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SUPREME COURT OF INDIA
ARUN MISHRA, M.R. SHAH, B.R. GAVAI, JJ.
M/s. Unicorn Industries - Appellant
Versus
Union of India & Others - Respondents
Civil Appeal No. 9237, 9238 of 2019 [Arising out of S.L.P. (Civil) No.21622, 28966 OF 2012]
Decided on : 06-12-2019
(a) Interpretation of statute - Taxing statute - Exemption - Mere reference to the source of power is not enough to attract the exemption - Exemption granted has to be read from the notification issued therefor. (Para 38)
(b) Central Excise Rules, 1944 - Rule 8 r/w Section 5A, Central Excise Act, 1944 - Exemption by Notification dated 9.9.2003 concerning additional duties under the Act of 1957 and additional duties of excise under the Act of 1978 - No reference to Finance Act, 2001 - 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 - Duty on NCCD, education cess and secondary and higher education cess are in the nature of additional excise duty - In absence of reference to Finance Act, 2001, the Notification could not have covered them. (Para 40)
(c) Interpretation - Delegated legislation - Circulars - Circular of 2004 - Based on interpretation of the provisions by one of the Customs Officers - Has no force of law - Cannot be binding on court. (Para 41)
(d) Interpretation of statute - Taxing statute - Exemption from excise duty making it nil - Does not preclude imposition of additional duty - Statutory exemption notification must cover specifically the duty exempted - When a particular kind of duty is exempted, other types of duty or cess imposed by different legislation for a different purpose cannot be said to have been exempted. (Para 41)
(e) Interpretation of judgment - Binding precedent - Judicial propriety - Judgment by a larger Bench - Binding on smaller Bench - Decision rendered in ignorance of a binding precedent and/or ignorance of a provision would be per incuriam. (Para 42)
Facts of the case:
The Government of India announced vide Office Memorandum dated 24.12.1997, specific fiscal incentives including total exemption from tax to the new industrial units and substantial expansion of existing unit in the North Eastern Region for a period of 10 years from the date of commencement of production. Government of Sikkim vide Notification dated 17.2.2003, notified new industrial policy whereby all fiscal incentives available to the industries in the North Eastern Region would be available to the units set up in the State of Sikkim.
The Central Government issued a Notification dated 9.9.2003 whereunder a manufacturer of specified goods was required to pay excise duty on the goods cleared from its unit. The manufacturer has to first utilize the Cenvat Credit for discharging duty liability on final products, and the remaining amount of duties had to be paid through Personal Ledger Account (PLA) or Current Account, i.e., in cash. Thus, the exemption scheme was to discharge the liability on the final product and then claim or avail the refund or re-credit of the duties paid in cash.
The Unicorn Industries established a unit in 2006 for manufacturing “Indian Mouth Freshener” an excisable commodity.
The Deputy Commissioner of Central Excise issued a show cause notice requiring the appellant to repay the amount of NCCD for the period July, 2006 to December, 2006, on the ground that exemption was not permissible under the notification for the units located in the State of Sikkim. The appellant filed a writ petition before the High Court for quashing the communication dated 2.1.2007. The High Court disposed of the same with liberty to show cause to the said communication. The appellant was asked to show cause why amount should not be recovered under Section 11A of the Central Excise Act along with the interest and penalty.
The exemption on Pan Masala came to an end vide Notification No.21/2007 dated 25.4.2007, which was challenged by way of separate Writ Petition. The High Court held that the appellant was entitled to exemption from payment of excise duty on manufacture of Pan Masala for ten years from the date of commencement of commercial production, i.e., 27.6.2006.
Vide Notifications dated 27.3.2008 and 10.6.2008, the benefit of Cenvat Credit was withdrawn. The appellant challenged the notification through Writ Petition. The High Court was pleased to allow the said petition.
