of India introduced secondary and higher education cess under Section 126 of the Finance Act, 2007. Section 128(1) of the Finance Act, 2007 indicated how the said cess was to be calculated. The respondents demanded by issuance of further notice education cess and secondary and higher education cess. The appellant filed a writ application in the High Court. By the impugned judgment, the same has been dismissed. The High Court dismissed the Writ Petition (C) No.24 of 2007, and another concerning NCCD and education cess, secondary and higher educati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said that they were covered under the exemption notification. The duty described above had been imposed by separate legislation, which was not covered under the exemption notification. It was an additional duty imposed in the nature of excise duty. They were not covered under the exemption notification. As such, the High Court has rightly dismissed the writ application filed by the appellants. Hence, no case for interference is made out. 15. It is not disputed that the Government of India took a policy decision, Ministry of Industry, Department of Industrial Policy and Promotion vide Office Memorandum dated 24.12.1997, concerning new industrial policy and concessions in the North Eastern region. The decision was taken for converting the Growth Centres and IIDCs into total tax free zones for the next ten years. All industrial activities in these zones would be free from income tax and excise duty for ten years from the commencement of production. 16. The benefit of the said notification was extended to the State of Sikkim vide notification dated 17.2.2003. Following benefits were extended to the new and the existing industrial units: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state or Industrial Area or Commercial Estate or Scheme Area, as the case may be, in the State of Sikkim, specified in Annexure II appended hereto, from so much of the duty of excise or additional duty of excise, as the case may be, leviable thereon under any of the said Acts as is equivalent to the amount of duty paid by the manufacturer of the said goods, other than the amount of duty paid by utilization of CENVAT credit under the CENVAT Credit Rules, 2002. (emphasis supplied) 18. Section 136 of the Finance Act, 2001 provides imposition of the NCCD. Section 136 is extracted hereunder: 136. National Calamity Contingent Duty. (1) In the case of goods specified in the Seventh Schedule, being goods manufactured or produced, there shall be levied and collected for the purposes of the Union, by surcharge, a duty of excise, to be called the National Calamity Contingent Duty (hereinafter referred to as the National Calamity Duty), at the rates specified in the said schedule. (2) The National Calamity Duty chargeable on the goods specified in the Seventh Schedule shall be in addition to any other d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Education Cess on excisable goods shall be in addition to any other duties of excise chargeable on such goods under the Central Excise Act, 1944 (1 of 1944) or any other law for the time being in force. (3) The provisions of the Central Excise Act, 1944 (1 of 1944) and the rules made thereunder, including those relating to refunds and exemptions from duties and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Education Cess on excisable goods as they apply in relation to the levy and collection of the duties of excise on such goods under the Central Excise Act, 1944 or the rules, as the case may be. (emphasis supplied) 20. The Central Government introduced the secondary and higher education cess at the rate of 1 per cent of the total excise duty under Sections 126 and 128 of the Finance Act, 2007, which are reproduced hereunder: 126. (1) Without prejudice to the provisions of subsection (12) of section 2, there shall be levied and collected, in accordance with the provisions of this Chapter as surcharge for purposes of the Union, a cess to be called the Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional duties under the Act of 1957 and the additional duties under the Act of 1978. It is submitted that though various Finance Acts imposed these duties, they were recoverable as excise duty, notwithstanding their nomenclature. The notification dated 17.2.2003 indicated that 100 per cent income tax and excise duty exemption for ten years was granted. The exemption should cover the NCCD, education cess and the secondary and higher education cess imposed by the notifications issued under Finance Acts of 2001, 2004, and 2007. 22. The main question arising for consideration is when 100 per cent exemption had been granted for excise duty for a period of 10 years, whether the exemption notification issued for the State of Sikkim on 9.9.2003 shall be confined to the basic excise duty under the Act of 1944, additional duty under the Act of 1957 and additional duty under the Act of 1978, which were specifically mentioned in the notification issued on 9.9.2003, or it also include cess/duty imposed by Finance Acts of 2001, 2004 and 2007. 23. The submission raised on behalf of appellant is that the duty and cess in the nature of excise duty cannot be real ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional Duties of Excise (Goods of Special Importance) Act, 1957 and Section 3(3) of the Additional Duties of Excise (Textiles Textile Articles) Act, 1978 to goods cleared from the notified areas within the North Eastern States. The said Notification provided that the assessee would be entitled to refund of duty paid other than the duty paid by way of utilisation of CENVAT credit under the CENVAT Credit Rules, 2004. 