Central Excise Authority's Show Cause Notices Quashed: Earlier Judgment Deemed Binding Despite 'Per Incuriam' Status.

The court quashed the Demand-cum-show cause notices issued by the Central Excise Authority, asserting that refunds granted under the SRD Nutrients judgment cannot be deemed erroneous due to its later "per incuriam" status. The court emphasized the binding effect of the earlier judgment unless reversed by appeal or review. Departmental circulars were found binding, and the show cause notices were issued without jurisdiction, thus set aside. The writ petitions were allowed, and no costs were imposed.

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Issues Involved:
1. Legality of Demand-cum-show cause notices issued by the Central Excise Authority.
2. Interpretation of the Apex Court judgments in SRD Nutrients Pvt. Ltd. and Unicorn Industries.
3. Applicability of Section 11A of the Central Excise Act, 1944.
4. Effect of judgments declared "per incuriam."
5. Binding nature of departmental circulars.
6. Judicial review of show cause notices.

Issue-wise Detailed Analysis:

1. Legality of Demand-cum-show cause notices issued by the Central Excise Authority:
The petitioners challenged the Demand-cum-show cause notices issued by the Central Excise Authority, directing them to show cause why the amount of Education Cess and Secondary and Higher Education Cess, which were refunded to them, should not be recovered under Section 11A(i) of the Central Excise Act, 1944. The notices were based on the Apex Court's judgment in Unicorn Industries, which declared the earlier judgment in SRD Nutrients Pvt. Ltd. as "per incuriam." The court held that the refunds granted earlier pursuant to the judgment in SRD Nutrients cannot be considered erroneous merely because the judgment was later declared "per incuriam."

2. Interpretation of the Apex Court judgments in SRD Nutrients Pvt. Ltd. and Unicorn Industries:
The Apex Court in SRD Nutrients Pvt. Ltd. held that the appellants were entitled to a refund of Education Cess and Secondary and Higher Education Cess paid along with excise duty, as the excise duty itself was exempted from levy. However, in Unicorn Industries, the Apex Court declared the judgment in SRD Nutrients as "per incuriam" for not considering earlier judgments in Modi Rubber and Rita Textiles. The court in the present case held that the declaration of a judgment as "per incuriam" does not retrospectively alter the binding effect of the earlier judgment or the refunds granted under it.

3. Applicability of Section 11A of the Central Excise Act, 1944:
Section 11A allows for the recovery of duties not levied or paid, short-levied or short-paid, or erroneously refunded. The court emphasized that the power under Section 11A can only be invoked upon fulfillment of the conditions specified in Sub-section 4, such as fraud, collusion, willful misstatement, suppression of facts, or contravention of provisions with the intent to evade duty. The court found that the conditions for invoking Section 11A were not met in this case, as the refunds were granted based on the then-prevailing law laid down by the Apex Court in SRD Nutrients.

4. Effect of judgments declared "per incuriam":
The court held that the declaration of a judgment as "per incuriam" merely denudes it of its precedent value but does not affect the binding nature of the judgment between the parties to the original case. The refunds granted pursuant to the judgment in SRD Nutrients, which had attained finality, cannot be reopened or treated as erroneous solely on the basis of the subsequent judgment in Unicorn Industries.

5. Binding nature of departmental circulars:
The petitioners argued that the actions of the department were contrary to departmental circulars issued on 09.01.2020, which instructed officers to contest matters pending before courts by filing statutory appeals, writ appeals, or review petitions. The court held that departmental circulars are binding on the officers of the department and that the impugned show cause notices were issued in contravention of these circulars.

6. Judicial review of show cause notices:
The court reiterated that while it would not ordinarily interfere with show cause notices, it can do so when the notices are issued wholly without jurisdiction or by wrongful usurpation of power. The court found that the impugned show cause notices were issued without jurisdiction and by misinterpreting the powers under Section 11A, and therefore, set them aside.

Conclusion:
The court quashed the impugned Demand-cum-show cause notices, holding that the refunds granted earlier pursuant to the judgment in SRD Nutrients cannot be considered erroneous merely because the judgment was later declared "per incuriam." The court emphasized that the binding effect of the earlier judgment remains conclusive unless reversed by an appeal or review, and departmental officers cannot unilaterally revoke refunds granted based on judicial orders. The writ petitions were allowed, and no costs were imposed.

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