2025 (1) TMI 1561 - AT - Central Excise

Exemption Notifications Must Explicitly Cover Specific Cesses to Qualify for Refund of Education and Secondary Education Levies

The SC/Tribunal addressed the refund of Education Cess and Secondary and Higher Education Cess paid with Excise Duty. It determined that exemption ... Entitlement for refund of Education Cess and Secondary and Higher Education Cess - Excise Duty in terms of Notification No.56/2002-CE - HELD THAT:- The issue stands covered by the earlier decision of this Bench in the matter of M/s Ind Swift Labs Ltd. Vs Commissioner of Central Excise [2023 (9) TMI 962 - CESTAT CHANDIGARH]. By following the ratio of the above decision, there is no infirmity in the impugned order vide which the refund of the education cess and higher secondary education cess has been denied. Thus, all the appeals are dismissed and the order of the lower authority is sustained. The core legal question considered by the Tribunal was whether the refund of Education Cess and Secondary and Higher Education Cess paid along with Excise Duty under Notification No.56/2002-CE dated 14.11.2002, as amended, is admissible.The Tribunal examined the legal framework governing exemptions and refunds of excise duties and related cesses, with particular reference to the provisions of the Central Excise Act, 1944, the Central Excise Rules, 1944, and relevant notifications issued under these statutes. The key precedent relied upon was the earlier decision of the same Bench in the matter of M/s Ind Swift Labs Ltd., which had addressed the identical issue.Rule 8 of the Central Excise Rules, 1944, was pivotal in the analysis. This rule empowers the Central Government to exempt any excisable goods from the whole or any part of the duty leviable on such goods by issuing notifications. The term 'duty' as defined under Rule 2(v) refers to the duty levied under the Act. The Tribunal noted that exemption notifications must be explicit and specific to the duties or cesses they seek to exempt.The Tribunal observed that Notification No. 56/2002-CE, and its pari materia counterpart Notification No. 71/2003-CE, do not explicitly exempt the Education Cess and Secondary and Higher Education Cess, which were imposed later by separate Finance Acts (2004 and 2007 respectively). The notifications referenced only the Central Excise Act and its amendments but did not include the Finance Acts under which these cesses were introduced.It was emphasized that the Education Cess and Secondary and Higher Education Cess are additional duties in the nature of excise duty but are distinct from the excise duty covered by the original notifications. Therefore, exemption notifications issued prior to the imposition of these cesses could not have contemplated their exemption. The Tribunal underscored the necessity of a specific notification under the appropriate statutory authority to exempt these cesses.The Tribunal rejected the argument that circulars issued by Customs Officers or the Central Board of Excise and Customs could override or substitute the need for explicit statutory notifications. Such circulars lack the force of law and cannot bind the Court or override statutory provisions. The Tribunal also dismissed the contention that exemption of one kind of duty automatically implies exemption of other related duties or cesses, highlighting that each duty or cess is governed by its own statutory framework and requires explicit exemption.In support of its reasoning, the Tribunal relied on binding precedents, including decisions of larger benches which clarified that smaller benches cannot deviate from established legal principles laid down by larger benches. It was noted that certain earlier decisions which had taken a contrary view were rendered per incuriam as they failed to consider binding precedents.The Tribunal concluded that in the absence of a specific exemption notification for the Education Cess and Secondary and Higher Education Cess, refunds of these cesses paid along with excise duty are not admissible. The appeals were dismissed, and the orders of the lower authorities and the High Court upholding this view were affirmed.Significant holdings include the following:'Notification dated 9-9-2003 issued in the present case makes it clear that exemption was granted under Section 5A of the Act of 1944, concerning additional duties under the Act of 1957 and additional duties of excise under the Act of 1978. ... The notification could not have contemplated the inclusion of education cess and secondary and higher education cess imposed by the Finance Acts of 2004 and 2007 in the nature of the duty of excise.''A notification has to be issued for providing exemption under the said source of power. In the absence of a notification containing an exemption to such additional duties in the nature of education cess and secondary and higher education cess, they cannot be said to have been exempted.''The Circular of 2004 issued based on the interpretation of the provisions made by one of the Customs Officers, is of no avail as such Circular has no force of law and cannot be said to be binding on the Court.''The proposition urged that simply because one kind of duty is exempted, other kinds of duties automatically fall, cannot be accepted as there is no difficulty in making the computation of additional duties, which are payable under NCCD, education cess, secondary and higher education cess.''The decision of Larger Bench is binding on the Smaller Bench... The decisions in SRD Nutrients Private Limited and Bajaj Auto Limited are clearly per incuriam. The decisions in Modi Rubber and Rita Textiles Private Limited are binding on us being of Coordinate Bench, and we respectfully follow them.'Thus, the Tribunal firmly established the principle that exemption notifications must explicitly cover the particular duty or cess sought to be exempted, and that subsequent cesses introduced by separate Finance Acts require their own exemption notifications. Circulars or administrative instructions cannot substitute for statutory authority. The refund of Education Cess and Secondary and Higher Education Cess paid along with excise duty under the impugned notification is not admissible in the absence of specific exemption notifications.