Full Judgment Text
1
REPORTABLE
SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 9237 OF 2019
[ARISING OUT OF S.L.P. (CIVIL) NO.21622 OF 2012]
M/S. UNICORN INDUSTRIES …APPELLANT
VERSUS
UNION OF INDIA & OTHERS …RESPONDENTS
WITH
CIVIL APPEAL NO. 9238 OF 2019
[ARISING OUT OF S.L.P. (CIVIL) NO. 28966 OF 2012]
J U D G M E N T
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
Signature Not Verified
have been preferred.
Digitally signed by
JAYANT KUMAR ARORA
Date: 2019.12.06
16:05:24 IST
Reason:
The Government of India in order to promote industrial
3.
2
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 recredit of the duties paid in cash.
3
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.
The appellant has submitted that following excise duties were
6.
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
4
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 recredit 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.71/2003CE came to be amended on 25.4.2007 by
Notification No.21/2007, excluding Pan Masala falling under Chapter
XXI of the Tariff from the purview of the notification. Thus, the
5
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
No.22 of 2007. The High Court vide judgment and order dated 11.5.2012
allowed the Writ Petition (C) No.22 of 2007 and 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.
10. The appellant submitted that 14 separate claims were filed for
refund of additional excise duty and education cess on the ground these
levies are also duties of excise, for which exemption had been granted for
ten years. The appellant filed Writ Petition (C) No.24 of 2007 before the
High Court of Sikkim at Gangtok for quashing Notification No.71/2003
CE, confining the exemption to "under any of the said Acts” mentioned in
paragraph 1 of the notification. The prayer was made for a declaration
that the exemption notification was applicable to NCCD, additional excise
duty (Pan Masala) and education cess and the Notification No.71/2003
CE was repugnant to the Industrial Policy decision declared by Union of
India (respondent no.1) and State of Sikkim (respondent no.4). The
appellant claimed that excise duty exemption would include all levy in
nature of excise duty, levied and collected on goods manufactured in
6
India.
Vide Notifications dated 27.3.2008 and 10.6.2008, the benefit of
11.
Cenvat Credit was withdrawn. The appellant challenged the notification
through Writ Petition (C) No.11 of 2008. The High Court was pleased to
allow the said petition vide judgment and order dated 15.11.2010.
Akshay Ispat and Ferro Alloys Private Limited, the manufacturer of
12.
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 under
Chapter VI of Section 91 of the Finance Act, 2004. 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 recredit 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. The appellant submitted its
reply. After that, show cause notice dated 31.10.2006, was issued to the
appellant regarding default in payment of education cess for August,
2006 and September, 2006 and proceedings were initiated for
infringement under Section 91(3) of the Finance Act, 2004. The
7
appellant sent a reply; however, on 6.12.2006, another show cause
notice was issued. The appellant after that claimed on 19.12.2006
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 under Section 126 of the Finance Act, 2007.
Section 128(1) of the Finance Act, 2007 indicated how the said cess was
to be calculated. The respondents demanded by issuance of further
notice education cess and secondary and higher education cess. The
appellant filed a writ application in the High Court. By the impugned
judgment, the same 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.71/2003CE and the
appellant had illegally availed the benefits of the exemption in respect to
it. Aggrieved by the dismissal of the writ petitions, the appeals have been
preferred.
Learned counsel appearing on behalf of the appellant submitted
13.
that NCCD, education cess, and secondary and higher education cess
form part of the excise duty. Hence, the decision of the High Court is
bad in law. Reliance has been placed on SRD Nutrients Private Limited v.
8
Commissioner of Central Excise, Guwahati, (2018) 1 SCC 105 and the
decision of this Court in Bajaj Auto Limited v. Union of India & others ,
2019 SCC OnLine SC 421, decided on 27.3.2019. It is submitted that
the education cess was introduced by Sections 91 and 93 of the Finance
Act, 2004 and higher education cess by the Finance Act, 2007 and the
NCCD was imposed under Section 136 of the Finance Act, 2001. The
imposition is in the nature of a duty of excise and in addition to any
other duty of excise chargeable under the Central Excise Act, 1944 (‘the
Act of 1944’). It is further provided that the provisions of the Act of 1944
and Rules made thereunder relating to refunds and exemptions from
duties and imposition of penalty, shall, as far as may be, apply with
respect to the abovementioned duties in question. Reliance has also
been placed on circulars dated 10.8.2004 and 8.4.2011, issued by
Central Board of Excise and Customs, on the subject of education cess
and secondary and higher education cess.
Learned counsel appearing on behalf of respondents has submitted
14.
that the decision of the High Court is appropriate and no case for
interference is made out. The benefit of exemption granted, w.e.f.
9.9.2003 from payment of excise duty was withdrawn vide notification
dated 25.4.2007. Tobacco and Tobacco products including cigarettes,
9
cigars and gutkha , were excluded from the benefit of exemption of the
excise duty. The notification dated 25.4.2007 was set aside by the High
Court. The decision of the High Court has been reversed by this Court in
Union of India v. Unicorn Industries (Civil Appeal No. 7432 of 2019),
decided on 19.9.2019. Apart from that, when exemption notifications
were issued, the NCCD, education cess and secondary and higher
education cess were not even imposed, as such, it could not be said that
they were covered under the exemption notification. The duty described
above had been imposed by separate legislation, which was not covered
under the exemption notification. It was an additional duty imposed in
the nature of excise duty. They were not covered under the exemption
notification. As such, the High Court has rightly dismissed the writ
application filed by the appellants. Hence, no case for interference is
made out.
15. It is not disputed that the Government of India took a policy
decision, Ministry of Industry, Department of Industrial Policy and
Promotion vide Office Memorandum dated 24.12.1997, concerning new
industrial policy and concessions in the NorthEastern region. The
decision was taken for converting the Growth Centres and IIDCs into
total taxfree zones for the next ten years. All industrial activities in
10
these zones would be free from income tax and excise duty for ten years
from the commencement of production.
The benefit of the said notification was extended to the State of
16.
Sikkim vide notification dated 17.2.2003. Following benefits were
extended to the new and the existing industrial units:
“i) New industrial units and existing industrial units on their
substantial expansion as defined, set up in Growth Center,
Industrial Infrastructure Development Centers (IIDCs) and other
locations like Industrial Estates, Export Processing Zones, Food
Parks, IT Parks, etc., as notified by the Central Government are
entitled to 100% (hundred percent) income tax and excise duty
exemption for a period of 10 years from the date of commencement
of commercial production. Thrust Sector Industries as mentioned
in AnnexureII are entitled to similar concessions in the entire State
of Sikkim without area restrictions.”
