2025 (9) TMI 1270 - HC - Central Excise

Respondents ordered to refund Education Cess and Secondary & Higher Education Cess with interest per final orders; reopening rejected

M/s Coromandel International Limited (Unit-II) Versus Union of India, Assistant/Deputy Commissioner Central Goods & Services Division Jammu.

HC directed respondents to release the refund of Education Cess and Secondary & Higher Education Cess with applicable interest in favor of the petitioner ... Release of refund of Education Cess and Secondary & Higher Education (SHE) Cess along with applicable interest - HELD THAT:- Undoubtedly, the CESTAT passed its judgment placing reliance upon a judgment of the Supreme Court in the case of M/s SRD Nutrients Pvt. Ltd. [2017 (11) TMI 655 - SUPREME COURT]. It is also not in dispute that the order of the CESTAT passed in the case of the petitioner and similar orders passed in identical matters by the CESTAT were subject matter of challenge in various appeals before this Court. The argument of the learned counsel appearing for the Revenue that the ruling given by the Supreme Court in SRD Nutrients Pvt. Ltd’s case was contrary to the judgment previously rendered by a three-Judge Bench of the Supreme Court in the case of Union of India and others v. Modi Rubber Limited [1986 (8) TMI 60 - SUPREME COURT] and that subsequently Hon’ble the Supreme Court overruled the judgment passed in SRD Nutrients Pvt. Ltd case in a decision rendered in M/s Unicorn Industries v. Union of India and Others [2019 (12) TMI 286 - SUPREME COURT] and, therefore, the judgment passed in SRD Nutrients Pvt. Ltd was per incuriam and was not accepted by the Hon’ble Supreme Court. Rejecting the aforesaid argument, Hon’ble Supreme Court also dismissed the miscellaneous application filed by the Revenue seeking to undo the judgment in M/s SRD Nutrients Pvt. Ltd., which was subsequently overruled in M/s Unicorn Industries. The request made by the learned counsel for the respondents to seek reference of the matter to a larger Bench was also rejected on the ground that no such application could have been filed after the review petition filed in the case of M/s SRD Nutrients Pvt. Ltd. had been dismissed by the Supreme Court. It was clearly pointed by the Hon’ble Supreme Court that filing of miscellaneous application seeking to undo the judgment in M/s SRD Nutrients Pvt. Ltd was essentially a second application for seeking review of the judgment. It was clearly held that once there is a subsequent judgment overruling the earlier judgment on a point of law, earlier judgment cannot be re-opened or reviewed on the basis of a subsequent judgment. Hon’ble Supreme Court upheld the decision of this Court holding that the decision in M/s SRD Nutrients Pvt. Ltd. had attained finality and was binding on the parties thereto and, therefore, a subsequent decision of the Supreme Court in M/s Unicorn Industries cannot have a bearing on past decision, which had attained finality, although, these decisions had followed M/s SRD Nutrients Pvt. Ltd. which was subsequently overruled in M/s Unicorn Industries. The respondents do not deny the legal and factual position, but would submit that in view of the pendency of the miscellaneous application No. 2043-2052 of 2020 seeking once again modification of the judgment dated 10.11.2017 passed in M/s SRD Nutrients Pvt. Ltd., this Court should defer its consideration. The respondents are directed to release the refund of education and secondary & higher education cess along with applicable interest in favour of the petitioner in terms of the final order(s) of the CESTAT, Chandigarh passed in the case(s) of the petitioner - Petition allowed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether education cess and secondary & higher education (SHE) cess constitute duties of excise recoverable where basic excise duty on goods is exempted under the exemption notification, and whether refund of such cesses is payable where basic excise duty has been refunded/exempted. 2. Whether orders of the CESTAT allowing refund of education cess and SHE cess, which relied on the Supreme Court decision holding such cesses to be in the nature of surcharge, have attained finality and oblige executive respondents to release refunds with interest. 3. Whether pendency of a miscellaneous application before the Supreme Court seeking modification of the earlier Supreme Court ruling (on which the favorable orders were founded) justifies deferral of compliance with final orders in favor of claimants. