IMPORTANT POINTS
When the excise duty becomes refundable by virtue of it being exempted, the surcharge/ cess thereon also becomes refundable.
In Taxing statute when two views are possible, one which favours the assessees has to be adopted.

Headnote:(a) Central Excise Tariff Act, 1985 – Section 5A r/w Sections 91 to 93, Finance Act, 2004 – Exemption of excise duty – North Eastern Industrial Promotion Policy 1997 – Education Cess and Higher Education Cess – Circular dated August 10, 2004 and Circular dated April 08, 2011– Education Cess levied as surcharge @ 2% on Excise duty payable – In absence of excise duty no cess is payable – Held when Excise duty is refunded, the Cell also becomes refundable. (Para 21, 22)
       1997 (92) ELT 303 (SC) – Relied upon
       2007 (214) ELT 534 (Tri.-Del.); 2007 (215) ELT 55 (Tri.-Del.); 2007 (216) ELT 16 (Raj.) – Cited with approval
       2011 (267) ELT 653 (Tri.-Del.); (2017) 346 ELT 353 – Distinguished
       (1998) 3 SCC 570; 2012-TIOL-1837-CESTAT-BANG; AIR 1977 SC 2279 : (1977) 40 STC 497; BBSR-I, 2010-TIOL-1659-CESTAT-KOL – Referred
       (b) Administration of justice – Judicial discipline – CESTAT taking a view contrary to that taken by a coordinate Bench – Ought to refer the matter to larger Bench – Moreover not giving any reason for taking such view – Not proper. (Para 22)
       (c) Interpretation of statute – Taxing statute – When two views are possible – One which favours the assessees has to be adopted. (Para 23)
       Facts of the case:
       Government of India exempted manufacturing units in north-eastern States from paying excise duty over and above the CENVAT earned by them. Thus, while they were required to pay the demanded excise duty, the amount paid in excess of CENCAT was to be refunded. The dispute in these appeals is as to whether the amount of Education Cess and Higher Education Cess paid along with excess excise duty was also refundable.
       Refund of these cess was denied by CESTAT.
       Finding of the Court:
       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.
       Result: Appeals allowed.

JUDGMENT

A.K. SIKRI, J.

Leave granted in the special leave petitions.

2) In order to encourage the business community to set up manufacturing units in industrially backward areas like the North-Eastern States, viz. Assam, Jammu & Kashmir, Meghalaya, Tripura, Mizoram, Manipur, Nagaland, Arunachal Pradesh as well as Sikkim, notifications were issued by the Excise Department, Government of India, exempting goods specified in the First Schedule to the Central Excise Tariff Act, 1985 (other than those mentioned in the annexure to these notifications) from payment of excise duty in respect of the goods manufactured and cleared from units located in the aforesaid States. The methodology which was adopted and prescribed in these notifications was that the manufacturer was initially supposed to pay the excise duty leviable on such goods at the time of clearance as per the Tariff Act and thereafter claim the refund thereof. It was also mentioned in these notifications that exemption contained therein shall be available subject to the condition that the manufacturer first utilises whole of the CENVAT credit available to him on the last date of the month under consideration for payment of duty of goods cleared during such period and was to pay only the balance amount in cash. It is this balance amount which was refundable to him. Insofar as payment of the excise duty after availing the CENVAT credit and refund thereof subsequently is concerned, there is no dispute about the same. We are concerned with altogether different aspect which is associated with the aforesaid notification granting exemption from payment of excise duty.

3) It so happened that vide Finance Act, 2004, the Education Cess and Higher Education Cess were also imposed, which are surcharge on the excise duty. These Education Cess and Higher Education Cess were also levied and collected from the manufacturers who had set up their units in the aforesaid areas, along with the excise duty. However, while refunding the excise duty paid by these manufacturers, the Education Cess and the Higher Education Cess that were paid by the manufacturers along therewith were not refunded. The dispute, thus, which arises for consideration in these appeals is as to whether the Education Cess and Higher Education Cess which were paid along with the excise duty was also liable to be refunded along with the central excise duty in terms of the exemption notifications. This is the issue which is common in all these appeals and the factual background in which the matter has travelled up to this Court is also almost the same. Therefore, for the sake of convenience, purpose would be served in tracing the factual events from Civil Appeal Nos. 2781-2790 of 2010.

4) The appellant in these appeals is M/s. SRD Nutrients Private Limited (hereinafter referred to as the ‘assessee’). It is engaged in the manufacture and clearance of Malted Milk Food (Horlicks) using sweetened milk powder since April 12, 2008 and has set up its factory in the State of Assam. This unit is duly registered with the Central Excise Department.

5) Industrial Policy dated April 01, 2007 for the North-Eastern States, including the State of Assam, was announced by the Ministry of Commerce and Industry (Department of Industrial Policy and Promotion), Government of India to set up a special package for the North-Eastern States to accelerate industrial development of the State. As per this package, new industrial units were entitled to 100% excise duty exemption for a period of 10 years from the date of commencement of commercial production. Pursuant to the said Industrial Policy, the Central Government issued Notification No. 20/2007-Ex. dated April 25, 2007 granting exemption from duties of excise levied under the Central Excise Act, 1944 (hereinafter referred to as the ‘Act’) read with Section 3(3) of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and Section 3(3) of the Additional Duties of Excise (Textiles &

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2017 Supreme(SC) 1078

IMPORTANT POINTSWhen the excise duty becomes refundable by virtue of it being exempted, the surcharge/ cess thereon also becomes refundable. In Taxing statute when two views are possible, one which favours the assessees has to be adopted.

Cases Referred (5)

IMPORTANT POINTS
When the excise duty becomes refundable by virtue of it being exempted, the surcharge/ cess thereon also becomes refundable.
In Taxing statute when two views are possible, one which favours the assessees has to be adopted.