2013 (12) TMI 695 - AT - Central Excise

Exemption under Notification 56/2002 - Area based exemption - refund of education cess and higher education cess paid through PLA - Exemption from certain types of excise duties on goods manufactured by factories situated in specified areas of Jammu Whether the matter to be referred to the Larger Bench - Held that - the exemption is not for the whole of the three duties levied. It is only for part of it. Secondly it is not for all duties collected as excise duty but only for three specified duties. The fact that Education Cess is calculated as percentage of the aggregate of all excise duties cannot give Education Cess the same character as the other levies. The three levies dealt in the notification have distinct character and purposes. A new levy like Education Cess cannot at once take the nature of many levies. So the argument that Education Cess has the same nature as other excise duties exempt has no meaning. It is relevant that the notification was issued in the year 2002. At that time excise duty under Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 was leviable. This levy was 15% of basic excise duty. But that levy was specifically exempted in the notification and not by implication. The power to grant exemption is to be exercised by the government and not through judicial interpretation or by implication or by reading words into the notification which words are not there. - Refund of education cess and higher education cess denied - Decided against the assessee.

Summary

Issues Involved:
1. Whether the exemption under Notification No. 56/2002-CE dated 14-11-2002 extends to Education Cess and Higher Education Cess.
2. Whether the Tribunal was correct in not referring the matter to a Larger Bench despite differing views in previous judgments.

Detailed Analysis:

1. Exemption under Notification No. 56/2002-CE and its Applicability to Education Cess and Higher Education Cess:

- Notification Details: The appellant, a manufacturer in Jammu, claimed exemption under Notification No. 56/2002-CE, which provides an exemption from certain types of excise duties for goods manufactured in specified areas of Jammu. The mechanism involves the manufacturer paying excise duties and receiving a refund for the amount paid in cash or PLA.

- Appellant's Argument: The appellant argued that both Education Cess and Higher Education Cess are collected as duties of excise and should be exempted under the notification. They relied on previous court decisions such as Banswara Syntex Ltd. and Vipor Chemicals Pvt. Ltd., which held that education cess should be treated as part of excise duty and thus exempted.

- Revenue's Argument: The Revenue contended that the exemption is specific to three types of excise duties mentioned in the notification and does not extend to Education Cess and Higher Education Cess. They argued that these cesses were introduced after the notification and are collected for different purposes.

- Tribunal's Decision: The Tribunal found that the exemption notification specifically mentions only three types of excise duties and does not include Education Cess and Higher Education Cess. The Tribunal referred to the decision in Jindal Drugs Ltd. and concluded that the exemption cannot be extended by implication to new levies introduced after the notification. The Tribunal emphasized that the power to grant exemptions lies with the government and not through judicial interpretation.

2. Referral to Larger Bench:

- Appellant's Argument: The appellant argued that the Tribunal should not take a different view from the earlier decisions in Cyrus Surfactants Pvt. Ltd. and Bharat Box Factory Ltd. without referring the matter to a Larger Bench. They cited the Supreme Court's decision in Gammon India Ltd., which emphasized judicial discipline and the need to refer conflicting views to a Larger Bench.

- Tribunal's Decision: The Tribunal noted that the issue had been examined in detail in Jindal Drugs Ltd., which relied on the Supreme Court's decision in Modi Rubber Ltd. The Tribunal found no need to refer the matter to a Larger Bench, as the previous decisions in Cyrus Surfactants Pvt. Ltd. and Bharat Box Factory Ltd. did not consider the Supreme Court's ruling in Modi Rubber Ltd. The Tribunal also referred to the decision in Tawi Chemical Industries Ltd., which supported the view that there was no need for a Larger Bench referral.

- Dissenting Opinion: One member of the Tribunal disagreed, arguing that the matter should be referred to a Larger Bench to resolve the conflicting decisions. They cited the Supreme Court's concern about judicial consistency and the need to follow precedents.

Conclusion:
The Tribunal, by majority decision, rejected the appeals, holding that the exemption under Notification No. 56/2002-CE does not extend to Education Cess and Higher Education Cess. The Tribunal also concluded that there was no need to refer the matter to a Larger Bench, as the decision in Jindal Drugs Ltd. had adequately addressed the issue in light of relevant Supreme Court rulings.