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legal characterization of education cess and SHE cess and entitlement to refund when basic excise duty is exempted Legal framework: Exemption notifications relieved eligible industrial units from payment of excise duty for specified periods; education cess and SHE cess were levied in addition to basic excise duty. Claimants sought refund of such cesses where basic excise duty was exempted or refunded under relevant notifications. Precedent Treatment: The CESTAT applied a Supreme Court decision holding that the cesses are in the nature of a surcharge and that when the primary tax (basic Excise Duty) is exempted, ancillary levies like education cess and SHE cess cannot be collected. That Supreme Court decision had been followed by the CESTAT and by subsequent appellate orders of this Court which attained finality. Interpretation and reasoning: The Court accepted the legal characterisation that the cesses are not independent duties of excise but operate as additional levies contingent on the primary excise liability, so exemption of the primary excise duty precludes imposition/collection of the cesses. Consequently, where exemption/ refund of basic excise duty is found to apply, claimants are entitled to refund of education cess and SHE cess paid in connection with the exempted excise liability. Ratio vs. Obiter: The holding that cesses are surcharge-like and not separately collectible when primary duty is exempted is treated as ratio relied upon by the CESTAT and upheld as binding in the context of the claims under review. Conclusions: Refund of education cess and SHE cess is payable to eligible units when basic excise duty is exempted; the petitioner's claim is governed by that legal principle and the CESTAT's order allowing refund is correct in law. Issue 2 - Finality of tribunal/High Court orders and obligation to release refunds with interest Legal framework: Final judicial orders and tribunal decisions that have not been successfully challenged attain finality and create a legal obligation on revenue authorities to execute relief granted, including refunds with applicable interest. Precedent Treatment: The CESTAT's favorable orders were affirmed by a Division Bench of this Court, and further challenge (SLP) in respect of the Division Bench's decision was dismissed by the Supreme Court. The Supreme Court's dismissal confirmed the finality of the line of decisions that applied the SRD ruling. Interpretation and reasoning: Where an appellate tribunal's order in favour of a claimant has been upheld by a Division Bench and further SLPs have been dismissed, the orders operate as final for the parties concerned. The respondents' acknowledgment that the CESTAT orders have attained finality does not absolve them of the statutory duty to release refunds; administrative inaction despite final judicial direction is impermissible. Ratio vs. Obiter: The principle that final judicial/tribunal orders must be implemented by the executive (including payment of refunds with interest) is applied as ratio to direct release of dues within a finite timeframe. Conclusions: The respondents are legally obliged to release the refund of education cess and SHE cess, with applicable interest, in accordance with the final orders of the CESTAT as upheld by the Division Bench and not successfully impugned further. Issue 3 - Effect of a pending miscellaneous application in the Supreme Court seeking modification of the earlier decision relied upon by the CESTAT Legal framework: Doctrine of finality and limitations on re-opening settled decisions; procedural rules regarding review, recall or modification of Supreme Court judgments; obligations of subordinate courts and executive to give effect to final orders. Precedent Treatment: The Supreme Court previously rejected a second application seeking to undo its own earlier decision and held that once a decision has attained finality, a subsequent overruling cannot be used to re-open or review an earlier judgment for past cases that have attained finality. The Supreme Court rejected a request to refer the matter to a larger bench and treated the later application as an impermissible second review in circumstances where finality had attached to the earlier ruling. Interpretation and reasoning: Pending an interlocutory or collateral application in the Supreme Court challenging or seeking modification of the earlier decision upon which final lower court orders were based does not automatically suspend the obligation of the executive to implement final orders in other cases. Absent a specific stay or successful challenge overturning the particular final orders relied upon, the existence of a pending miscellaneous application in a separate matter is not a legal impediment to compliance. The Court therefore declined to defer consideration or implementation merely because of pendency of such application. Ratio vs. Obiter: The ruling that pendency of a miscellaneous application in the Supreme Court does not justify deferring compliance with final orders is applied as ratio in directing execution of refunds; notes regarding scope of review or re-opening of final decisions are explanatory but grounded in binding procedural principles. Conclusions: The respondents cannot postpone disbursement of refunds merely on account of a pending miscellaneous application in the Supreme Court; absent a stay or reversal applicable to the petitioner's finalized orders, the refunds must be released. Remedial Direction Having found entitlement and finality, the Court directed respondents to release the refund of education cess and SHE cess along with applicable interest in accordance with the final CESTAT orders, to be accomplished within a specified period (two months from service of the order).