2019 (12) TMI 286 - SC - Central Excise

Area based exemption - Recovery of refund of Refund of NCCD on the ground that exemption was not permissible under the notification for the units located in the State of Sikkim - Binding nature of Circular issued by the CBEC (CBIC) - appellant submitted that NCCD, education cess, and secondary and higher education cess form part of the excise duty - manufacture of Indian Mouth Freshener - Levy of education cess, higher education cess, and National Calamity Contingent Duty (NCCD) - Notification dated 17.2.2003 - N/N. 71/2003 dated 9.9.2003 HELD THAT - It is not in dispute that when initial exemption notification was issued in 1997 for the North-Eastern States, which was later on applied to the State of Sikkim on 9.9.2003. The benefits from payment of excise duty and additional excise duty were confined to the basic excise duty payable under the Acts of 1944, 1957 and 1978. There was no reference made to NCCD imposed under the Finance Act, 2001. Apart from that, when the notification came to be issued, the education cess and secondary and higher education cess, which came to be imposed by Finance Acts of 2004 and 2007, were not in vogue. A Division Bench of this Court in SRD Nutrients Private Limited 2017 (11) TMI 655 - SUPREME COURT has considered the Finance Acts of 2004 and 2007, by which education and secondary and higher education cess were imposed. Under the Industrial Policy dated 1.4.2007 for the North Eastern States, the notification dated 25.4.2007, issued by the Central Government, came up for consideration before this Court. In Bajaj Auto Limited 2019 (3) TMI 1427 - SUPREME COURT a Division Bench of this Court considered the question of liability towards NCCD, education cess and secondary and higher education cess on manufacturing establishment which is exempted from payment of central excise duty under the Act of 1944. - The most unfortunate part is that the binding decision of larger bench consisting of three Judges of this Court in Union of India v. Modi Rubber Limited, 1986 (8) TMI 60 - SUPREME COURT , dealing with the similar issue, was not placed for consideration before this Court when the abovementioned decisions came to be rendered. This Court in Modi Rubber Limited (supra) has considered the purport of the notifications and the specific provisions mentioned therein and held that exemption has to be considered in the light of provisions of Central Excise Rules, 1944, as envisaged under Rule 2(v) of Central Excise Rules, 1944. It cannot, in the circumstances, bear an extended meaning to include special excise duty and auxiliary excise duty. Merely reference to the source of power is not enough to attract the exemption and what exemption has been granted to be read from the notification issued therein. This Court has further laid down that in case notification granting exemption issued under the Central Excise Rules, 1944 without reference to any other statute, the exemption must be read as limited to the duty of excise payable under the Central Excises and Salt Act, 1944. It cannot cover such special or another kind of duty of excise. Notification dated 9.9.2003 issued in the present case makes it clear that exemption was granted under Section 5A of the Act of 1944, concerning additional duties under the Act of 1957 and additional duties of excise under the Act of 1978. It was questioned on the ground that it provided for limited exemption only under the Acts referred to therein. There is no reference to the Finance Act, 2001 by which NCCD was imposed, and the Finance Acts of 2004 and 2007 were not in vogue. The notification was questioned on the ground that it should have included other duties also. The notification could not have contemplated the inclusion of education cess and secondary and higher education cess imposed by the Finance Acts of 2004 and 2007 in the nature of the duty of excise. The duty on NCCD, education cess and secondary and higher education cess are in the nature of additional excise duty and it would not mean that exemption notification dated 9.9.2003 covers them particularly when there is no reference to the notification issued under the Finance Act, 2001. The Circular of 2004 issued based on the interpretation of the provisions made by one of the Customs Officers, is of no avail as such Circular has no force of law and cannot be said to be binding on the Court. Similarly, the Circular issued by Central Board of Excise and Customs in 2011, is of no avail as it relates to service tax and has no force of law and cannot be said to be binding concerning the interpretation of the provisions by the courts. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Levy of education cess, higher education cess, and National Calamity Contingent Duty (NCCD) on excisable goods.
2. Applicability of exemption notifications to these cesses and duties.
3. Interpretation of the term "duty of excise" in exemption notifications.

Detailed Analysis:

1. Levy of Education Cess, Higher Education Cess, and NCCD:
The appeals concern whether education cess, higher education cess, and NCCD should be levied on excisable goods. The Government of India had announced fiscal incentives, including total exemption from tax for new industrial units and substantial expansion of existing units in the North Eastern Region and Sikkim.

2. Applicability of Exemption Notifications:
The Central Government issued Notification No. 71/2003 on 9.9.2003, granting exemption from payment of excise duty for goods specified in the notification and cleared from units located in specified areas within the State of Sikkim. The notification required manufacturers to pay excise duty on goods cleared from their units and then claim a refund or re-credit of the duties paid in cash.

The appellant, a manufacturer of "Indian Mouth Freshener," claimed refunds for various excise duties, including NCCD, additional excise duty, and education cess, arguing these levies were also duties of excise. The Deputy Commissioner of Central Excise issued a show cause notice requiring the appellant to repay the amount of NCCD, leading to legal challenges.

3. Interpretation of the Term "Duty of Excise":
The key legal question is whether the term "duty of excise" in the exemption notification includes NCCD, education cess, and higher education cess imposed by Finance Acts of 2001, 2004, and 2007. The appellant argued that these levies are in the nature of excise duty and should be included in the exemption.

The High Court dismissed the writ petitions, holding that NCCD, education cess, and higher education cess were not included under the exemption Notification No. 71/2003CE, and the appellant had illegally availed the benefits of the exemption.

Legal Precedents and Analysis:
The Supreme Court referred to several precedents, including SRD Nutrients Private Limited v. Commissioner of Central Excise, Guwahati and Bajaj Auto Limited v. Union of India, where it was held that education cess and higher education cess are in the nature of excise duty and should be exempted if the basic excise duty is exempted.

However, the Supreme Court also considered the binding precedent set by a three-judge bench in Union of India v. Modi Rubber Limited and Rita Textiles Private Limited v. Union of India, which held that exemption notifications under the Central Excise Rules, 1944, should be limited to the duties of excise payable under the Central Excises and Salt Act, 1944, and not extended to special duties of excise or other levies imposed by separate legislation.

Conclusion:
The Supreme Court upheld the High Court's decision, dismissing the appeals. It concluded that the exemption notification dated 9.9.2003 did not cover NCCD, education cess, and higher education cess, as these levies were imposed by separate Finance Acts and were not in vogue when the notification was issued. The Court emphasized that statutory notifications must specifically cover the duties exempted, and the absence of explicit inclusion means these additional duties were not exempted.

The Supreme Court's decision reaffirmed the principle that exemption notifications should be interpreted strictly and in accordance with the specific provisions mentioned therein, without extending to duties imposed by separate legislation unless explicitly stated.