Refund of education cess and higher education cess follows exemption of the underlying excise duty under incentive-linked notifications.

Education cess and higher education cess levied as a percentage of excise duty were treated as part of the excise levy, so once the underlying excise duty stood exempted under the industrial incentive policy and connected notifications, the cess component also became refundable. The parties accepted that this principle had already been settled by the Supreme Court and applied to the claim for the relevant period. Accordingly, the refund was required to be worked out and paid for the period covered by the exemption.

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Issues: Whether education cess and higher education cess paid along with excise duty were refundable when the underlying excise duty was exempted under the industrial incentive policy and connected notifications.

Analysis: The Court noted that the Supreme Court had already held that education cess and higher education cess levied at 2% of excise duty partake the character of excise duty itself and become refundable once the excise duty is exempted. The respondents also accepted that the same principle governed the present case. In view of that settled position and the consensus between the parties, the refund claim for the relevant period was required to be worked out and paid.

Conclusion: The petitioner was entitled to refund of education cess and higher education cess for the period from May 2005 to May 2015.

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