The Government decided to exempt 100 per cent income tax and
17.
excise duty for ten years. In accordance with the policy decision the
Notification No.71/2003 was issued on 9.9.2003 by the Central
Government in exercise of powers conferred by Section 5A(1) of the Act of
1944 read with Section 3(3) of the Additional Duties of Excise (Goods of
Special Importance) Act, 1957 (‘the Act of 1957’) and Section 3(3) of the
Additional Duties of Excise (Textiles and Textiles Articles) Act, 1978 (‘the
Act of 1978’), exempted goods specified in the First Schedule and the
Second Schedule to the Central Excise Tariff Act, 1985, other than goods
specified in Annexure I in the State of Sikkim. The exemption from
11
payment of so much of excise duty or additional duty of excise, as the
case may be, leviable thereon under any of the said Act. The relevant
portion is extracted hereunder:
“Notification No.71/2003 – Central Excise
In exercise of the powers conferred by subsection (1) of section 5A
of the Central Excise Act, 1944 (1 of 1944), read with subsection (3)
of section 3 of the Additional Duties of Excise (Goods of Special
Importance) Act, 1957 (58 of 1957) and subsection (3) of Section 3
of the Additional Duties of Excise (Textiles and Textiles Articles) Act,
1978 (40 of 1978), the Central Government, being satisfied that it is
necessary in the public interest so to do, hereby exempts the goods
specified in the First Schedule and the Second Schedule to the
Central Excise Tariff Act, 1985 (5 of 1986), other than goods
specified in Annexure I appended hereto, and cleared from a unit
located in the Industrial Growth Centre or Industrial Infrastructure
Development Centre or Export Promotion Industrial Park or
Industrial Estate or Industrial Area or Commercial Estate or
Scheme Area, as the case may be, in the State of Sikkim, specified
in Annexure – II appended hereto, from so much of the duty of
excise or additional duty of excise, as the case may be, leviable
thereon under any of the said Acts as is equivalent to the amount of
duty paid by the manufacturer of the said goods, other than the
amount of duty paid by utilization of CENVAT credit under the
CENVAT Credit Rules, 2002.”
(emphasis supplied)
18. Section 136 of the Finance Act, 2001 provides imposition of the
NCCD. Section 136 is extracted hereunder:
“136. National Calamity Contingent Duty.(1) In the case of goods
specified in the Seventh Schedule, being goods manufactured or
produced, there shall be levied and collected for the purposes of the
Union, by surcharge, a duty of excise, to be called the National
Calamity Contingent Duty (hereinafter referred to as the National
Calamity Duty), at the rates specified in the said schedule.
(2) The National Calamity Duty chargeable on the goods specified in
the Seventh Schedule shall be in addition to any other duties of
excise chargeable on such goods under the Central Excise Act, 1944
(1 of 1944) or any other law for the time being in force.
(3) The provisions of the Central Excise Act, 1944 (1 of 1944) and
12
the rules made thereunder, including those relating to refunds and
exemptions from duties and imposition of penalty, shall, as far as
may be, apply in relation to the levy and collection of the National
Calamity Duty leviable under this section in respect of the goods
specified in the Seventh Schedule as they apply in relation to the
levy and collection of the duties of excise on such goods under that
Act or those rules, as the case may be.”
(emphasis supplied)
19. The education cess came to be imposed vide notification dated
10.9.2004 issued under the Finance Act, 2004. Sections 91 and 93 are
extracted hereunder:
“91. Education Cess(1) Without prejudice to the provisions of sub
section (11) of Section 2, there shall be levied and collected, in
accordance with the provisions of this Chapter as surcharge for
purposes of the Union, a cess to be called the Education Cess, to
fulfil the commitment of the Government to provide and finance
universalized quality basic education.
(2) The Central Government may, after due appropriation made by
Parliament by law in this behalf, utilize, such sums of money of the
Education Cess levied under subsection (11) of Section 2 and this
Chapter for the purposes specified in subsection (1), as it may
consider necessary.
*
93. Education Cess on Excisable Goods (1) The Education Cess
levied under Section 81, in the case of goods specified in the First
Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), being
goods manufactured or produced, shall be a duty of excise (in this
section referred to as the Education Cess on excisable goods), at the
rate of two per cent, calculated on the aggregate of all duties of
excise (including special duty of excise or any other duty of excise
but excluding Education Cess on excisable goods) which are levied
and collected by the Central Government in the Ministry of Finance
(Department of Revenue) under the provisions of the Central Excise
Act, 1944 (1 of 1944) or under any other law for the time being in
force.
(2) The Education Cess on excisable goods shall be in addition to
any other duties of excise chargeable on such goods under the
Central Excise Act, 1944 (1 of 1944) or any other law for the time
being in force.
(3) The provisions of the Central Excise Act, 1944 (1 of 1944) and
13
the rules made thereunder, including those relating to refunds and
exemptions from duties and imposition of penalty shall, as far as
may be, apply in relation to the levy and collection of the Education
Cess on excisable goods as they apply in relation to the levy and
collection of the duties of excise on such goods under the Central
Excise Act, 1944 or the rules, as the case may be.”
(emphasis supplied)
20. The Central Government introduced the secondary and higher
education cess at the rate of 1 per cent of the total excise duty under
Sections 126 and 128 of the Finance Act, 2007, which are reproduced
hereunder:
"126. (1) Without prejudice to the provisions of subsection (12) of
section 2, there shall be levied and collected, in accordance with the
provisions of this Chapter as surcharge for purposes of the Union, a
cess to be called the Secondary and Higher Education Cess, to fulfil
the commitment of the Government to provide and finance
secondary and higher education.
(2) The Central Government may, after due appropriation made by
Parliament by law in this behalf, utilize, such sums of money of the
Secondary and Higher Education Cess levied under subsection
(12) of section 2 and this Chapter for the purposes specified in
subsection (1) as it may consider necessary.
XXXXXX XXXXXX XXXXXX XXXXXX
128. (1) The Secondary and Higher Education Cess levied under
section 126, in the case of goods specified in the First Schedule to
the Central Excise Tariff Act, 1985, being goods manufactured or
produced, shall be a duty of excise (in this section referred to as the
Secondary and Higher Education Cess on excisable goods), at the
rate of one per cent., calculated on the aggregate of all duties of
excise (including special duty of excise or any other duty of excise
but excluding Education Cess chargeable under section 93 of the
Finance (No. 2) Act, 2004 and Secondary and Higher Education
Cess on excisable goods) which are levied and collected by the
Central Government in the Ministry of Finance (Department of
Revenue), under the provisions of the Central Excise Act, 1944 or
under any other law for the time being in force.
