2021 (10) TMI 484 - HC - Central Excise

Recovery of refunded earlier, deposited by each of the petitioners as Education Cess and Secondary and Higher Education Cess - erroneous refund or not - case of the petitioners (manufacturers) was that Education Cess and Higher Education Cess was part of excise duty and since they have been exempted from excise duty they are also liable to be exempted from paying Education Cess and Higher Education Cess and as excise duty has been returned to them, the amount paid by them as Education Cess and Higher Education Cess is also liable to be returned to them. HELD THAT - What amounts to be paid erroneously has been explained by another Division Bench of this Court in the case of Rajendra Singh -Vs- Superintendent of Taxes Ors. 1989 (7) TMI 317 - GAUHATI HIGH COURT . Though it relates to the Tripura Sales Tax Act, 1976, but the principle would be the same. In para 10 of the said judgment, it has been held that an erroneous order would be one which has been passed without any authority of law or which has been passed by an authority without making an enquiry - To our mind an erroneous refund would also be a refund which has been made by an order which is without jurisdiction. All the same, such is not the case here in the present matters. To summarize the basic argument of the respondents would be that irrespective of the fact that M/s SRD Nutrients Private Limited 2017 (11) TMI 655 - SUPREME COURT has been declared as per incuriam, the matter has attained finality between the parties, inasmuch as, the order passed by the Revenue for refund of the amount has not been challenged, nor has the order of the learned Single Judge, by which the learned Single Judge has directed that in view of the M/s SRD Nutrients Private Limited the amount should be refunded, been taken in writ appeal before this High Court. The matter having attained finality, it cannot be now opened at this stage even though M/s SRD Nutrients Private Limited has been declared as per incuriam, in the case of M/s Unicorn Industries. We agree with the submissions of the learned counsels for the assessees/petitioners that, under the facts and circumstances of the case, the amount refunded to them cannot be recovered, as it was not refunded to them erroneously, but it was returned to them for the reason that it was the requirement of law; law as it stood at the relevant time. The matter having attained finality cannot be re-opened for the reason that the earlier law has been declared to be per incuriam . Appeal of Revenue dismissed.

Issues Involved:
1. Refund of Education Cess and Higher Education Cess.
2. Jurisdiction and legality of the show cause notices under Section 11A of the Central Excise Act.
3. Binding effect of judgments declared as per incuriam.
4. Application of res judicata and finality of decisions.

Issue-wise Detailed Analysis:

1. Refund of Education Cess and Higher Education Cess:
The Government of India announced the "Industrial Policy Resolution" to boost industrial progress in the North East Region, granting tax holidays and excise duty exemptions. Under this policy, manufacturers were exempted from excise duty, and the excise duties already paid were refunded. However, the Education Cess and Higher Education Cess paid by the manufacturers were not initially refunded. The manufacturers argued that these cesses were part of excise duty and should also be refunded. The Hon'ble Supreme Court in M/s SRD Nutrients Private Limited held that since excise duty was exempted, there would not be any education cess as well. Consequently, some manufacturers were refunded the Education Cess and Higher Education Cess.

2. Jurisdiction and Legality of the Show Cause Notices under Section 11A of the Central Excise Act:
After the decision in M/s Unicorn Industries, which declared the judgment in M/s SRD Nutrients Private Limited as per incuriam, the Revenue issued show cause notices to the manufacturers under Section 11A(1) of the Central Excise Act to re-deposit the refunded Education Cess and Higher Education Cess. The manufacturers challenged these notices, arguing that the refunds were made based on the prevailing law at the time and could not be considered erroneous merely because the earlier judgment was later declared per incuriam.

3. Binding Effect of Judgments Declared as Per Incuriam:
The manufacturers contended that the refunds were made in compliance with the Supreme Court's judgment in M/s SRD Nutrients Private Limited, which was the law at that time. They argued that the judgment's declaration as per incuriam in M/s Unicorn Industries did not retrospectively invalidate the refunds. The principle of res judicata was cited, emphasizing that the finality of the earlier judgment between the parties remained unaffected despite the later declaration of per incuriam.

4. Application of Res Judicata and Finality of Decisions:
The manufacturers relied on various judgments to support their argument that the finality of a decision remains binding between the parties even if the decision is later declared per incuriam. The court agreed with this view, stating that the refunds made based on the judgment in M/s SRD Nutrients Private Limited were not erroneous and could not be recovered. The court emphasized that the matter had attained finality and could not be reopened merely because the earlier judgment was declared per incuriam.

Conclusion:
The court dismissed the appeals filed by the Revenue, upholding the decision of the learned Single Judge. It was concluded that the refunds of Education Cess and Higher Education Cess were made in accordance with the prevailing law at the time and were not erroneous. The finality of the earlier judgment between the parties remained intact, and the show cause notices issued by the Revenue were quashed.

← Previous Next →