5. Reproduction of the first three paragraphs of this Notification would be sufficient, which are as follows: NOTIFICATION No.: 20/2007CE dated 2542007 North East - Exemption to all goods, except as specified, cleared from Assam, Tripura, Meghalaya, Mizoram, Manipur, Nagaland, Arunachal Pradesh or Sikkim from duty paid other than by utilisation of CENVAT credit. In exercise of the powers conferred by subsection (1) of Section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) other than those mentioned in the Annexure and cleared from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refund the amount on provisional basis by the 15th of the next month to the month under consideration and thereafter may adjust the amount of refund by such amount as may be necessary in the subsequent refunds admissible to the manufacturer. Circulars have also been referred to in the decision of this Court in SRD Nutrients Private Limited (supra). The same is extracted hereunder: 17. It is clear from the arguments of the counsel for the parties that divergent views are expressed by the CESTAT as well as High Courts. Even one Bench of the same Tribunal has differed from its earlier Division Bench decision. In this scenario, it becomes important as to how the Department has viewed the position regarding education cess and higher education cess which is payable as a surcharge on the excise duty, once the excise duty is exempted. Two circulars are relevant in this behalf, one is Circular dated 10-8-2004 which clarifies that education cess is part of excise duty. In this circular, certain clarifications are given by the Ministry of Finance (Department of Revenue), Government of India and the relevant portion thereof reads as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toms with respect to service tax. In case service tax stands exempted, education cess and secondary and higher education cess shall not be levied. 26. This Court in SRD Nutrients Private Limited (supra) has observed that the circulars bind department. When there is no excise duty, the education cess and secondary and higher education cess could not have been demanded. This Court observed thus: 21. One aspect that clearly emerges from the reading of these two circulars is that the Government itself has taken the position that where whole of excise duty or service tax is exempted, even the education cess as well as secondary and higher education cess would not be payable. These circulars are binding on the Department. 22. Even otherwise, we are of the opinion that it is more rational to accept the aforesaid position as clarified by the Ministry of Finance in the aforesaid circulars. Education cess is on excise duty. It means that those assessees who are required to pay excise duty have to shell out education cess as well. This education cess is introduced by Sections 91 to 93 of the Finance (No. 2) Act, 2004. As per Section 91 there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er arose from the State of Uttarakhand; an Office Memorandum dated 7.1.2003 was issued, by which 100 per cent outright excise duty exemption for ten years was granted from the date of commencement of the commercial production. Notification dated 10.6.2003 issued under Section 5A has been reproduced in the decision mentioned above, the same is extracted hereunder: GENERAL EXEMPTION NO. 41 Exemption to goods other than specified goods cleared from units located in the Industrial Growth Centre or Industrial Infrastructure Development Centre or Export Promotion Industrial Park or Industrial Estate or Industrial Area or Commercial Estate or Scheme Area of Uttarakhand and Himachal Pradesh.-In exercise of the powers conferred by subsection (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) read with subsection (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and subsection (3) of section 3 of the Additional Duties of Excise (Textiles and Textiles Articles) Act, 1978 (40 of 1978), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty. It has to bear the same character as those respective taxes to which the surcharge is appended. NCCD will not cease to be an excise duty, but is the same as an excise duty, even if it is levied on the product. Thus, when NCCD, at the time of collection, takes the character of a duty on the product, whatever may be the rationale behind it, it is also subject to the provisions relating to excise duty, applicable to it in the manner of collection as well as the obligation of the taxpayer to discharge the duty. Once the excise duty is exempted, NCCD, levied as an excise duty, cannot partake a different character and, thus, would be entitled to the benefit of the exemption notification. The exemption notification also states that the exemption is from the whole of the duty of excise or additional duty of excise. We may also note that the exemption itself is for a period of ten years from the date of commercial production of the unit. 24. We are, thus, of the view that the appellant would not be liable to pay the NCCD. 28. The Division Bench of this Court has rendered both the above decisions. The most unfortunate part is that the binding decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified in the corresponding entry in column 5. 