S.11A Central Excise Act | Revenue Can't Recover Refunded Cess Merely Because SC Judgment Permitting Refund Was Later Overruled: Sikkim HC
The Sikkim High Court recently criticized the Siliguri GST and Excise Commissionerate for seeking to recover the cess refunded to the claimants in terms of Supreme Court's judgment in M/s SRD Nutrients (P) Limited vs. CCE, (2018), on the basis of a subsequent judgment overruling it.
The Apex Court in M/s SRD Nutrients (supra) had held that when payment of Excise Duty is exempt under the Central Excise Act, 1944, then the 2% Education Cess and Secondary and Higher Education Cess payable on the aggregate duties of excise will also be exempted.
This judgment was later overruled in M/s Unicorn Industries vs. Union of India and others (2020) and it was held that there is no exemption from payment of education cess where exemption from payment of excise duty is granted under a notification.
Citing this judgment, Revenue invoked Section 11A of the Excise Act and sought to recover claims “erroneously refunded” by it.
The provision stipulates procedure for recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded.
The division bench of Chief Justice Biswanath Somadder and Justice Meenakshi Madan Rai found that M/s Unicorn Industries judgment came into force at a subsequent date, that is, after the refund claims were sanctioned by the competent authority.
Thus, it ruled that when the Excise Officer had allowed refund claims in light of M/s SRD Nutrients (holding field at the time), he was applying the law laid down by the Supreme Court by virtue of Article 142 of the Constitution.
Though the Judgment was subsequently overruled, the bench held,
“Any subsequent change in the legal position would not permit him to invoke the powers of section 11A of the Act of 1944. As is well settled, all legal proceedings on the date when are being decided by any Court, would be governed by the law laid down by the Hon'ble Supreme Court which prevails on such date.”
The High Court also pointed out that the position was clarified by the Supreme Court itself in Commissioner of CGST and Central Excise (J&K) v. M/s Saraswati Agro Chemicals Pvt. Ltd. (2023) yet, a “frivolous appeal” was preferred by the Revenue.
The Department argued that it sought to recover duty “erroneously refunded” to the respondent.
However, the Court said Section 11A makes a distinction between refund for reasons of fraud, collusion or suppression of facts and refunds processed otherwise.
The Court also said if Revenue's argument on applying the subsequent overruling judgment is allowed, “then all judgments rendered by all competent Courts — following judicial precedents laid down by the Hon'ble Supreme Court holding the field at that material point of time — would be set to naught if at a subsequent stage those judicial precedents are overruled by subsequent decisions of the Hon'ble Supreme Court. A total chaos would result and no lis would assume finality.”
Accordingly, the Court dismissed Revenue's appeal.
Appearance: Deputy Solicitor General Sangita Pradhan with Advocate Natasha Pradhan for appellant; Advocates Mahesh Raichandani and Ranjit Prasad for respondent
Case title: Commissioner of Central Goods and Services Tax and Central Excise v. M/s Alkem Laboratories Ltd.
Case no.: TAX APP. NO. 01 OF 2024