2018 (8) TMI 1379 - AT - Central Excise

Refund of Education Cess and Higher Education Cess under Notification No. 39/2001-CE

The Tribunal ruled that the appellants were entitled to a refund of Education Cess and Higher Education Cess when availing area-based exemption under ... Refund of Education Cess and Higher Education Cess paid along with excise duty - character of Education Cess as a surcharge partaking the character of excise duty - application of exemption benefit to surcharge/cess where basic excise duty is nil - area-based exemption under Notification No. 39/2001-CE - benefit of alternative view favouring the assesseeRefund of Education Cess and Higher Education Cess paid along with excise duty - character of Education Cess as a surcharge partaking the character of excise duty - area-based exemption under Notification No. 39/2001-CE - Entitlement to refund of Education Cess and Higher Education Cess paid along with excise duty where excise duty was exempted under Notification No. 39/2001-CE. - HELD THAT: - The Tribunal applied the Supreme Court's decision in SRD Nutrients Pvt. Ltd., which held that Education Cess is a surcharge calculated on excise duty and, by statutory design, partakes the character of excise duty. Consequently, where basic excise duty is nil by reason of an exemption, Education Cess (and Higher Education Cess) measured on that duty cannot survive independently and is not payable. The Court noted supporting reasoning of the Rajasthan High Court and earlier precedents treating such cesses as subject to the same exemption/rebate regime applicable to excise duty. Where two views are possible, the view favouring the assessee is to be adopted. Applying these principles, the Tribunal concluded that the appellants are entitled to refund of the Education Cess and Higher Education Cess paid along with the exempted excise duty.Appeals allowed; impugned orders set aside and appellants held entitled to refund of Education Cess and Higher Education Cess paid along with excise duty exempted under Notification No. 39/2001-CE, with consequential relief as per law.Final Conclusion: The Tribunal, following the Supreme Court in SRD Nutrients Pvt. Ltd., allowed the appeals and directed refund of Education Cess and Higher Education Cess paid where the underlying excise duty was exempt under Notification No. 39/2001-CE, setting aside the impugned orders and granting consequential relief as per law. Issues:Refund entitlement of Edu. Cess and Secondary & Higher Secondary Edu. Cess under area-based exemption Notification No. 39/2001-CE dated 31.7.2001.Comprehensive Analysis:Issue: Refund entitlement of Edu. Cess and Secondary & Higher Secondary Edu. Cess under area-based exemption NotificationThe primary issue in the present appeal was whether the appellants were entitled to a refund of Education Cess and Higher Education Cess when availing area-based exemption under Notification No. 39/2001-CE dated 31.7.2001. The judgment referred to a previous decision by the Hon'ble Supreme Court in the case of SRD Nutrients Pvt. Ltd., which clarified the rationale behind Education Cess being levied on excise duty. The Education Cess was deemed to be payable on excisable goods as per Section 93 of the Finance Act, 2004, and calculated at 2% on the aggregate of excise duties. It was concluded that when excise duty was exempted, no Education Cess would be applicable, as the surcharge was to be calculated on the excise duties. The judgment highlighted the importance of judicial discipline, noting that when two views were possible, the one favoring the assessees should be adopted.Judicial Precedents and Interpretations:The judgment also delved into various legal interpretations and precedents. It referenced the decisions in Bharat Box Factory Ltd. and Cyrus Surfactants Pvt. Ltd., where it was held that Education Cess and Higher Education Cess were refundable along with excise duty. The Rajasthan High Court's decision in Banswara Syntex Ltd. was cited to support the refundability of surcharges collected under different enactments. The Explanation appended to a specific Notification clarified the treatment of Education Cess as a special Duty of Excise under the Finance Act, 2004. The judgment further drew parallels with a previous case involving automobile cess, emphasizing that Education Cess and Higher Education Cess levied at 2% of excise duty were akin to excise duty itself.Conclusion and Relief:Based on the legal principles and precedents discussed, the Tribunal concluded that the appellants were indeed entitled to a refund of Education Cess and Higher Education Cess paid along with excise duty once the excise duty itself was exempted. Consequently, the appeals were allowed, the impugned orders were set aside, and the appellants were granted consequential relief as per the law.In summary, the judgment extensively analyzed the refund entitlement of Education Cess and Higher Education Cess under a specific area-based exemption notification, drawing on legal interpretations, precedents, and the rationale behind the levy of such surcharges on excise duties.