31. This Court in Modi Rubber Limited (supra) considered the question that since 1963, the special duty of excise was levied inter alia on the manufacture of tyres from year to year up to 1971 by various Finance Acts passed from time to time. It was discontinued from 1972 to 1978, and the Finance Act, 1978, again revived it. After that, it continued to be levied from year to year right up to the period. The special duties of excise came to be imposed under Section 32 of the Finance Act, 1979, which came up for consideration before this Court in Modi Rubber Limited (supra). The same is extracted hereunder: 32. Special Duties of Excise.- (1) In the case of goods chargeable with a duty of excise under the Central Excises Act as amended from time to time, read with any notification for the time being in force issued by the Central Government in relation to the duty so chargeable there shall be levied and collected a special duty of excise equal to five per cent of the amount so chargeable on such goods. (2) Sub-section (1) shall cease to have effect after the 31st day of March, 1980, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Finance Acts. The assessee thereupon filed a writ petition in the Delhi High Court, challenging the order of the Assistant Collector of Excise. The Delhi High Court upheld the claim of the assessee. It took the view that the expression duty of excise included not only basic duty of excise levied under the Central Excises and Salt Act, 1944, but also the special duty of excise levied under the various Finance Acts and any other duties of excise levied under Central enactment. Meanwhile, Parliament also enacted the Central Excise Laws (Amendment and Validation) Act, 1982 laying down statutory rules which should guide the court in interpreting notifications granting exemption from payment of duty of excise and prescribing the conditions on which a notification granting exemption from payment of duty of excise can be construed as applicable to duty of excise levied under any Central law making the provisions of the Central Excises and Salt Act, 1944 and the Rules made thereunder applicable to the levy and collection of duty of excise under such Central Law. 35. The question arose for consideration before this Court as to what is the real import of the expres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Excises and Salt Act, 1944 or under any other enactment. The respondents sought to support this contention by pointing out that whenever the Central Government wanted to confine the exemption granted under a notification to the duty of excise leviable under the Central Excises and Salt Act, 1944, the Central Government made its intention abundantly clear by using appropriate words of limitation such as duty of excise leviable ... under Section 3 of the Central Excises and Salt Act, 1944 or duty of excise leviable ... under the Central Excises and Salt Act, 1944 or duty of excise leviable ... under the said Act as in the Notification No. CER8( 2)/55C. E. dated September 17, 1955, Notification No. 255/77C. E. dated July 20, 1977, Notification No. CER8( 1)/55C. E. dated September 2, 1955, Notification No. CER8( 9)/55C. E. dated December 31, 1955, Notification No. 95/61C. E. dated April 1, 1961, Notification No. 23/55C. E. dated April 29, 1955, and similar other notifications. But, here said the respondents, no such words of limitation are used in the two notifications in question and the expression duty of excise must, therefore, be read according to its plain nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must bear the same meaning which it has in Rule 8(1) and that meaning clearly is - excise duty payable under the Central Excises and Salt Act, 1944 as envisaged in Rule 2 clause (v). It cannot in the circumstances bear an extended meaning so as to include special excise duty and auxiliary excise duty. 37. This Court in Modi Rubber Limited (supra) further considered the question when the notification was issued on 1.8.1974, there was no special duty of excise leviable on tyres, it came to be introduced in 1978 under various Finance Acts. It was held that the notification could not be read as comprehending the special duty of excise on the date of the notification and came to be levied four years later. This Court also laid down that the presumption is that when the Central Government issues a notification granting exemption from payment of excise duty under Rule 8(1) of Rules of 1944, the Central Government would have considered whether exemption should be granted and if so, to what extent and can only be with reference to the duty of excise which is then leviable, not a duty to be imposed in future. This Court in Modi Rubber Limited (supra) strongly repelled the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly in respect of excise duty then prevailing but also in respect of all future duties of excise which may be levied from time to time. 38. This Court in Modi Rubber Limited (supra) also considered the provisions of Section 32 of the Finance Act, 1979, levying special duty making applicable to the provisions of the Act of 1944 and the Rules made thereunder, relating to refunds and exemptions from duties. They shall, as far as may be, apply in relation to the levy and collection of the special duty of excise as they apply to the levy and collection of the duty of excise under the Act of 1944. It was held that reference to the provisions