14
(2) The Secondary and Higher Education Cess on excisable goods
shall be in addition to any other duties of excise chargeable on such
goods, under the Central Excise Act, 1944 or any other law for the
time being in force and the Education Cess chargeable under
section 93 of the Finance (No. 2) Act, 1944.
(3) The provisions of the Central Excise Act, 1944 and the rules
made thereunder, including those relating to refunds and
exemptions from duties and imposition of penalty shall, as far as
may be, apply in relation to the levy and collection of the Secondary
and Higher Education Cess on excisable goods as they apply in
relation to the levy and collection of the duties of excise on such
goods under the Central Excise Act, 1944 or the rules made
thereunder, as the case may be."
21. The appellant challenged the exemption Notification No.71/2003
dated 9.9.2003, before the High Court only to the extent that it limits the
exemption only in relation to basic excise duty under the Excise Act,
additional duties under the Act of 1957 and the additional duties under
the Act of 1978. It is submitted that though various Finance Acts
imposed these duties, they were recoverable as excise duty,
notwithstanding their nomenclature. The notification dated 17.2.2003
indicated that 100 per cent income tax and excise duty exemption for ten
years was granted. The exemption should cover the NCCD, education
cess and the secondary and higher education cess imposed by the
notifications issued under Finance Acts of 2001, 2004, and 2007 .
22. The main question arising for consideration is when 100 per cent
exemption had been granted for excise duty for a period of 10 years,
15
whether the exemption notification issued for the State of Sikkim on
9.9.2003 shall be confined to the basic excise duty under the Act of
1944, additional duty under the Act of 1957 and additional duty under
the Act of 1978, which were specifically mentioned in the notification
issued on 9.9.2003, or it also include cess/duty imposed by Finance Acts
of 2001, 2004 and 2007.
The submission raised on behalf of appellant is that the duty and
23.
cess in the nature of excise duty cannot be realized, particularly in view
of the provisions in the Finance Acts of 2001, 2004 and 2007 relating to
refund and exemption, which have made applicable, the provisions of the
Act of 1944 and the Rules made thereunder relating to exemption. As
such, in view of the decisions of Division Bench of this Court in
SRD
Nutrients Private Limited (supra) and Bajaj Auto Limited (supra), the
decision of the High Court deserves to be set aside.
24. It is not in dispute that when initial exemption notification was
issued in 1997 for the NorthEastern States, which was later on applied
to the State of Sikkim on 9.9.2003. The benefits from payment of excise
duty and additional excise duty were confined to the basic excise duty
payable under the Acts of 1944, 1957 and 1978. There was no reference
16
made to NCCD imposed under the Finance Act, 2001. Apart from that,
when the notification came to be issued, the education cess and
secondary and higher education cess, which came to be imposed by
Finance Acts of 2004 and 2007, were not in vogue.
25. A Division Bench of this Court in SRD Nutrients Private Limited
(supra) has considered the Finance Acts of 2004 and 2007, by which
education and secondary and higher education cess were imposed.
Under the Industrial Policy dated 1.4.2007 for the NorthEastern States,
the notification dated 25.4.2007, issued by the Central Government,
came up for consideration before this Court. The said notification and
the industrial policy, have been dealt with in paragraphs 4 and 5 of the
SRD Nutrients Private Limited (supra), which are extracted hereunder:
“4. Industrial Policy dated 142007 for the NorthEastern 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
NorthEastern 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 ten years from the date
of commencement of commercial production. Pursuant to the said
Industrial Policy, the Central Government issued Notification No.
20/2007Ex. Dated 2542007 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 & Textile
Articles) Act, 1978 to goods cleared from the notified areas within
the NorthEastern States. The said Notification provided that the
assessee would be entitled to refund of duty paid other than the
duty paid by way of utilisation of CENVAT credit under the CENVAT
Credit Rules, 2004.
17
5. Reproduction of the first three paragraphs of this Notification
would be sufficient, which are as follows:
“
NOTIFICATION No.: 20/2007CE dated 2542007
NorthEast — Exemption to all goods, except as specified,
cleared from Assam, Tripura, Meghalaya, Mizoram,
Manipur, Nagaland, Arunachal Pradesh or Sikkim from
duty paid other than by utilisation of CENVAT credit.
In exercise of the powers conferred by subsection (1) of
Section 5A of the Central Excise Act, 1944 (1 of 1944), the
Central Government, being satisfied that it is necessary in the
public interest so to do, hereby exempts the goods specified in
the First Schedule to the Central Excise Tariff Act, 1985 (5 of
1986) other than those mentioned in the Annexure and cleared
from a unit located in the States of Assam or Tripura or
Meghalaya or Mizoram or Manipur or Nagaland or Arunachal
Pradesh or Sikkim, as the case may be, from so much of the
duty of excise leviable thereon under the said Act as is
equivalent to the amount of duty paid by the manufacturer of
goods other than the amount of duty paid by utilisation of
CENVAT credit under the CENVAT Credit Rules, 2004.
2. In cases where all goods produced by a manufacturer are
eligible for exemption under this Notification, the exemption
contained in this Notification shall be available subject to the
condition that, the manufacturer first utilises whole of the
CENVAT credit available to him on the last day of the month
under consideration for payment of duty on goods cleared
during such month and pays only the balance amount in cash.
3. The exemption contained in this notification shall be given
effect to in the following manner, namely—
( a ) the manufacturer shall submit a statement of the duty paid
other than the amount of duty paid by utilisation of CENVAT
credit under the CENVAT Credit Rules, 2004, to the Assistant
Commissioner or the Deputy Commissioner of Central Excise,
as the case may be, by the 7th of the next month in which the
duty has been paid other than the amount of duty paid by
utilisation of CENVAT credit under the CENVAT Credit Rules,
2004;
( b ) the Assistant Commissioner of Central Excise or the Deputy
Commissioner of Central Excise, as the case may be, after
such verification, as may be deemed necessary, shall refund
the amount of duty paid other than the amount of duty paid
18
by utilisation of CENVAT credit under the CENVAT Credit
Rules, 2004, during the month under consideration to the
manufacturer by the 15th of the next month:
Provided that in cases, where the exemption contained in this
Notification is not applicable to some of the goods produced by
a manufacturer, such refund shall not exceed the amount of
duty paid less the amount of the CENVAT credit availed of, in
respect of the duty paid on the inputs used in or in relation to
the manufacture of goods cleared under this Notification;
( c ) if there is likely to be any delay in the verification, Assistant
Commissioner of Central Excise or the Deputy Commissioner
of Central Excise, as the case may be, shall refund the amount
on provisional basis by the 15th of the next month to the
month under consideration and thereafter may adjust the
amount of refund by such amount as may be necessary in the
subsequent refunds admissible to the manufacturer.”
