2008 (4) TMI 277 - HC - Central Excise

Court orders refund of Education Cess under Central Excise Rules

The Court allowed the petition challenging the denial of refund of Education Cess under the Central Excise Rules, 2002. Relying on statutory provisions ... Refund of Education Cess - Education Cess as surcharge on excise duty - definition of 'duty' including CENVAT under Section 2A - rebate of duty under Rule 18/notification - payment from CENVAT credit account and refund to same accountRefund of Education Cess - Education Cess as surcharge on excise duty - rebate of duty under Rule 18/notification - Claim for refund of Education Cess paid on export consignments for the period prior to 6-9-2004 where refund of excise duty has been allowed - HELD THAT: - The Court accepted the view that Education Cess, being levied in the nature of a surcharge on excise duty, falls within the ambit of duty for the purpose of rebate where excise duty refund is allowable. The Court relied on the reasoning in the Division Bench decision of the Rajasthan High Court in Banswara Syntex Ltd. and noted that Notification No.19 of 2004 (which later expressly included Education Cess within the expression 'duty') confirms the character of Education Cess as part of duty; accordingly, for the period prior to that notification an assessee entitled to refund of excise duty is also entitled to refund of the Education Cess paid as a corollary. The Court found no reason to deny the refund of Education Cess in circumstances where excise duty has been held refundable and actual refund of excise duty has been granted. [Paras 3, 5]Petition allowed insofar as the petitioner is entitled to refund of Education Cess paid in relation to goods on which excise duty has already been refunded.Definition of 'duty' including CENVAT under Section 2A - payment from CENVAT credit account and refund to same account - Whether Education Cess paid from the petitioner's CENVAT credit account must be refunded and credited back to that account - HELD THAT: - The Court referred to Section 2A of the Central Excise Act (which treats references to 'duty' to include CENVAT) and observed that the petitioner had paid both excise duty and Education Cess from its CENVAT account. Given that excise duty had been found refundable and actually refunded, the Court held that the Education Cess paid from the CENVAT account should also be refunded and credited to the same account. The Court declined to examine the departmental contention that Education Cess was required to be paid only from PLA since refund was directed to be made to the same account from which it was paid. [Paras 5, 6]Respondent directed to sanction rebate of the Education Cess paid from the petitioner's CENVAT account and credit the refund to that same account within one month.Final Conclusion: The petition is allowed: the petitioner is entitled to refund of Education Cess paid in relation to goods for which excise duty refund has been granted, and the refund is to be credited to the same CENVAT account from which the Education Cess was paid; respondent directed to sanction the rebate within one month. Issues:Challenge of denial of refund of Education Cess under Central Excise Rules, 2002.Analysis:In a petition under Article 226 of the Constitution, the petitioner contested the denial of refund of Education Cess under the provisions of a Notification under clause 40 of 2001-C.E., dated 26-6-2001 issued under Rule 18 of the Central Excise Rules, 2002, despite already receiving a refund of Cenvat credit on export consignments. The petitioner argued that Education Cess is akin to a surcharge on excise duty, thus, if entitled to an excise duty refund, they should also receive a refund of Education Cess. Reference was made to a decision by a Division Bench of the Rajasthan High Court in a similar matter. The petitioner's contention was supported by Notification No. 19 of 2004, allowing rebate on Education Cess under certain conditions. A Division Bench of the Rajasthan High Court had previously ruled that the definition of 'duty' includes Education Cess on excisable goods even for the period before 6-9-2004, entitling an assessee to a refund of Education Cess paid as a surcharge on excise duty.The respondents argued that since the petitioner paid duty from their CENVAT Credit Account, they were not entitled to a refund of Education Cess. However, the petitioner contended that both excise duty and Education Cess were paid from the same CENVAT Credit Account, thus, if a refund of excise duty was granted, Education Cess should also be refunded. The petitioner relied on a Tribunal decision to support their argument. The Court examined Section 2A of the Central Excise Act, which includes CENVAT in the definition of 'duty'. Considering the statutory provisions and the payment method of the duties by the petitioner, the Court agreed with the Rajasthan High Court's decision and directed the refund of Education Cess to be credited to the same CENVAT Credit Account from which it was paid, disregarding the Department's argument that Education Cess should be paid only from the PLA Account.Consequently, the Court allowed the petition, directing the Assistant Commissioner of Central Excise to refund the Education Cess amount collected from the petitioner in relation to the goods for which excise duty had already been refunded, within one month. The refund was to be credited to the same account from which the Education Cess was initially paid. The Court made the rule absolute with no costs, permitting direct service.