2025 (5) TMI 52 - AT - Central Excise

Education Cess Deemed Part of Excise Duty, Refund Claim Upheld Under Area-Based Exemption Principle of Finality Affirmed

Sun Pharma Laboratories Limited Versus Commissioner of Central Excise and Service Tax, Jammu

Sun Pharma Laboratories Limited Versus Commissioner of Central Excise and Service Tax, Jammu - TMI 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Tribunal in these appeals are:Whether the appellant is entitled to refund of education cess and secondary & higher education cess paid on excisable goods, when operating under area based exemption Notification No. 56/2002-CE dated 14.11.2002.Whether education cess and secondary & higher education cess constitute duties of excise such that CENVAT Credit of basic excise duty can be utilized for their payment.Whether the show cause notices issued for recovery of refund claims rejected by the jurisdictional Central Excise officer are sustainable in law.The applicability and binding effect of judicial precedents, particularly the decisions of the Hon'ble Apex Court and this Tribunal, on the issue of refund of education cess and secondary & higher education cess.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Entitlement to refund of education cess and secondary & higher education cessRelevant legal framework and precedents: The appellant was operating under area based exemption Notification No. 56/2002-CE dated 14.11.2002, which provides exemption from basic excise duty for specified goods. The dispute arose because the appellant claimed refund of education cess and secondary & higher education cess paid, which was rejected by the department on the ground that these cesses are not duties of excise and hence not eligible for CENVAT Credit or refund. The key precedent relied upon by the appellant is the Hon'ble Apex Court decision in SRD Nutrients Pvt Ltd vs. CCE, Guwahati - 2017 (355) ELT 481 (SC), which held that education cess and secondary & higher education cess are integral parts of excise duty and eligible for refund.Court's interpretation and reasoning: The Tribunal noted that the impugned order by the Commissioner (Appeals) rejected the refund claim by holding that education cess and secondary & higher education cess are not excise duties. However, this position was overruled by the Apex Court in SRD Nutrients Pvt Ltd, which clarified that these cesses are part of excise duty and thus refundable. The Tribunal further observed that this legal position has been consistently followed in various final orders passed by the Tribunal itself, including in the appellant's own cases for previous periods.Key evidence and findings: The Tribunal relied on the appellant's own prior appeals where the refund of education cess and secondary & higher education cess was allowed following the Apex Court's ruling. The Tribunal also considered the show cause notices issued for recovery of refund claims and found them to be infructuous in view of settled law.Application of law to facts: Since the appellant was entitled to refund of the cesses as per binding judicial precedents, the rejection of refund by the Commissioner (Appeals) was contrary to law. The Tribunal applied the Apex Court's ruling and its own consistent precedents to hold that the appellant's refund claims were valid.Treatment of competing arguments: The Revenue's argument reiterating the impugned order was rejected as the Tribunal found that the issue was no longer res integra and had been conclusively settled in favour of the appellant by the Apex Court and the Tribunal's own prior decisions.Conclusions: The appellant is entitled to refund of education cess and secondary & higher education cess paid, and the show cause notices issued for recovery of such refund claims are not sustainable.Issue 2: Whether education cess and secondary & higher education cess are duties of exciseRelevant legal framework and precedents: The legal question whether education cess and secondary & higher education cess constitute duties of excise was conclusively addressed by the Apex Court in SRD Nutrients Pvt Ltd, which held these cesses to be part of excise duty and thus eligible for CENVAT Credit and refund.Court's interpretation and reasoning: The Tribunal emphasized that the impugned order's contrary view was overruled by the Apex Court and that this Tribunal had consistently followed the Apex Court's decision in multiple final orders. The Tribunal also referred to the Apex Court's ruling in Commr of CGST, Jammu vs. Saraswati Agro Chemicals Pvt Ltd - 2023 (386) ELT 193 (SC), which underscored the principle of finality in litigation and held that once a decision is rendered by the Apex Court, it cannot be reopened or reviewed merely because a subsequent larger bench overruled it.Key evidence and findings: The Tribunal found that the appellant's own cases for earlier periods were decided in their favour following the Apex Court's ruling. The Tribunal also noted the legal principle that education cess and secondary & higher education cess are integral components of excise duty for the purposes of CENVAT Credit and refund.Application of law to facts: Applying the settled legal position, the Tribunal held that education cess and secondary & higher education cess are excise duties and hence the appellant was entitled to utilize CENVAT Credit for their payment and claim refund thereof.Treatment of competing arguments: The Revenue's insistence on non-entitlement was rejected as contrary to binding judicial precedents and the principle of finality in litigation.Conclusions: Education cess and secondary & higher education cess are duties of excise and eligible for refund and CENVAT Credit.Issue 3: Validity of show cause notices for recovery of refund claimsRelevant legal framework and precedents: The show cause notices were issued for recovery of refund claims rejected on the ground that education cess and secondary & higher education cess were not excise duties. The Tribunal relied on the settled law from the Apex Court and its own prior decisions holding these cesses to be excise duties.Court's interpretation and reasoning: The Tribunal held that since the refund claims were valid and the rejection of refund was contrary to law, the show cause notices seeking recovery became infructuous and unsustainable.Key evidence and findings: The Tribunal noted the appellant's prior successful appeals and the binding Apex Court rulings confirming entitlement to refund.Application of law to facts: The Tribunal applied the principle that once a refund claim is validly allowed by judicial authority, recovery proceedings based on contrary orders cannot be sustained.Treatment of competing arguments: The Revenue's reliance on the impugned order was rejected as the Tribunal found that the issue was conclusively settled in favour of the appellant.Conclusions: The show cause notices for recovery of refund claims are not sustainable and must be set aside.3. SIGNIFICANT HOLDINGSThe Tribunal made the following crucial legal determinations:'Merely that decision in SRD Nutrients Pvt Ltd (supra) was subsequently overruled, reference to Larger Bench vide order dated 27-9-2021 as reported in 2021 (378) ELT 579 (SC) on a miscellaneous application filed by Revenue seeking to undo aforesaid decision was unnecessary in view of Explanation to Order XLVII Rule 1 of Code of Civil Procedure, 1908 which provides that an earlier judgment cannot be reopened or reviewed to bring it in line with subsequent judgment overruling it - After all, there has to be finality in litigation and a person cannot be vexed twice.'This pronouncement underscores the principle of finality in litigation and that once a decision is rendered by the Apex Court, it cannot be reopened or reviewed to align with a subsequent overruling decision, thereby protecting litigants from repeated vexation.The Tribunal also established the core principle that education cess and secondary & higher education cess are integral parts of excise duty and thus eligible for refund and utilization of CENVAT Credit, following the binding Apex Court decision in SRD Nutrients Pvt Ltd.Final determinations on each issue are as follows:The appellant is entitled to refund of education cess and secondary & higher education cess paid on excisable goods under the area based exemption notification.Education cess and secondary & higher education cess constitute duties of excise and are eligible for CENVAT Credit and refund.The show cause notices issued for recovery of refund claims rejected on the ground of non-entitlement are not sustainable and are set aside.The impugned order rejecting the appellant's refund claims is not sustainable in law and is accordingly set aside.