Circulars have also been referred to in the decision of this Court in
SRD Nutrients Private Limited (supra). The same is extracted hereunder:
“17. It is clear from the arguments of the counsel for the parties that
divergent views are expressed by the CESTAT as well as High Courts.
Even one Bench of the same Tribunal has differed from its earlier
Division Bench decision. In this scenario, it becomes important as to
how the Department has viewed the position regarding education
cess and higher education cess which is payable as a surcharge on
the excise duty, once the excise duty is exempted. Two circulars are
relevant in this behalf, one is Circular dated 1082004 which
clarifies that education cess is part of excise duty. In this circular,
certain clarifications are given by the Ministry of Finance
(Department of Revenue), Government of India and the relevant
portion thereof reads as under:
“ Subject : Issues relating to imposition of education cess on
excisable goods and on imported goods, as pointed out by the
trade and the field formations—Reg.
The undersigned is directed to state that subsequent to Budget
2004 announcements, a number of representations/references
have been received from the trade as well as from the field
formations pertaining to imposition of education cess on
excisable goods and on imported goods. The points raised and
the clarifications thereon are as follows:
19
Issue (1) : Whether education cess on excisable goods is leviable
on goods manufactured prior to imposition of cess but cleared
after imposition of such cess?
Clarification : Education cess on excisable goods is a new levy.
In similar cases, it has been held by the Supreme Court that if
a levy is not there at the time the goods are manufactured or
produced in India, it cannot be levied at the stage of removal of
the said goods. Thus, education cess is not leviable on
excisable goods manufactured prior to imposition of cess but
cleared after imposition of such cess.
Issue (2) : Whether goods that are fully exempted from excise
duty/customs duty or are cleared without payment of excise
duty/customs duty (such as clearance under bond or
fulfilment of certain conditions) would be subjected to cess.
Clarification : The education cess is leviable at the rate of two
per cent of the aggregate of all duties of excise/customs
(excluding certain duties of customs like antidumping duty,
safeguard duty, etc.), levied and collected . If goods are fully
exempted from excise duty or customs duty, are chargeable to
NIL duty or are cleared without payment of duty under
specified procedure such as clearance under bond, there is no
collection of duty. Thus, no education cess would be leviable
on such clearances. In this regard, letter D.O. No.
605/54/2004DBK dated 2172004 issued by Member
(Customs) may also be referred to.”
(emphasis in original)”
In the circular dated 10.8.2004, reference has been made to the
notification issued by Member (Customs), wherein it is stated that there
is no collection of excise duty; hence, no education cess would be leviable
on such clearances.
Circular dated 8.4.2011 had been issued by the Central Board of
Excise and Customs with respect to service tax. In case service tax
stands exempted, education cess and secondary and higher education
cess shall not be levied.
20
26. This Court in SRD Nutrients Private Limited (supra) has observed
that the circulars bind department. When there is no excise duty, the
education cess and secondary and higher education cess could not have
been demanded. This Court observed thus:
“21. One aspect that clearly emerges from the reading of these two
circulars is that the Government itself has taken the position that
where whole of excise duty or service tax is exempted, even the
education cess as well as secondary and higher education cess
would not be payable. These circulars are binding on the
Department.
Even otherwise, we are of the opinion that it is more rational to
22.
accept the aforesaid position as clarified by the Ministry of Finance
in the aforesaid circulars. Education cess is on excise duty. It
means that those assessees who are required to pay excise duty
have to shell out education cess as well. This education cess is
introduced by Sections 91 to 93 of the Finance (No. 2) Act, 2004. As
per Section 91 thereof, education cess is the surcharge which the
assessee is to pay. Section 93 makes it clear that this education
cess is payable on "excisable goods," i.e., in respect of goods
specified in the First Schedule to the Central Excise Tariff Act,
1985. Further, this education cess is to be levied @ 2% and
calculated on the aggregate of all duties of excise which are levied
and collected by the Central Government under the provisions of
the Central Excise Act, 1944 or under any other law for the time
being in force. Subsection (3) of Section 93 provides that the
provisions of the Central Excise Act, 1944 and the Rules made
thereunder, including those related to refunds and duties, etc. shall
as far as may be applied in relation to levy and collection of
education cess on excisable goods. A conjoint reading of these
provisions would amply demonstrate that education cess as a
surcharge is levied @ 2% on the duties of excise, which are payable
under the Act. It can, therefore, be clearly inferred that when there
is no excise duty payable, as it is exempted, there would not be any
education cess as well, inasmuch as education cess @ 2% is to be
calculated on the aggregate of duties of excise. There cannot be any
surcharge when basic duty itself is NIL.
*
24. We are in agreement with the aforesaid reasons accorded by the
Rajasthan High Court since it is in consonance with the legal
principle enunciated by this Court. For this purpose, we may refer
21
to the judgment in CCE v. TELCO (1997) 5 SCC 275. In that case,
issue pertained to valuation of cess which was levied @ 1/8 per cent
of ad valorem “value” of the Central excise duty. The Court held that
the calculation of 1/8 per cent ad valorem of the motor vehicle for
the purposes of the levy and collection of the automobile cess must
be made that was being calculated since automobile cess was to be
levied and calculated as if it was excise duty. As a fortiori, the
education cess and higher education cess levied @ 2% of the excise
duty would partake the character of excise duty itself.”
