Lupin Limited EPIP Kartholi SIDCO Industrial Complex Vs Union of India and Ors. (Jammu & Kashmir and Ladakh High Court)
Summary: The Jammu & Kashmir and Ladakh High Court considered a batch of writ petitions challenging the Revenue’s attempts to recover education cess refunds previously granted to manufacturers enjoying excise duty exemptions. The petitioners had received refunds based on the Supreme Court’s judgment in SRD Nutrients (P) Limited v. CCE, (2018) 1 SCC 105. Subsequently, a larger Bench of the Supreme Court in Unicorn Industries v. Union of India, (2020) 3 SCC 492, overruled that decision and clarified that exemption from excise duty did not automatically extend to education cess. Relying on the subsequent judgment, the Revenue initiated proceedings to recover refunds already granted.
The High Court examined the subsequent Supreme Court decision in Commissioner of CGST and Central Excise (J&K) v. Saraswati Agro Chemicals Pvt. Ltd., SLP (Civil) Diary No. 18051/2023, decided on 04.07.2023. The Supreme Court had clarified that matters already settled under the law prevailing at the relevant time could not be reopened merely because the legal position subsequently changed. The Central Government Standing Counsel acknowledged that the pending petitions appeared to be covered by this decision.
Applying that principle, the High Court held that education cess refunds already granted pursuant to SRD Nutrients before the judgment in Unicorn Industries could not be recovered solely on the basis of the subsequent change in judicial interpretation. Accordingly, the Court directed the Revenue not to recover such refunds and set aside the impugned show cause notices and consequential orders. It also rejected the objection that petitions challenging show cause notices were premature, holding that the notices had become infructuous in light of the binding Supreme Court decision. The connected writ petitions were disposed of.
Cases Discussed
1. Commissioner of CGST and Central Excise (J&K) v. Saraswati Agro Chemicals Pvt. Ltd. (Supreme Court; SLP (Civil) Diary No. 18051/2023; decided on 04.07.2023): The Supreme Court clarified that education cess refunds already settled under SRD Nutrients could not be recovered merely because that decision was subsequently overruled. The High Court followed this decision in granting relief.
2. Unicorn Industries v. Union of India (Supreme Court; (2020) 3 SCC 492): The larger Bench held that exemption from excise duty did not necessarily extend to education cess. However, this subsequent ruling could not justify recovery of refunds already settled under the earlier prevailing judgment.
3. SRD Nutrients (P) Limited v. CCE (Supreme Court; (2018) 1 SCC 105): This decision formed the original legal basis for granting education cess refunds to the petitioners. Although subsequently overruled, refunds already settled under it were protected against recovery in the circumstances considered.
FULL TEXT OF THE ORDER OF JAMMU & KASHMIR AND LADAKH HIGH COURT
01. All these matters are taken up together in view of the common issue involved and disposed of by this order.
02. Without going into the detailed facts of the case it is the admitted position that “education cess” which was earlier imposed, was refunded to the petitioner after excise duty exemption was granted, on the basis of the decision rendered in SRD Nutrients (P) Limited vs. CCE, (2018) 1 SCC 105.
03. Subsequently, the decision in SRD Nutrients came to be overruled by a larger Bench in M/s Uniocorn Industries vs. Union of India, (2020) 3 SCC 492 holding that merely because exemption from payment of excise duty was granted, it does not necessarily mean that exemption can also be granted for education cess. Therefore, on the strength of the decision in M/s Unicorn Industries, the Revenue sought to recover the education cess which was refunded earlier in terms of the decision in SRD Nutrients.
04. However, now this issue has been clarified by the Supreme Court in its latest decision in Special Leave Petition (Civil) Diary No.(s) 18051/2023, „Commissioner of CGST and Central Excise (J&K) versus M/s Saraswati Agro Chemicals Pvt. Ltd.’ decided on 04.07.2023 whereby it has been clarified that issues which have been settled on the basis of the decision in vogue at the relevant time, i.e., SRD Nutrients, which allowed refund of education cess which was earlier levied by the Revenue, cannot be recovered on the strength of M/s Uniocorn Industries, by holding that the matter which have been already settled on the basis of a judgment already in operation cannot be reopened merely because there is a change in law.
05. Mr. Rohan Nanda, learned Central Government Standing Counsel, appearing for the respondents fairly submitted that the petitions in hand appears to be covered by the decision rendered by the Supreme Court in SLP (Civil) Dairy No. 18051/2023 and submitted that appropriate orders may be passed in view of the above referred decision.
06. Under these circumstances, we are of the opinion that in view of the aforesaid decision of Supreme Court in M/s Saraswati that if the education cess has already been refunded in terms of the decision rendered in SRD Nutrients, merely because of the subsequent decision in M/s Unicorn, the Revenue cannot seek recovery of the education cess which was already refunded in terms of the SRD Nutrients.
07. Accordingly, we of the view that the present batch of writ petitions can be disposed directing the Revenue not to seek recovery of the education cess, which had already been refunded in terms of decision in SRD Nutrients, and this order will be applicable to those education cess matters in which refund have been made prior to rendering of the judgment in M/s Unicorn Industries.
08. According, for the reasons stated herein above, the impugned show cause notices/ orders passed pursuant to these show cause notices, issued by the respondents are set aside.
09. Mr. Rohan Nanda, learned counsel for the respondents submits that the petitions challenging show cause notices are not maintainable, as these are premature. However, as we are of the view that in the light of the decision of the Supreme Court in M/s Saraswati issuance of the notices by the Revenue has been rendered infructuous and, accordingly, would be liable to be set aside, irrespective of the issue of maintainability.
10. The petitions are, accordingly, disposed of.
