2018 (2) TMI 391 - AT - Central Excise

Refund of Education cess and Higher Secondary Education cess relating to area based exemption - N/N. 39/2001 dated 31.07.2011 - Held that - the issue has been considered by the Hon ble Supreme Court recently in SRD Nutrients Pvt. Ltd. Vs CCE Guwahati 2017 (11) TMI 655 - SUPREME COURT OF INDIA , where it was held that appellants were entitled to refund of Education Cess and Higher Education Cess which was paid along with excise duty once the excise duty itself was exempted from levy - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Entitlement to refund of Education cess and Higher Secondary Education cess under area based exemption Notification No.39/2001-CE dated 31.07.2011.

Analysis:

Issue 1: Entitlement to refund of Education cess and Higher Secondary Education cess under area based exemption Notification

The case involved appeals filed against the order-in-appeals passed by the Commissioner of Central Excise (Appeals), Rajkot. The appellants were availing area-based exemption under Notification No.39/2001-CE dated 31.07.2001 and had filed refund claims, except for Education and Higher Secondary Education cess. The appeals were filed as the Ld. Commissioner (Appeals) rejected their claims. The main contention was whether the appellants were entitled to refund of Education cess and Higher Secondary Education cess under the said exemption.

Analysis: The Hon'ble Supreme Court had previously settled the issue in the case of SRD Nutrients Pvt. Ltd. vs. CCE Guwahati, where it was clarified that when the excise duty itself is exempted, Education Cess and Higher Secondary Education cess would not be payable. The circulars issued by the Government supported this position, making it binding on the Department. The Education Cess is a surcharge on excise duty and is payable on excisable goods. As per the Finance Act, Education Cess is calculated on the aggregate of all duties of excise. Therefore, when there is no excise duty payable due to exemption, there should be no Education Cess as well. The principle of adopting the view that favors the assessees was also highlighted. Based on this reasoning, the appeals were allowed, and the appellants were held entitled to the refund of Education Cess and Higher Secondary Education cess once the excise duty itself was exempted.

Conclusion: The Tribunal, following the precedent set by the Hon'ble Supreme Court, set aside the impugned orders and allowed the appeals, granting consequential relief as per law. This judgment reaffirmed the principle that when excise duty is exempted, Education Cess and Higher Secondary Education cess are not payable, entitling the appellants to a refund of these amounts.