under section 32 of the Finance Act as to the source of power under which notifications dated 1.8.1974 and 1.3.1981 were issued, it could not be held that exemption granted under these two notifications was extendable to Finance Act, 1979. It was limited only to the duty of excise payable under the Act of 1944. The expression 'duty of excise' in these two notifications could not legitimately be construed as comprehending special duty of excise. Merely reference to the source of power is not enough to attract the exemption and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Excises and Salt Act, 1944 and the expression duty of excise in these two notifications could legitimately be construed as comprehending special duty of excise. This argument is, in our opinion, not well-founded and cannot be sustained. It is obvious that when a notification granting exemption from duty of excise is issued by the Central Government in exercise of the power under Rule 8(1) simpliciter, without anything more, it must, by reason of the definition of duty contained in Rule 2 clause (v) which according to the well recognised canons of construction would be projected in Rule 8(1), be read as granting exemption only in respect of duty of excise payable under the Central Excises and Salt Act, 1944. Undoubtedly, by reason of subsection (4) of Section 32 of the Finance Act, 1979 and similar provision in the other Finance Acts, Rule 8(1) would become applicable empowering the Central Government to grant exemption from payment of special duty of excise, but when the Central Government exercises this power, it would be doing so under Rule 8(1) read with subsection (4) of Section 32 or other similar provision. The reference to the source of power in such a case would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion granted under all these notifications specifically refers to special duty of excise or additional duty of excise, as the case may be. It is, therefore, clear that where a notification granting exemption is issued only under subrule (1) of Rule 8 of the Central Excise Rules, 1944 without reference to any other statute making the provisions of the Central Excises and Salt Act, 1944 and the Rules made thereunder applicable to the levy and collection of special, auxiliary or any other kind of excise duty levied under such statute, the exemption must be read as limited to the duty of excise payable under the Central Excises and Salt Act, 1944 and cannot cover such special, auxiliary or other kind of duty of excise. The notifications in the present case were issued under sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 simpliciter without reference to any other statute and hence the exemption granted under these two notifications must be construed as limited only to the duty of excise payable under the Central Excises and Salt Act, 1944. This Court in Modi Rubber Limited (supra) has also considered when the exemption is granted under the particular provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions as may be specified in the notification) any excisable goods from the whole or any part of duty leviable on such goods. (2) The Central Board of Excise and Customs may by special order in each case exempt from the payment of duty, under circumstances of an exceptional nature, any excisable goods. The word duty is defined under Rule 2(v) to mean the duty as levied under the Act. 40. Notification dated 9.9.2003 issued in the present case makes it clear that exemption was granted under Section 5A of the Act of 1944, concerning additional duties under the Act of 1957 and additional duties of excise under the Act of 1978. It was questioned on the ground that it provided for limited exemption only under the Acts referred to therein. There is no reference to the Finance Act, 2001 by which NCCD was imposed, and the Finance Acts of 2004 and 2007 were not in vogue. The notification was questioned on the ground that it should have included other duties also. The notification could not have contemplated the inclusion of education cess and secondary and higher education cess imposed by the Finance Acts of 2004 and 2007 in the nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cover specifically the duty exempted. When a particular kind of duty is exempted, other types of duty or cess imposed by different legislation for a different purpose cannot be said to have been exempted. 42. The decision of larger bench is binding on the smaller bench has been held by this Court in several decisions such as Mahanagar Railway Vendors Union v. Union of India Ors. (1994) Suppl. 1 SCC 609, State of Maharashtra Ors. v. Mana Adim Jamat Mandal, AIR 2006 SC 3446 and State of Uttar Pradesh Ors. v. Ajay Kumar Sharma Ors. (2016) 15 SCC 289. The decision rendered in ignorance of a binding precedent and/or ignorance of a provision has been held to be per incuriam in Subhash Chandra Ors. v. Delhi Subordinate Services Selection Board Ors. (2009) 15 SCC 458, Dashrath Rupsingh Rathod v. State of Maharashtra (2014) 9 SCC 129, and Central Board of Dawoodi Bohra Community Ors. v. State of Maharashtra Ors. (2005) 2 SCC 673. It was held that a smaller bench could not disagree with the view taken by a larger bench. 43. Thus, it is clear that before the Division Bench deciding SRD Nutrients Private Limited and Bajaj Auto Limited (supra), t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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