Education Cess Lawfully Refunded To The Assessee, Can't Recover Later Based On Change Of View Of The Supreme Court: J&K and Ladakh High Court

The Bench, consisting of Chief Justice Pankaj Mithal and Justice Sanjay Dhar, held that a case cannot be reopened after the expiry of the limitation period merely on the ground that subsequently the view of the court on the said aspect has changed or that subsequently a different opinion has been expressed by the courts in another case.

The Court thus dismissed the appeals filed by the revenue department seeking recovery of the Education Cess and the Secondary & Higher Education Cess refunded to the assessee in accordance with the decision of the Supreme Court, which was operative at the relevant time.

The Government of India issued Notification No. 56/2002-CE dated 14.11.2002 under the Central Excise Act, 1944 in context of the State of Jammu & Kashmir. The said Notification provided for 100% excise duty exemption to new industrial units for a period of 10 years from the date of commencement of production. Under the said Notification, the excise duty paid in cash was made refundable.

Subsequently, with respect to the manufactured/produced goods, the Government of India also provided for levy of Education Cess and Secondary & Higher Education Cess vide the Finance Act, 2004 and the Finance Act, 2007 respectively, on the excise duty.

The Commissioner (Appeals) passed an order denying the refund of Education Cess and Secondary & Higher Education Cess to the assessee M/s Narbada Industries. Against the said order, the assessee filed an appeal before the CESTAT. The CESTAT passed an order setting aside the orders passed by the Commissioner (Appeals) and directed the revenue authorities to refund the Education Cess and Secondary & Higher Education Cess to the assessee in view of the decision of the Supreme Court in the case of SRD Nutrients Pvt Ltd versus Commissioner of Central Excise, Guwahati (2017).

The Commissioner, CGST and Central Excise filed an appeal against the order passed by the CESTAT before the High Court of Jammu & Kashmir and Ladakh.

The High Court observed that after the issuance of the exemption Notification dated 14.11.2002, and after the levy of the Education Cess and Secondary & Higher Education Cess vide the Finance Act of 2004 and 2007 respectively, a dispute had arisen as to whether the Education Cess and the Secondary & Higher Education Cess were also required to be refunded as per the Exemption Notification.

The Court noted that the said issue was resolved by the Supreme Court in the case of SRD Nutrients Pvt Ltd versus Commissioner of Central Excise, Guwahati (2017), wherein the Supreme Court had ruled that the Education Cess and the Secondary & Higher Education Cess levied on the excise duty partook the character of excise duty, and hence they could not be levied.

The Court ruled that in view of the judgment of the Supreme Court in the case of SRD Nutrients Pvt Ltd versus Commissioner of Central Excise, Guwahati (2017), the CESTAT had held that the assessee was entitled to refund of Education Cess and the Secondary & Higher Education Cess. The Court observed that the revenue authorities had failed to challenge the said order passed by the CESTAT and had accepted the decision of CESTAT by proceeding to refund the said Cess to the assessee.

The Court added that only after a contrary view was taken by the Supreme Court in the case of Unicorn Industries versus Union of India (2019), that the revenue department decided to file an appeal against the order of the CESTAT.

The revenue department contended before the High Court that the occasion to file appeals against the order of the CESTAT arose only after the decision of the Supreme Court in the case of Unicorn Industries versus Union of India (2019) and that the appeals were filed by the revenue department within the prescribed limitation period from the date of the said decision.

The revenue department averred that the orders passed by the CESTAT were based upon the judgment of the Supreme Court in the case of SRD Nutrients Pvt Ltd versus Commissioner of Central Excise, Guwahati (2017), which has been reversed by the Supreme Court in the case of Unicorn Industries versus Union of India (2019). Thus, the revenue department submitted that the appeals were filed by it to rectify the mistake of the Court. Therefore, the revenue department contended that it was entitled to get the delay condoned as the limitation period would begin from the date on which the said mistake had come to its notice, in view of Section 17 of the Indian Limitation Act, 1963.

The Court ruled that the Central Excise Act is a special and a self-contained code which provides for the limitation period for filing an appeal. The Court held that Section 17 of the Limitation Act would not be applicable since its application is restricted to cases where the limitation is prescribed under the Limitation Act itself.

The Court observed that Section 35G of the Central Excise Act, 1944 provides for a limitation of 180 days from the date on which an order is received by the party for the purposes of filing an appeal. Also, the Court noted that the High Court may admit an appeal even after the expiry of the said period on being satisfied that there was a sufficient cause for not filling the appeal within the prescribed time.

The Court ruled that the revenue department had failed to file the appeal within the limitation period as prescribed under Section 35G of the Central Excise Act, 1944. The Court refuted the contentions of the revenue department that the limitation period for filing an appeal must be calculated from the date of the subsequent decision of the Supreme Court in the case of Unicorn Industries versus Union of India (2019). The Court held that the Central Excise Act does not provide for commencement of the limitation period from any other date except from the date of service or receipt of the copy of an order, for the purpose of filing an appeal.