Akshay Ispat and Ferro Alloys Private Limited, the manufacturer of Ferro Silicon, an excisable commodity, has filed other appeal. It had obtained permanent registration under the Central Excise Rules 2002 on 11.3.2004. The Government of India introduced education cess. The appellant did not claim the benefit of the education cess for the period August 2004 to March 2006. After that, it started taking the re-credit of the education cess w.e.f. 1.4.2006. On 12.9.2006, the Superintendent, Central Excise, sent a communication directing the appellant to pay the education cess with interest and penalty for August, 2006. Proceedings were initiated for infringement under Section 91(3) of the Finance Act, 2004. Thereafter appellant claimed repayment of education cess for the period August, 2004 to March, 2006. In March 2007, the Government of India introduced secondary and higher education cess. The respondents demanded education cess and secondary and higher education cess. The appellant filed a writ application in the High Court which has been dismissed. The High Court dismissed the Writ Petition (C) No.24 of 2007, and another concerning NCCD and education cess, secondary and higher education cess and held that they were not included under exemption Notification No.71/2003-CE and the appellant had illegally availed the benefits of the exemption in respect to it.
Finding of the Court:
Exemption from excise duty does not preclude imposition of additional duty.
Result: Appeal dismissed.
JUDGMENT :
Arun Mishra, J.
1. Leave granted.
2. The question involved in the appeals is with respect to the levy of education cess, higher education cess, and National Calamity Contingent Duty (NCCD) on it. The appeals arise out of common judgment. The High Court has held that duties in question are not part of the exemption notification. The writ petitions have been dismissed. Hence, the appeals have been preferred.
3. The Government of India in order to promote industrial development in the North Eastern Region, announced vide Office Memorandum dated 24.12.1997, specific fiscal incentives including total exemption from tax to the new industrial units and substantial expansion of existing unit in the North Eastern Region for a period of 10 years from the date of commencement of production. Government of Sikkim vide Notification dated 17.2.2003, notified new industrial policy whereby all fiscal incentives available to the industries in the North Eastern Region would be available to the units set up in the State of Sikkim.
4. The Central Government issued a Notification dated 9.9.2003, granting exemption from payment of duty of excise for goods specified in the notification and cleared from a unit located in the Industrial Growth Centre or other specified areas within the State of Sikkim. Under the notification, a manufacturer of specified goods was required to pay excise duty on the goods cleared from its unit. The manufacturer has to first utilize the Cenvat Credit for discharging duty liability on final products, and the remaining amount of duties had to be paid through Personal Ledger Account (PLA) or Current Account, i.e., in cash. Thus, the exemption scheme was to discharge the liability on the final product and then claim or avail the refund or re-credit of the duties paid in cash.
5. The Unicorn Industries established a unit in 2006 for manufacturing “Indian Mouth Freshener” an excisable commodity covered under Chapter 21 of the First Schedule of Central Excise Tariff Act, 1985. It was registered under the Central Excise Act. In June 2006, the appellant had started manufacturing its product.
6. The appellant has submitted that following excise duties were recovered under diverse names/nomenclature and rates on Indian Mouth Freshener manufactured and cleared by the appellant:
a. Basic Excise Duty @ 37.5 % ad valorem;
b. National Calamity Contingent Duty (NCCD) @ 23% ad Valorem (under Section 136 of the Finance Act, 2001);
c. Additional Excise Duty (Pan Masala & Tobacco Products) @ 5.5% ad valorem (under Section 85 of the Finance Act, 2005); and
d. Education Cess @ 2% ad valorem (under Section 91 of the Finance Act, 2004) aggregating to 68% ad valorem.
7. As per Notification No.71/2003CE dated 9.9.2003, the appellant was entitled to refund of the abovesaid duties of excise. The respondents extended benefits and used to grant refund to the appellant as per the abovementioned notification. The Excise Authorities used to issue a certificate of reutilization of excise duty for the particular month. The appellant used to re-credit the amount of excise duty.
8. The Deputy Commissioner of Central Excise issued a show cause notice dated 2.1.2007, requiring the appellant to repay the amount of NCCD for the period July, 2006 to December, 2006, on the ground that exemption was not permissible under the notification for the units located in the State of Sikkim. The appellant filed a writ petition before the High Court for quashing the abovementioned communication dated 2.1.2007. The High Court disposed of the same with liberty to show cause to the said communication. The appellant filed its reply. On 4.7.2007, the Commissioner, Central Excise issued show cause notice, it was submitted that grounds phrased in the response were unsustainable. The appellant was asked to show cause why amount should not be recovered under Section 11A of the Central Excise Act along with the interest and penalty.
9. Notification No.71/2003-CE came to be amended on 2
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