Topcem India Vs Union Of India And 3 Ors (Gauhati High Court)
Conclusion: Education Cess and Secondary and Higher Education Cess which have already been refunded in terms of earlier decision in‘M/S SRD Nutrients Private Limited’, could not be revoked co-laterally by a Quasi Judicial Authority of the Department without taking recourse to the statutory and/or judicial remedies available to the Department.
Held: HC held that the refund granted/sanctioned earlier in terms of the Judgment of the Apex Court rendered in “M/S SRD Nutrients Private Limited” as well as in terms of orders passed by this Court directing such refunds of Education Cess and Secondary and Higher Education Cess in terms of “M/S SRD Nutrients Private Limited”, could not be revoked co-laterally by a Quasi Judicial Authority of the Department without taking recourse to the statutory and/or judicial remedies available to the Department. In view of dismissal of the earlier review petition filed by the Department against the Judgment of the Apex Court in “M/S SRD Nutrients Private Limited” and also in view that no appeal or review having been preferred against orders of this Court directing entitlement of refund of Education Cess and Secondary and Higher Education Cess to assessees, the issue between the parties to the lis having attained finality, the later Judgment of the Apex Court in “M/S Unicorn Industries” holding “M/S SRD Nutrients Private Limited” to be per incuriam, would not permit the Department to unilaterally revoke or re-open the issue without taking recourse to the remedies available to them before a judicial forum. Such actions initiated by issuance of the impugned show cause notices, if permitted, would amount to revoking the earlier orders passed by the departmental officers exercising Quasi Judicial powers unilaterally and which action could not be permitted in view of the law laid down by the Apex Court in “Abdul Kuddus”.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
Heard Dr. A. Saraf, learned senior counsel assisted by Mr. P. Das, learned counsel for the petitioner in WP(C) No. 2918/2020, WP(C) No. 1366/2020, WP(C) No. 2916/2020, WP(C) No. 2920/2020, WP(C) No. 2926/2020, WP(C) No. 2940/2020, WP(C) No. 3155/2020, WP(C) No. 3156/2020, WP(C) No. 3237/2020, WP(C) No. 3298/2020, WP(C) No. 3372/2020, WP(C) No. 3464/2020, WP(C) No. 3763/2020, WP(C) No. 4031/2020, WP(C) No. 4035/2020, WP(C) No. 4046/2020 and WP(C) No. 4194/2020.
2. Mr. R. K. Choudhury, learned counsel assisted by Mr. A. Das, learned counsel appears for the petitioners in WP(C) No. 1780/2020, WP(C) No. 2899/2020 & WP(C) No. 4824/2020.
3. Mr. G. Sahewalla, learned senior counsel assisted by Mr. M. Sahewalla, learned counsel appears for the petitioners in WP(C) No. 3087/2020, WP(C) No. 3596/2020 WP(C) No. 3610/2020, WP(C) No. 3810/2020, WP(C) No. 4053/2020, WP(C) No. 4493/2020 and WP(C) No. 4721/2020.
4. Mr. D. Saraf, learned counsel appears for petitioners in WP(C) No. 3113/2020 and WP(C) No. 3835/2020.
5. Ms. N. Hawelia and Ms. N. Gogoi, learned counsels appears for the petitioners in WP(C) No. 2872/2020, WP(C) No. 2929/2020, WP(C) No. 2935/2020, WP(C) No. 2947/2020, WP(C) No. 2951/2020, WP(C) No. 3049/2020, WP(C) No. 3166/2020, WP(C) No. 3176/2020, WP(C) No. 3177/2020, WP(C) No. 3386/2020, WP(C) No. 3762/2020 and WP(C) No. 4947/2020.
6. Mr. B. Chakraborty, learned counsel appears for the petitioners in WP(C) No. 5800/2020.
7. Also heard Mr. S. C. Keyal, learned standing counsel assisted by Ms. P. Das, and Ms. G. Hazarika, learned counsels for the respondent, Central Excise and GST Department and Mr. P. Parasar and Mr. C. Sarma Baruah, learned CGC appearing for the Union of India.
