2020 (9) TMI 6 - HC - Central Excise

Excise Duty Exemption Dispute: Court Halts Recovery of Education Cess Refunds Pending Further Review.

The petitioner was initially granted an excise duty exemption under the Northeast Industrial Policy, 2007, and received refunds for education cess and ... Exemption of education cess & secondary and higher education cess - Area Based Exemption availed - whether in view of the exemption granted to the excise duty the petitioner would also be entitled to an exemption to the payment of education cess & secondary and higher education cess? HELD THAT:- By the order dated 13.02.2019 of the Assistant Commissioner, Excise, GST and Central Excise, certain amounts were sanctioned for being refunded to the petitioner and accordingly the refunds were given effect. Subsequent thereto, the Supreme Court in its pronouncement in Unicorn Industries vs. Union of India and others reports [2019 (12) TMI 286 - SUPREME COURT] has held that In view of the subsequent judgment of the Supreme Court in Unicorn Industries (supra) the respondent authorities had issued the demand cum show cause notice dated 09.06.2020 to the petitioner by which a question was raised that the earlier refund of the education cess & secondary and higher education cess given to them has now become erroneous refunds and therefore, a recovery be made under section 11(A-1) of the Central Excise Act 1944 - The demand cum show-cause notice dated 09.06.2020 is assailed in this writ petition on the ground that the condition precedent to invoke the power under section 11(A-1) is that the refund made must be erroneous. Thus, a question for determination would be as to whether the proposition of law laid down in Unicorn Industries would render the refund made to the petitioner to be erroneous - until further orders we stay the operation of the demand cum- show-cause notice dated 09.06.2020. Issues:1. Entitlement to exemption in the payment of excise duty under Northeast Industrial Policy, 2007.2. Calculation of education cess & secondary and higher education cess based on excise duty payable.3. Entitlement to exemption of education cess & secondary and higher education cess when excise duty is exempted.4. Interpretation of judgments in SRD Nutrients Pvt. Ltd. Vs. Commissioner of Central Excise, Guwahati and Unicorn Industries vs. Union of India.5. Validity of demand cum show cause notice dated 09.06.2020 for recovery under section 11(A-1) of the Central Excise Act 1944.6. Condition precedent for invoking power under section 11(A-1) regarding erroneous refunds.7. Impact of Unicorn Industries judgment on the refund made to the petitioner.8. Stay of operation of the demand cum show-cause notice dated 09.06.2020.Analysis:The petitioner, under the Northeast Industrial Policy, 2007, was entitled to exemption in the payment of excise duty. However, they were required to pay education cess & secondary and higher education cess based on the excise duty payable. A question arose whether exemption from excise duty extended to exemption from education cess & higher education cess. The Supreme Court's judgment in SRD Nutrients Pvt. Ltd. case held that appellants were entitled to a refund of education cess and higher education cess once excise duty was exempted.Subsequently, in the Unicorn Industries case, the Supreme Court clarified that even if one duty is exempted, it does not automatically exempt other duties like education cess. The judgment emphasized that statutory notifications must specifically cover the duty exempted. The petitioner had received refunds based on the SRD Nutrients Pvt. Ltd. judgment. However, a demand cum show cause notice was issued for recovery under section 11(A-1) of the Central Excise Act 1944, claiming the earlier refunds were erroneous.The petitioner argued that the refunds were not erroneous when made as they were in line with the law prevailing at that time. The court noted that the condition precedent for invoking section 11(A-1) was not satisfied. The question for determination was whether the Unicorn Industries judgment rendered the refunds erroneous. Pending further orders, the operation of the demand cum show-cause notice was stayed.The court directed the filing of affidavits by the Excise Department and allowed time for responses from the petitioners. The matter was listed for further consideration, and recovery of the higher education cess refunded was stayed until the next date. The court also permitted additional affidavits to be filed by the Excise Department within a specified time frame, with corresponding responses from the petitioners.This detailed analysis covers the issues raised in the judgment, providing a comprehensive understanding of the legal complexities and interpretations involved in the case.