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2020 (8) TMI 293 - HC - Central ExciseExemption of Education Cess Secondary and Higher Education Cess - whether in view of the exemption granted to the excise duty the petitioner would also be entitled to an exemption to the payment of Education Cess Secondary and Higher Education Cess? - HELD THAT - The said question was decided by the Supreme Court inits pronouncement in SRD Nutrients Pvt. Ltd. Vs. Commissioner of Central Excise, Guwahati 2017 (11) TMI 655 - SUPREME COURT wherein in paragraph 27 of the said judgment it was held that the appellants therein were entitled to refund of education cess and higher education cess which was paid along withthe excise duty once the excise duty itself was exempted from levy. In view of the subsequent judgment of the Supreme Court in Unicorn Industries 2019 (12) TMI 286 - SUPREME COURT the respondent authorities had issued the demand cum show cause notice dated 02.06.2020 to the petitioners by which a question was raised that the earlier refund of the Education Cess Secondary and Higher Education Cess given to them has now become erroneous refunds and therefore, a recovery be made under section 11(A-1) of the Central Excise Act 1944 - The demand cum show-cause notice dated 02.06.2020 is assailed in this writ petition on the ground that the condition precedent to invoke the power under section 11(A-1) is that the refund made must be erroneous - the condition precedent of section 11(A-1) of the Excise Central Act, 1944 is not satisfied. A question for determination would be as to whether the proposition of law laid down in Unicorn Industries (supra) would render the refunds made to the petitioners to be erroneous. Until further orders we stay the operation of the demand cum show-cause notice dated 02.06.2020 - List on 08.09.2020.
Issues Involved:
1. Entitlement to exemption of Education Cess & Secondary and Higher Education Cess under Northeast Industrial Policy, 2007. 2. Impact of Supreme Court judgments on refund of Education Cess & Higher Education Cess. 3. Validity of demand cum show-cause notice for recovery under section 11(A-1) of the Central Excise Act, 1944. Analysis: Issue 1: Entitlement to exemption of Education Cess & Secondary and Higher Education Cess The petitioners, under the Northeast Industrial Policy, 2007, were entitled to exemption in the payment of excise duty. However, Education Cess & Secondary and Higher Education Cess were required to be paid based on the excise duty payable. The question arose whether the petitioners, due to excise duty exemption, were entitled to exemption from paying Education Cess & Higher Education Cess. The Supreme Court in SRD Nutrients Pvt. Ltd. case held that once excise duty was exempted, the petitioners were entitled to a refund of Education Cess & Higher Education Cess paid along with excise duty. Issue 2: Impact of Supreme Court judgments on refund of Education Cess & Higher Education Cess Subsequent to the refund sanctioned to the petitioners, the Supreme Court in Unicorn Industries case held that exemption of one duty does not automatically exempt other duties or cess. The court emphasized that statutory notifications must specifically cover the duty exempted, and different duties imposed by various legislation cannot be considered exempted. The court stated that the previous judgments were not considered, and the decisions in SRD Nutrients Pvt. Ltd. case were binding. The respondent authorities issued a demand cum show-cause notice to recover the earlier refunded amounts, claiming them to be erroneous refunds under section 11(A-1) of the Central Excise Act, 1944. Issue 3: Validity of demand cum show-cause notice for recovery The petitioners contested the demand cum show-cause notice, arguing that the refunds made were not erroneous at the time they were issued, as per the law in force during that period. They contended that the condition precedent for invoking section 11(A-1) was not satisfied, as the refunds were justified under the law prevailing then. The court stayed the operation of the notice until further orders, pending a determination of whether the refunds made to the petitioners were erroneous in light of the Unicorn Industries judgment. In conclusion, the judgment addresses the complex interplay between excise duty exemptions and the payment of Education Cess & Higher Education Cess, emphasizing the importance of statutory notifications and the binding nature of previous court decisions. The court's decision to stay the demand cum show-cause notice reflects a cautious approach pending a thorough examination of the legality of the refunds in question.
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