8. All these writ petitions raise common questions of law and, therefore, the same are taken together for hearing and disposal. The matters were heard on several dates and pursuant thereto the same are taken up for disposal by this common Judgment and Order. Dr. A. Saraf, learned senior counsel has lead the arguments for the petitioners. All other learned counsels for the petitioners have adopted the arguments of Dr. Saraf. The brief facts necessary for adjudicating the issues raised in the present proceedings are narrated as under:-
9. In all these writ petitions, the petitioners have challenged the Demand-cum-show cause notices issued by the Central Excise Authority directing the petitioner to show cause as to why the amount of Education Cess and Secondary and Higher Education Cess, which were refunded to the petitioners should not be recovered under the Provisions of Section 11A(i) of the Central Excise Act, 1944, (hereinafter known as the “Act”) and further as to why interest should not be charged and realized in terms of Section 11AA of the Act. The show cause notices were issued in view of the Judgment and Order of the Apex Court in M/S Unicorn Industries –Vs- Union of India reported in (2020) 3 SCC 492 whereby an earlier Judgment of the Apex Court, namely, SRD Nutrients Pvt. Ltd. –Vs- Commissioner of Central Excise, Guwahati reported in (2018) 1 SCC 105 have been declared to be per incuriam. According to the Department, the refunds sanctioned to the petitioners earlier were made pursuant to the Judgment of the Apex Court in SRD Nutrients Pvt. Ltd. (supra) and the said Judgment having been held to be “per incuriam” by the Apex Court in the recent Judgment of M/S Unicorn Industries –Vs- Union of India; the refunds earlier granted to the petitioners on the strength of the Judgment in M/S SRD Nutrients (supra) have become “erroneous refunds” and, therefore, the same are sought to be recovered from the petitioners by way of impugned show cause notice.
10. For enhancing the industrial progress in the North-East Region and for attracting
the investees with a view to foster industrial growth and industrial activities in the North-East region, the Govt. of India announced an Industrial Policy Resolution vide Notification dated 24.12.1997. The Industrial Policy Resolution (hereinafter referred to as “IPR”) contained a package of incentives and concessions for the industries established in the entire North-East Region.
11. The said IPR amongst others declared all industrial activities in growth centers; integrated infrastructural development centers, export promotion and industrial parks, export processing zone, industrial estates and industrial areas as completely tax free zones for a period of 10 (ten) years. It was announced and promised by the Government of India that all industrial activities for such areas would be free from, inter alia, income tax, central excise for a period of 10(ten) years from the date of commencement of production and also that the State Government would be moved for exemptions of sales tax, municipal tax and other such local taxes on industrial activity in the said areas. It was further stated in the aforesaid office memorandum of 24.12.1997, that Ministry of Finance of Government of India would be moved to amend the existing rules/notifications for giving effect to the decisions embodied in the Industrial Policy Resolution. Apart from exemption from, inter alia, income tax and Central excise duty, the IPR, envisages other different incentives and concessions like Capital Investment Subsidy assistance in obtaining Term Loan and Working Capital and Interest Subsidy.
12. In terms of the promises made by the Government of India in the North-East Industrial Policy Resolution contained in the office Memorandum dated 24.12.1997, various Notifications conferring benefits in terms with the promise as visualized in the Industrial Policy Resolution were issued by various authorities of the Central Government. Insofar as the exemption of Central Excise was concerned, the respondents issued notifications No. 32/99-CE and 33/99-CE both dated 08.07.1999 respectively granting exemption in respect of all excisable goods cleared from a unit located in the Growth or Integrated Infrastructure Development Centre or Export Promotion Industrial Park or Industrial Estates or Industrial area or Commercial Estate, as the case may be, specified in the Annexure appended to the said notifications from such of the excise or additional duty of excise leviable thereon as is equivalent to the amount of the duty paid by the manufacturer of goods from the account current maintained under Rule 9 read with Rule 173 G of the Rules. The exemption contained in the said notification was made applicable to only new Industrial Units which commenced their commercial production on or after the 24th Day of December, 1997 and to the Industrial Units existing before the 24th day of December but which undertook substantial expansion by way of increase in the installed capacity by not less than 25% on or after the 24th day of December, 1997. The exemption contained in the said notifications in terms of para 4 of the Notification was made applicable to any of the above stated Industrial units for a period not exceeding 10 years from the date of publication of the Notification in the official Gazette or from the date commencement of commercial production, which ever was later.
13. The Government of India on 01.04.2007 announced a new Policy, namely, the North-East Industrial and Investment Promotion Policy (NEIIPP), 2007. Vide the said Policy, the Government of India vide the NEIIPP, 2007 has also approved a package of fiscal concessions and other concession for the North-East Region. In the said new Policy NEJIPP of 2007, on the issue of the excise duty exemption under clause (v) it was clearly noted that “hundred per cent excise duty exemption will be continued, on finished products made in the North-Eastern Region, as was available NEIP, 1997”.