27. In Bajaj Auto Limited (supra), a Division Bench of this Court
considered the question of liability towards NCCD, education cess and
secondary and higher education cess on manufacturing establishment
which is exempted from payment of central excise duty under the Act of
1944. The matter arose from the State of Uttarakhand; an Office
Memorandum dated 7.1.2003 was issued, by which 100 per cent
outright excise duty exemption for ten years was granted from the date of
commencement of the commercial production. Notification dated
10.6.2003 issued under Section 5A has been reproduced in the decision
mentioned above, the same is extracted hereunder:
“GENERAL EXEMPTION NO. 41
Exemption to goods other than specified goods cleared from units
located in the Industrial Growth Centre or Industrial Infrastructure
Development Centre or Export Promotion Industrial Park or
Industrial Estate or Industrial Area or Commercial Estate or
Scheme Area of Uttarakhand and Himachal Pradesh.—In exercise of
the powers conferred by subsection (1) of section 5A of the Central
Excise Act, 1944 (1 of 1944) read with subsection (3) of section 3 of
the Additional Duties of Excise (Goods of Special Importance) Act,
1957 (58 of 1957) and subsection (3) of section 3 of the Additional
Duties of Excise (Textiles and Textiles Articles) Act, 1978 (40 of
1978), the Central Government, being satisfied that it is necessary
in the public interest so to do, hereby exempts the goods specified
in the First Schedule and the Second Schedule to the Central Excise
Tariff Act, 1985 (5 of 1986), other than the goods specified in
22
AnnexureI appended hereto, and cleared from a unit located in the
Industrial Growth Centre or Industrial Infrastructure Development
Centre or Export Promotion Industrial Park or Industrial Estate or
Industrial Area or Commercial Estate or Scheme Area, as the case
may be, specified in [AnnexureII and Annexure III] appended
hereto, from the whole of the duty of excise or additional duty of
excise, as the case may be, leviable thereon under any of the said
Acts.”
The Division Bench has relied upon the decision of SRD Nutrients
Private Limited (supra). The decision of the Rajasthan High Court in
Banswara Syntex Ltd. v. Union of India, 2007 SCC OnLine Raj. 365,
which was considered in SRD Nutrients Private Limited (supra), was also
referred to, besides the circular of 2004. This Court has observed thus:
“21. We may notice that the primary reasoning contained in the
impugned order is common for the three cesses, i.e., NCCD;
Education Cess and Secondary & Higher Education Cess. These
were in the nature of surcharges levied in other Acts, which have
not been specifically excluded under the Notification in question.
That reasoning does not prevail, more so because of the judgment in
SRD Nutrients Pvt. Ltd. The question, thus, is whether, even though
the NCCD is in the nature of an excise duty, its incidence being on
the product, rather than on the value of the excise duty, that itself
would make any difference to the applicability of the NCCD to excise
exempt units.
22. On a proper appreciation of the judicial pronouncement in SRD
Nutrients Pvt. Ltd ., we are not inclined to take a different view from
the one taken for Education Cess and Secondary & Higher
Education Cess, even while considering the issue of NCCD.
23. We may notice that this Court, in SRD Nutrients Pvt. Ltd. gave
its imprimatur to the view expressed by the Rajasthan High Court
in Banswara Syntex Ltd. The rationale is that while there may be
surcharges under different financial enactments to provide the
Government with revenue for specified purposes, the same have
been notified as leviable in the nature of a particular kind of duty.
In the case of NCCD, it is in the nature of an excise duty. It has to
bear the same character as those respective taxes to which the
surcharge is appended. NCCD will not cease to be an excise duty,
but is the same as an excise duty, even if it is levied on the product.
23
Thus, when NCCD, at the time of collection, takes the character of a
duty on the product, whatever may be the rationale behind it, it is
also subject to the provisions relating to excise duty, applicable to it
in the manner of collection as well as the obligation of the taxpayer
to discharge the duty. Once the excise duty is exempted, NCCD,
levied as an excise duty, cannot partake a different character and,
thus, would be entitled to the benefit of the exemption notification.
The exemption notification also states that the exemption is from
the “whole of the duty of excise or additional duty of excise.” We
may also note that the exemption itself is for a period of ten years
from the date of commercial production of the unit.
24. We are, thus, of the view that the appellant would not be liable
to pay the NCCD.”
The Division Bench of this Court has rendered both the above
28.
decisions. The most unfortunate part is that the binding decision of
larger bench consisting of threeJudges of this Court in Union of India v.
(1986) 4 SCC 66, dealing with the similar issue,
Modi Rubber Limited,
was not placed for consideration before this Court when the
abovementioned decisions came to be rendered.
29. This Court in Modi Rubber Limited (supra) has considered the
similar question in the backdrop of the facts that what is the meaning of
the expression ‘duty of excise’ employed in the notifications dated
1.8.1974 and 1.3.1981, issued by the Government of India under Rule
8(1) of the Central Excise Rules. A question arose whether expression
‘duty of excise’ is limited in its connotation only to basic duty levied
under the Central Excises and Salt Act, 1944 or it also covers special
24
duties of excise levied under the various Finance Bills and Acts,
additional duty of excise levied under the Act of 1957 and other kind of
duty of excise levied under the Central enactments.
30. In Modi Rubber Limited (supra), the company was the manufacturer
of tyres, which product was subject to a duty of excise under the Central
Excises and Salt Act, 1944. The word ‘duty’ under the said Act is defined
in Rule 2(v) to mean “the duty payable under Section 3 of the Act”. The
exemption is dealt with under Rule 8 of Central Excise Rules, exempting
various categories of excisable goods from the whole or any part of the
duty of excise leviable on such goods. The notification dated 1.8.1974,
came up for consideration before this Court in Modi Rubber Limited
(supra), which is extracted hereunder:
“3…..
Notification No. 123/74C.E. dated August 1, 1974
In the exercise of the powers conferred by subrule (1) of Rule 8
of the Central Excise Rules, 1944, the Central Government hereby
exempts tyres for motor vehicles falling under subitem (1) of Item
No.16 of the First Schedule to the Central Excises and Salt Act,
1944 (1 of 1944), from so much of the duty of excise leviable
thereon as is in excess of fiftyfive per cent ad valorem .”
The notification was confined to the exemption of duty of excise
under the Act of 1944 in excess of 55 per cent ad valorem. Subsequently,
the notification dated 1.3.1981, was issued by the Central Government
exempting specified goods from so much of the duty of excise leviable
thereon as is more than the duty specified in the corresponding entry in
25
column 5.
31. This Court in Modi Rubber Limited (supra) considered the question
that since 1963, the special duty of excise was levied inter alia on the
manufacture of tyres from year to year up to 1971 by various Finance
Acts passed from time to time. It was discontinued from 1972 to 1978,
and the Finance Act, 1978, again revived it. After that, it continued to be
levied from year to year right up to the period. The special duties of
excise came to be imposed under Section 32 of the Finance Act, 1979,
which came up for consideration before this Court in Modi Rubber
(supra). The same is extracted hereunder:
Limited
“32. Special Duties of Excise.— (1) In the case of goods chargeable
with a duty of excise under the Central Excises Act as amended
from time to time, read with any notification for the time being in
force issued by the Central Government in relation to the duty so
chargeable there shall be levied and collected a special duty of
excise equal to five per cent of the amount so chargeable on such
goods.