The Court added that as per the provisions of Section 35G(2A), satisfaction must be recorded by the Court regarding the presence of a sufficient cause for not filing the appeal within the prescribed limitation period, within the said limitation period itself.

The Court held that the said limitation period had expired much before the decision of the Supreme Court was rendered in the case of Unicorn Industries versus Union of India (2019). The Court added that there was no explanation furnished by the revenue department as to why the appeal against the order of CESTAT was not filed within 180 days.

The Court observed that the Andhra Pradesh High Court in the case of Anandi Roller Flour Mills Limited, Hyderabad versus State of Andhra Pradesh (2001) had held that any subsequent change of law is not a sufficient cause for condoning the delay in filing an appeal or a petition.

The Court noted that the Madras High Court in the case of Andal Sweet Stall and Tiffin Dining Hall versus State of Tamil Nadu (1981) had refused to condone the delay in filing an appeal since the judgment on the basis of which the appeals were being filed was pronounced long after the expiry of the limitation period.

The Court thus held that there was no sufficient ground to condone the delay in filing the appeal.

The Court ruled that a case cannot be reopened after the expiry of the limitation period merely on the ground that subsequently the view of the court on the said aspect has changed or that subsequently a different opinion has been expressed by the courts in another case.

"Thus, where the limitation for taking any remedy against any particular order has expired long back, ordinarily said case is not liable to be reopened merely for the reason that subsequently the view of the court on the aspect decided by it has changed or that a different opinion has been expressed by the court in some other case. If such an action is permitted, there would be no finality to any decision."

The Court observed that as per the law laid down by the Supreme Court in the case of Mafatlal Industries Limited versus Union of India (1997), merely because subsequently the Supreme Court has taken a different view and has overruled its earlier decision, that does not constitute a sufficient ground for condoning the delay in filing an appeal or a petition beyond the limitation period.

Thus, the Court held that the Supreme Court has clearly laid down that a decision which has become conclusive between the parties cannot be reopened on the basis of a subsequent decision of the Court taking a contrary view.

The Court noted that the Supreme Court in the case of State of Gujarat versus ESSAR Oil Limited (2012) had held that no refund can be ordered against a party if the party has acquired the benefit lawfully and if it has not been unjustly enriched by the said refund.

The Court noted that since the assessee had got the benefit of the refund lawfully under the prevailing law, it could not be directed to refund the same merely on the basis of a change of opinion. Therefore, the Court held that the revenue department cannot file an appeal seeking return of the amounts lawfully refunded to the assessee in consonance with the decision of the Supreme Court in SRD Nutrients Pvt Ltd versus Commissioner of Central Excise, Guwahati (2017), on the ground that there was a change of opinion subsequently.

The Court thus held that the assessee was entitled to refund of Educational Cess and the Secondary & Higher Educational Cess on the basis of the judgment of the Supreme Court in the case of SRD Nutrients Pvt Ltd versus Commissioner of Central Excise, Guwahati (2017), which was in operation at the relevant time. The Court added that, therefore, the revenue department could not seek recovery of the said refunded amount on the basis of the subsequent decision of the Supreme Court rendered in the case of Unicorn Industries versus Union of India (2019).

The Court ruled that if the said action of the revenue department was permitted, it would open a Pandora box and the lis between the parties which had attained finality would never come to an end. The Court added that this would be against the public policy.

The Court thus held that the appeals filed by the revenue department were barred by limitation and thus were not maintainable. The Court added that merely on the basis of a change of opinion of the Court in a subsequent matter involving another party, the revenue department was not entitled to reopen the decisions which had attained finality.

The Court thus dismissed the appeals filed by the revenue department.

Case Title: Commissioner of CGST and Commissioner of Central Excise versus M/s Narbada Industries

Dated: 23.05.2022 (J&K and Ladakh High Court)

Counsel for the Appellant (s): Mr. Jagpaul Singh, Advocate

Counsel for the Respondents: Sh. K.S. Johal, Sr. Advocate with Sh. Karman Singh Johal, Advocate; Sh. Pranav Kohli, Sr. Advocate with Sh. Arun Dev Singh, Advocate; Smt. Seema Sheikher, Sr. Advocate with Sh. C.S. Gupta, Advocate and Sh. Sameer Bakshi, Advocate; Sh. Sudhir Malhotra, Advocate; Sh. Gautam Chugh, Advocate with Sh. J.A. Hamal, Advocate; Ms. Supriya Arora, Advocate; Ms. Kanika Malhotra, Advocate; Sh. Amrinder Singh, Advocate; Ms. Garima Gupta, Advocate; Sh. Jatin Mahajan, Advocate; Sh. Mohd Ashfaq Mir, Advocate

Click Here To Read /Download Order