14. In terms of the promise made by the Government of India in the North-East Industrial and Investment Promotion Policy (NEIIPP), 2007 dated 01.04.2007, Notification No.20/2007 was issued conferring benefits in terms with the promises as visualized in the NEIIPP, 2007, insofar as the exemption of Central Excise was concerned, granting exemption in respect of all excisable goods cleared from a unit located in the states of Assam or Tripura or Meghalaya or Mizoram or Manipur of Nagaland or Arunachal Pradesh or Sikkim, from such of the excise or additional duty of excise leviable thereon as is equivalent to the amount of the duty paid by the manufacturer of goods other than the amount of Duty paid by utilization of CENVAT credit under the CENVAT Credit Rules, 2004. The exemption contained in the said notification was made applicable to only new Industrial Units which commenced their commercial production on or after the 1st of April, 2007 but not later than 31st day of March, 2017 and to the Industrial Units existing before the 1st day of April, 2007 which undertook substantial expansion by way of increase in the installed capacity by not less than 25% on or after the 1st day of April, 2007. The exemptions contained in the said notifications in terms of para 4 of the Notification are made applicable to any of the Industrial Units for a period not exceeding 10 years from the date of publication of the Notification in the official Gazette or from the date of commencement of commercial production, which ever was later.
15. Bolstered by the promises and incentives offered by the Govt. of India under the North-East Industrial Policy Resolution by Office Memorandum dated 24.12.1997 and the subsequent Notification granting Central Excise Exemption, the petitioners set up their respective units for manufacturing of the respective excisable goods falling under various Central Excise Tariff Heads and Sub-heads. The particulars regarding the industrial units set pup by the petitioners are described in details later in this Judgment,.
16. All the petitioners are stated to be duly registered with the Central Excise Authority in accordance with the provisions of Central Excise Act, 1944. The goods manufactured at the petitioners’ Plants/factories are cleared upon payment of Central Excise duties leviable thereon after due compliance of all required procedural formalities under cover of appropriate Central excise invoices. The petitioners had been claiming exemptions under Notification No. 20/2007-CE dated 25.04.2007, as amended, by way of refund excise duty through Account Current in respect of the above mentioned final products w.e.f. 25.11.2011.
17. By Finance Act, 2004, the Parliament levied Education Cess by way of the Finance Act, 2004. Education Cess was levied on goods specified in the First Schedule of the Central Excise Tariff Act, 1985, being goods manufactured or produced on which there shall be a duty of excise i.e. Education Cess, @ 2% calculated on aggregate of all duties of excise (including special duty of excise or any other duty of excise but excluding Education Cess on excisable goods) which are levied and collected by the Central Govt. in the Ministry of Finance (Department of Revenue) under the provision of Central Excise Act, 1944 or any other law for the time being in force. It was also provided that Education Cess on excisable goods shall be in addition to any other duties of excise chargeable on such goods under Central Excise Act, 1944 or any other law for the time being in force. The provisions of Central Excise Act, and the Rules made thereunder, including those relating to refunds and exemptions from duties and imposition of penalties shall as far as may be apply in relation to the levy and collection of Education Cess on excisable goods as far as they apply in relation to the levy and collection of duties of excise on such goods under Central Excise Act, 1944 or the Rules.
17.1. Subsequently, by Finance Act, 2004, Higher Education Cess was also levied as a duty under the Central Excise Act. In terms of the provisions of the Finance Act, 2004, the petitioners were paying the Education Cess and the Higher Education Cess however, as per the Notification No. 20/07 CE dated 25.04.2007, although the basic duty was refunded to the petitioners, but the Education Cess and the Higher Education Cess paid by the petitioners were not refunded to the petitioners. Several representations were made to the Department for refund of the Education Cess and the Higher Education Cess not being acceded to. The issue travelled to the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), as well as to the various High Courts of the country including this Court in respect of entitlement of the petitioners towards refund of Education Cess and Higher Education Cess when the basic Excise duty exempted and refunded. Various departmental circulars like Circular dated 10.08.2004 and Circular dated 08.04.2011 were also issued whereby the view of the Government was that when the whole of excise duty or service tax was exempted then education Cess as well as Secondary and Higher Education Cess would not be payable. However, in spite of the circular being issued, the petitioners continued to pay Education Cess and Higher Education Cess on the basic Central Excise Duty and which were not refunded to the petitioners in terms of the Notification No. 20/07 CE dated 25.04.2007. Ultimately, the question pertaining to entitlement of industrial units like the petitioners towards refund of Education Cess and Secondary and Higher Education Cess paid by the petitioners when the basic excise duty was exempted from the levy, was finally decided by the Apex Court in M/S SRD Nutrients Pvt. Ltd. Vs. Commissioner of Central Excise, Guwahati reported in (2018) 1 SCC 105.