(2) Subsection (1) shall cease to have effect after the 31st day of
March, 1980, except as respects things done or omitted to be done
before such cesser; and Section 6 of the General Clauses Act, 1897,
shall apply upon such cesser as if the said subsection had then
been repealed by a Central Act.
(3) The Special duties of excise referred to in subsection (1) shall
be in addition to any duties of excise chargeable on such goods
under the Central Excises Act or any other law for the time being in
force.
(4) The provisions of the Central Excises Act and the rules made
thereunder, including those relating to refunds and exemptions
from duties, shall, as far as may be, apply in relation to the levy and
collection of the special duties of excise leviable under this section
in respect of any goods as they apply in relation to the levy and
collection of the duties of excise on such goods under that Act or
those rules as the case may be.”
26
(emphasis supplied)
The provisions of Section 32 are to the
32. pari materia
abovementioned provisions of the Finance Act(s) in question. The special
duty under Section 32 of Finance Act, 1979 imposed was in addition to
any duties of excise chargeable on such goods under the provisions of
the Central Excises Act and the Rules made thereunder, with respect to
refunds and exemptions from duties, shall, as far as may be, apply to the
levy and collection of special duties of excise leviable under the
provisions of Section 32 of the Finance Act, 1979.
33. The assessee Modi Rubber Limited (supra) claimed that in view of
the notification dated 1.8.1974, assessee was exempted from payment
not only in respect of basic excise duty levied under the Central Excises
and Salt Act, 1944, but also in respect of special duty of excise levied
under the relevant Finance Acts, because the language used in the
notification was not restrictive and it referred generally to ‘duty of excise’
without any qualification, therefore, it covered all duties of excise
whether levied under the Central Excises and Salt Act, 1944 or under
any other Central enactments. The dispute pertained to the period from
November 1979 to October 1982.
27
34. The Assistant Collector of Excise, in the case of Modi Rubber
(supra), held that exemption granted under the notification dated
Limited
1.8.1974, was not available in respect of special duty of excise levied
under the Finance Acts. The assessee thereupon filed a writ petition in
the Delhi High Court, challenging the order of the Assistant Collector of
Excise. The Delhi High Court upheld the claim of the assessee. It took
the view that the expression ‘duty of excise’ included not only basic duty
of excise levied under the Central Excises and Salt Act, 1944, but also
the special duty of excise levied under the various Finance Acts and any
other duties of excise levied under Central enactment. Meanwhile,
Parliament also enacted the Central Excise Laws (Amendment and
Validation) Act, 1982 laying down statutory rules which should guide the
court in interpreting notifications granting exemption from payment of
duty of excise and prescribing the conditions on which a notification
granting exemption from payment of duty of excise can be construed as
applicable to duty of excise levied under any Central law making the
provisions of the Central Excises and Salt Act, 1944 and the Rules made
thereunder applicable to the levy and collection of duty of excise under
such Central Law.
The question arose for consideration before this Court as to what is
35.
28
the real import of the expression ‘duty of excise’ in the notifications dated
1.8.1974 and 1.3.1981 and whether it includes the duties of excise
leviable not only under the Central Excises and Salt Act, 1944, but also
under any other enactment.
36. This Court in Modi Rubber Limited (supra) has considered the
purport of the notifications and the specific provisions mentioned therein
and held that exemption has to be considered in the light of provisions of
Central Excise Rules, 1944, as envisaged under Rule 2(v) of Central
Excise Rules, 1944. It cannot, in the circumstances, bear an extended
meaning to include special excise duty and auxiliary excise duty. This
Court observed thus:
“ 6. The first question that arises for consideration on these facts is
as to what is the true import of the expression "duty of excise" in
the notifications dated August 1, 1974, and March 1, 1981. It is
only if this expression is held to include duties of excise leviable not
only under the Central Excises and Salt Act, 1944 but also under
any other enactments that the question would arise whether the
Central Laws (Amendment and Validation) Act, 1982 is
constitutionally invalid. We, therefore, asked the learned counsel
appearing on behalf of the parties to confine their arguments only to
the first question of interpretation of the expression ‘duty of excise’
in the notifications dated August 1, 1974 and March 1, 1981.
7. Both these notifications, as the opening part shows, are issued
under Rule 8(1) of the Central Excise Rules, 1944 and since the
definition of ‘duty’ in Rule 2, clause ( v ) must necessarily be
projected in Rule 8(1) and the expression “duty of excise” in Rule
8(1) must be read in the light of that definition, the same expression
used in these two notifications issued under Rule 8(1) must also be
interpreted in the same sense, namely, duty of excise payable under
the Central Excises and Salt Act, 1944 and the exemption granted
under both these notifications must be regarded as limited only to
29
such duty of excise. But the respondents contended that the
expression ‘duty of excise’ was one of large amplitude and in the
absence of any restrictive or limitative words indicating that it was
intended to refer only to duty of excise leviable under the Central
Excises and Salt Act, 1944, it must be held to cover all duties of
excise whether leviable under the Central Excises and Salt Act,
1944 or under any other enactment. The respondents sought to
support this contention by pointing out that whenever the Central
Government wanted to confine the exemption granted under a
notification to the duty of excise leviable under the Central Excises
and Salt Act, 1944, the Central Government made its intention
abundantly clear by using appropriate words of limitation such as
“duty of excise leviable ... under Section 3 of the Central Excises
and Salt Act, 1944” or “duty of excise leviable ... under the Central
Excises and Salt Act, 1944” or “duty of excise leviable ... under the
said Act” as in the Notification No. CER8(2)/55C.E. dated
September 17, 1955, Notification No. 255/77C.E. dated July 20,
1977, Notification No. CER8(1)/55C.E. dated September 2, 1955,
Notification No. CER8(9)/55C.E. dated December 31, 1955,
Notification No. 95/61C.E. dated April 1, 1961, Notification No.
23/55C.E. dated April 29, 1955, and similar other notifications.
