2012 (9) TMI 707 - HC - Central Excise

Refund of education cess - export - rebate of duty - amendment is prospective or retrospective notification no. 40/2001, 90/2004 and 28/2004 - Held that - The custom authorities are not right in rejecting the claim of refund of education cess, by treating the explanatory notification to be prospective. - The explanatory notification being part of original notification therefore has to apply from the date of original notification and does not operate with prospective effect, as it does not give any substantive right independently. The Notification dated 6-9-2004 had included the definition of Excise Duty only in consonance with the meaning of Excise Duty as was existing on the date Notification was issued, even if Explanation would not have been there the term Duty of Excise in ordinary circumstance would have included the surcharge levied as Education Cess in terms of Section 93 of the Act of 2004. - writ petition allowed - refund of education to be allowed with retrospective effect.

Summary

Issues Involved:
1. Entitlement to refund of education cess as part of Central Excise duty.
2. Interpretation of notification and explanation regarding education cess.
3. Retrospective or prospective effect of explanatory notification.

Issue-wise Detailed Analysis:

1. Entitlement to Refund of Education Cess as Part of Central Excise Duty:

The petitioner, M/s. Loyal Textile Mills Ltd., sought a writ of certiorari to quash the order dated 28-4-2006, which declined their claim for a refund of education cess. The petitioner argued that the education cess is a part of Central Excise duty and should be refunded as such. The authorities, including the Assistant Commissioner of Central Excise, the Commissioner of Central Excise (Appeals), and the revisional authority, rejected the claim, stating that the education cess is not explicitly mentioned in the notification allowing rebates.

2. Interpretation of Notification and Explanation Regarding Education Cess:

The petitioner contended that the education cess, levied under the Finance Act, 2004, should be considered part of the excise duty eligible for rebate. The notification dated 26th June 2001 allowed a rebate of the whole duty paid on excisable goods, but it did not explicitly mention education cess. However, an explanation issued on 6th September 2004 clarified that "duty" includes education cess. The petitioner argued that this explanation should be read as part of the original notification and not as a prospective amendment.

The revisional authority held that the explanation was restrictive and did not apply retrospectively. They cited judgments from the Supreme Court and the Tribunal, emphasizing that to claim benefits under a notification, strict compliance with its terms is necessary. The authority concluded that the education cess was not eligible for rebate for the period from 9-7-2004 to 3-9-2004.

3. Retrospective or Prospective Effect of Explanatory Notification:

The petitioner argued that the explanatory notification should be treated as part of the original notification, thereby having a retrospective effect. The court agreed with this view, stating that explanatory notifications are akin to judicial interpretations that clarify existing rights and should be considered effective from the date of the original notification.

The court cited the Rajasthan High Court's judgment in Banswara Syntex Ltd. v. Union of India, which held that education cess, collected as part of excise duty, should be eligible for rebate from the date it became payable. The court concluded that the explanatory notification did not grant any new substantive rights but merely clarified the existing ones.

Conclusion:

The court found merit in the petitioner's arguments and held that the authorities were incorrect in rejecting the refund claim for the education cess by treating the explanatory notification as prospective. The court ordered the refund of the education cess to the petitioner within two months from the receipt of the certified copy of the order, setting aside the impugned orders of the lower authorities.

Order:

The writ petition is allowed, and the impugned order is set aside. The writ, in the nature of mandamus, is issued to refund the claimed education cess to the petitioner within two months of the receipt of a certified copy of this order. No costs.