18. The Apex Court by the Judgment and Order dated 10.11.2017 in “M/S SRD Nutrients (supra)” decided the issue by holding that the appellants were entitled to refund of Education Cess and Secondary and Higher Education Cess which were paid along with excise duty as the excise duty itself was exempted from levy. In the said Judgment, the Apex Court held that Education Cess is payable on excise duty and those assessees who are required to pay excise duty have to shell out Education Cess as well. It was further held that Education Cess was introduced by Sections 91 to 93 of the Finance (No. 2) Act, 2004 and as per Section 91 thereof, Education Cess is the surcharge which the assessee is required to pay. The Apex Court held that Section 93 of the Act of 2004 made it clear that Education Cess is payable on the ‘excisable goods’ i.e. in respect of goods specified in the First Schedule to the Central Tariff Act, 1985 and the same was to be levied @ 2% and calculated on the aggregate of all duties of excise which were levied and collected by the Central Government under the provisions of the Central Excise Act, 1944 or under any other law for time being in force. Subsection (3) of Section 93 provided that the provisions of the Central Excise Act, 1944 and the rules made thereunder, including those related to refunds and duties etc. shall as far as may be applied in relation to levy and collection of Education Cess on excisable goods. In view of the aforesaid, the Apex Court held that when there is no excise duty payable, as it is exempted, there would not be any Education Cess as well, inasmuch as Education Cess @ 2% is to be calculated on the aggregate of duties of excise and that there cannot be any surcharge when basic duty itself is Nil.
19. A review petition by the Department was filed before the Apex Court bearing number Review Petition (C) D. No. 6714 of 2018 in Civil Appeal Nos. 2781-2790 of 2010 against the aforesaid judgment dated 10.11.2017 passed by the Supreme Court. The Apex Court vide its order dated 10.07.2018 dismissed the review application.
20. In view of the aforesaid judgment of the Apex Court, the petitioners filed their claim petitions for refund of Education Cess and Higher Education Cess for the respective relevant periods before the concerned Department Authorities of Central Excise vide their representations giving reference to the judgment of the Apex Court in, M/S SRD Nutrients (supra).
21. Since in-spite of the claims filed by the petitioner, no refund on account of Education and Secondary & Higher Education Cess was granted to the petitioners, some of the petitioners filed writ applications before this Hon’ble Court challenging the inaction of the respondent authorities in not granting refunds of Education and Secondary & Higher Education Cess claimed in spite of the law laid down by the Apex Court in SRD Nutrients (supra). This Hon’ble Court following the decision of the Apex Court in SRD Nutrients (supra) disposed of the writ petitions by directing the respondent authorities to refund the Education Cess as well as Secondary & Higher Education Cess which was collected from the petitioners along with excise duty.
22. In pursuance to the Judgment of the Apex Court passed in SRD Nutrients (Supra) as well as the directions of this Court, the Assistant Commissioner, the respondent No. 3 herein, passed respective Refund Orders on various dates sanctioning the refunds claimed by the petitioners as Education Cess and Secondary and Higher Education Cess for the relevant periods. The said amounts sanctioned were subsequently refunded to the petitioner.
23. Pursuant to the refund orders sanctioned by the Department, the Apex Court while dealing with similar issues, in a recent judgment rendered in the case of Unicorn Industries –Vs- Union of India, held that in the absence of notifications containing an exemption to additional duties in the nature of Education Cess and Secondary & Higher Education Cess, it cannot be said that same are exempted. The Apex Court held that in Union Of India & Ors –Vs- M/S Modi Rubber Limited reported in (1986) 4 SCC 66, and in Rita Textiles Pvt. Ltd. and Ors. –Vs- Union of India reported in (1986) Supp SCC 557 had already laid down the law and the subsequent judgment rendered by the Apex Court in the case of SRD Nutrients(supra) being contrary to the view taken earlier, was held to be per incuriam. The Apex Court in Unicorn Industries(supra) held that earlier binding judgments of the Apex Court in M/S Modi Rubber Limited and Rita Textiles Pvt. Ltd. were not placed for consideration and, therefore, decision of the Apex Court rendered in SRD Nutrients and Bajaj Auto Limited were clearly per incuriam.
24. After the decision of the Apex Court in Unicorn Industries, the Department issued impugned Demand-cum-show cause notices to the petitioners on various dates, seeking recovery of the refund of Education Cess, Secondary & Higher Education Cess earlier sanctioned/granted to the petitioners were treated to have been erroneously made. The Department by the impugned show case notices held that the amounts so refunded are liable to be recovered from the petitioners in terms of provisions of Section 11A(i) of the Central Excise Act, 1944 and further held the petitioners to be liable to pay interest on the amount so recovered in terms of Section 11AA of the Act. The petitioners were directed to show cause as to why the amount erroneously refunded to the petitioners should not be demanded and recovered back from the petitioners in terms of Section 11A(i) of the Central Excise Act, 1944. The details of various demand-cum-show cause notices seeking recovery of Education Cess and Secondary and Higher Education Cess earlier sanctioned by the Department in respect of the each of the petitioners, the showing the amounts sought to be recovered, the authority issuing the show cause notices along with items manufactured by each of the petitioners is extracted from the pleadings in a tabular form for convenience:-