But, here said the respondents, no such words of limitation are
used in the two notifications in question and the expression “duty of
excise” must, therefore, be read according to its plain natural
meaning as including all duties of excise, including special duty of
excise and auxiliary duty of excise. Now, it is no doubt true that in
these various notifications referred to above, the Central
Government has, while granting exemption under Rule 8(1), used
specified language indicating that the exemption, total or partial,
granted under each such notification is in respect of excise duty
leviable under the Central Excises and Salt Act, 1944. But, merely
because, as a matter of drafting, the Central Government has in
some notifications specifically referred to the excise duty in respect
of which exemption is granted as “duty of excise” leviable under the
Central Excises and Salt Act, 1944, it does not follow that in the
absence of such words of specificity, the expression “duty of excise”
standing by itself must be read as referring to all duties of excise. It
is not uncommon to find that the legislature sometimes, with a view
to making its intention clear beyond doubt, uses language ex
abundanti cautela though it may not be strictly necessary and even
without it the same intention can be spelt out as a matter of judicial
construction and this would be more so in case of subordinate
legislation by the executive. The officer drafting a particular piece of
subordinate legislation in the Executive Department may employ
words with a view to leaving no scope for possible doubt as to its
intention or sometimes even for greater completeness, though these
words may not add anything to the meaning and scope of the
subordinate legislation. Here, in the present notifications, the words
duty of excise leviable under the Central Excises and Salt Act, 1944’
30
do not find a place as in the other notifications relied upon by the
respondents. But, that does not necessarily lead to the inference
that the expression “duty of excise’ in these notifications was
intended to refer to all duties of excise including special and
auxiliary duties of excise. The absence of these words does not
absolve us from the obligation to interpret the expression “duty of
excise” in these notifications. We have still to construe this
expression — what is its meaning and import — and that has to be
done, bearing in mind the context in which it occurs. We have
already pointed out that these notifications having been issued
under Rule 8(1), the expression ‘duty of excise’ in these notifications
must bear the same meaning which it has in Rule 8(1) and that
meaning clearly is — excise duty payable under the Central Excises
and Salt Act, 1944 as envisaged in Rule 2 clause ( v ). It cannot in the
circumstances bear an extended meaning so as to include special
excise duty and auxiliary excise duty.”
37. This Court in Modi Rubber Limited (supra) further considered the
question when the notification was issued on 1.8.1974, there was no
special duty of excise leviable on tyres, it came to be introduced in 1978
under various Finance Acts. It was held that the notification could not
be read as comprehending the special duty of excise on the date of the
notification and came to be levied four years later. This Court also laid
down that the presumption is that when the Central Government issues
a notification granting exemption from payment of excise duty under
Rule 8(1) of Rules of 1944, the Central Government would have
considered whether exemption should be granted and if so, to what
extent and can only be with reference to the duty of excise which is then
leviable, not a duty to be imposed in future. This Court in Modi Rubber
Limited (supra) strongly repelled the argument that it would cover the
31
duties to be imposed in the future not prevailing at the relevant time
thus:
“ 8. Moreover, at the date when the first notification was issued,
namely, August 1, 1974, there was no special duty of excise leviable
on tyres. It came to be levied on tyres with effect from the financial
year 1978 under various Finance Acts enacted from year to year. It
is therefore difficult to understand how the expression “duty of
excise” in the notification dated August 1, 1974 could possibly be
read as comprehending special duty of excise which did not exist at
the date of this notification and came to be levied almost four years
later. When special duty of excise was not in existence at the date of
this notification, how could the Central Government, in issuing this
notification, have intended to grant exemption from payment of
special excise duty? The presumption is that when a notification
granting exemption from payment of excise duty is issued by the
Central Government under Rule 8(1), the Central Government
would have applied its mind to the question whether exemption
should be granted and if so, to what extent. And obviously, that can
only be with reference to the duty of excise, which is then leviable.
The Central Government could not be presumed to have projected
its mind into the future and granted exemption in respect of excise
duty which may be levied in the future, without considering the
nature and extent of such duty and the object and purpose for
which such levy may be made and without taking into account the
situation which may be prevailing then. It is only when a new duty
of excise is levied, whether special duty of excise or auxiliary duty of
excise or any other kind of duty of excise, that a question could
arise whether any particular article should be exempted from
payment of such duty of excise and the Central Government would
then have to apply its mind to this question and having regard to
the nature and extent of such duty of excise and the object and
purpose for which it is levied and the economic situation including
supply and demand position then prevailing, decide whether
exemption from payment of such excise duty should be granted and
if so, to what extent. It would be absurd to suggest that by issuing
the notification dated August 1, 1974 the Central Government
intended to grant exemption not only in respect of excise duty then
prevailing but also in respect of all future duties of excise which
may be levied from time to time.”
38. This Court in Modi Rubber Limited (supra) also considered the
32
provisions of Section 32 of the Finance Act, 1979, levying special duty
making applicable to the provisions of the Act of 1944 and the Rules
made thereunder, relating to refunds and exemptions from duties. They
shall, as far as may be, apply in relation to the levy and collection of the
special duty of excise as they apply to the levy and collection of the duty
of excise under the Act of 1944. It was held that reference to the
provisions under section 32 of the Finance Act as to the source of power
under which notifications dated 1.8.1974 and 1.3.1981 were issued, it
could not be held that exemption granted under these two notifications
was extendable to Finance Act, 1979. It was limited only to the duty of
excise payable under the Act of 1944. The expression 'duty of excise' in
these two notifications could not legitimately be construed as
comprehending special duty of excise. Merely reference to the source of
power is not enough to attract the exemption and what exemption has
been granted to be read from the notification issued therein. This Court
has further laid down that in case notification granting exemption issued
under the Central Excise Rules, 1944 without reference to any other
statute, the exemption must be read as limited to the duty of excise
payable under the Central Excises and Salt Act, 1944. It cannot cover
such special or another kind of duty of excise. This Court in
Modi
Rubber Limited (supra) has discussed the provisions of the Finance Act,
33
1979 thus:
“ 9. We have already pointed out, and this is one of the principal
arguments against the contention of the respondents, that by
reason of the definition of “duty” in clause ( v ) of Rule 2 which must
be read in Rule 8(1), the expression “duty of excise” in the
notifications dated August 1, 1974 and March 1, 1981 must be
construed as duty of excise payable under the Central Excises and
Salt Act, 1944. The respondents sought to combat this conclusion
by relying on subsection (4) of Section 32 of the Finance Act, 1979
— there being an identical provision in each Finance Act levying
special duty of excise — which provided that the provisions of the
Central Excises and Salt Act, 1944 and the rules made thereunder
including those relating to refunds and exemptions from duties
shall, as far as may be, apply in relation to the levy and collection of
special duty of excise as they apply in relation to the levy and
collection of the duty of excise under the Central Excises and Salt
Act, 1944. It was urged on behalf of the respondents that by reason
of this provision, Rule 8(1) relating to exemption from duty of excise
became applicable in relation to the levy and collection of special
duty of excise and exemption from payment of special duty of excise
could therefore be granted by the Central Government under Rule
8(1) in the same manner in which it could be granted in relation to
the duty of excise payable under the Central Excises and Salt Act,
1944. The argument of the respondents based on this premise was
that the reference to Rule 8(1) as the source of the power under
which the notifications dated August 1, 1974 and March 1, 1981
were issued could not therefore be relied upon as indicating that the
duty of excise from which exemption was granted under these two
notifications was limited only to the duty of excise payable under
the Central Excises and Salt Act, 1944 and the expression “duty of
excise” in these two notifications could legitimately be construed as
comprehending special duty of excise. This argument is, in our
opinion, not wellfounded and cannot be sustained. It is obvious
that when a notification granting exemption from duty of excise is
issued by the Central Government in exercise of the power under
Rule 8(1) simpliciter, without anything more, it must, by reason of
the definition of ‘duty’ contained in Rule 2 clause ( v ) which
according to the well recognised canons of construction would be
projected in Rule 8(1), be read as granting exemption only in respect
of duty of excise payable under the Central Excises and Salt Act,
1944. Undoubtedly, by reason of subsection (4) of Section 32 of the
Finance Act, 1979 and similar provision in the other Finance Acts,
Rule 8(1) would become applicable empowering the Central
Government to grant exemption from payment of special duty of
excise, but when the Central Government exercises this power, it
would be doing so under Rule 8(1) read with subsection (4) of
Section 32 or other similar provision. The reference to the source of
34
power in such a case would not be just to Rule 8(1), since it does
not of its own force and on its own language apply to granting of
exemption in respect of special duty of excise, but the reference
would have to be to Rule 8(1) read with subsection (4) of Section 32
or other similar provision. It is significant to note that during all
these years, whenever exemption is sought to be granted by the
Central Government from payment of special duty of excise or
additional duty of excise, the recital of the source of power in the
notification granting exemption has invariably been to Rule 8(1)
read with the relevant provision of the statute levying special duty of
excise or additional duty of excise, by which the provisions of the
Central Excises and Salt Act, 1944 and the rules made thereunder
including those relating to exemption from duty are made
applicable. Take for example, the Notification bearing No. 63/78
dated August 1, 1978 where exemption is granted in respect of
certain excisable goods “from the whole of the special duty of excise
leviable thereon under subclause (1) of clause 37 of the Finance
Bill, 1978”. The source of the power recited in this notification is
“subrule (1) of Rule 8 of the Central Excise Rules, 1944 read with
subclause (5) of clause 37 of the Finance Bill, 1978”. So also in the
Notification bearing No. 29/79 dated March 1, 1979 exempting
unmanufactured tobacco “from the whole of the duty of excise
leviable thereon both under the Central Excises and Salt Act, 1944
and Additional Duties of Excise (Goods of Special Importance) Act,
1957”, the reference to the source of power mentioned in the
opening part of the notification is “subrule (1) of Rule 8 of the
Central Excise Rules, 1944 read with subsection (3) of Section 3 of
the Additional Duties of Excise (Goods of Special Importance) Act,
1957”. The respondents have in fact produced several notifications
granting exemption in respect of special duty of excise or additional
duty of excise and in each of these notifications, we find that the
source of power is described as subrule (1) of Rule 8 of the Central
Excise Rules, 1944 read with the relevant provision of the statute
levying special duty of excise or additional duty of excise by which
the provisions of the Central Excises and Salt Act, 1944 and the
Rules made thereunder including those relating to exemption from
duty are made applicable. Moreover, the exemption granted under
all these notifications specifically refers to special duty of excise or
additional duty of excise, as the case may be. It is, therefore, clear
that where a notification granting exemption is issued only under
subrule (1) of Rule 8 of the Central Excise Rules, 1944 without
reference to any other statute making the provisions of the Central
Excises and Salt Act, 1944 and the Rules made thereunder
applicable to the levy and collection of special, auxiliary or any
other kind of excise duty levied under such statute, the exemption
must be read as limited to the duty of excise payable under the
Central Excises and Salt Act, 1944 and cannot cover such special,
auxiliary or other kind of duty of excise. The notifications in the
present case were issued under subrule (1) of Rule 8 of the Central
35
Excise Rules, 1944 simpliciter without reference to any other
statute and hence the exemption granted under these two
notifications must be construed as limited only to the duty of excise
payable under the Central Excises and Salt Act, 1944.”
This Court in Modi Rubber Limited (supra) has also considered
when the exemption is granted under the particular provision; it would
not cover any other kind of duty of excise imposed under separate Acts.
This Court observed thus:
“ 10. We may incidentally mention that in the appeals a question of
interpretation was also raised in regard to the Notification bearing
No. 249/67 dated November 8, 1967 exempting tyres for tractors
from “so much of the duty leviable thereon under item 16 of the
First Schedule to the Central Excises and Salt Act, 1944 as is in
excess of 15 per cent”. The argument of the respondents in the
appeals was that the exemption granted under this notification was
not limited to the duty of excise payable under the Central Excises
and Salt Act, 1944 but it also extended to special duty of excise,
additional duty of excise and auxiliary duty of excise leviable under
other enactments. This argument plainly runs counter to the very
language of this notification. It is obvious that the exemption
granted under this notification is in respect of “so much of the duty
leviable thereon under item 16 of the First Schedule to the Central
Excises and Salt Act, 1944 as is in excess of 15 per cent” and these
words describing the nature and extent of the exemption on their
plain natural construction, clearly indicate that the exemption is in
respect of duty of excise leviable under the Central Excises and Salt
Act, 1944 and does not cover any other kind of duty of excise. No
more discussion is necessary in regard to this question beyond
merely referring to the language of this notification.”
The appeals were allowed, and it was held that exemption was not
available in respect of special duty of excise or additional duty of excise
or auxiliary duty of excise. A threeJudge Bench in Rita Textiles Private
Limited v. Union of India, 1986 SCC Supp. 557, has followed the decision
36
of Modi Rubber Limited (supra). The decision in Modi Rubber Limited
(supra) squarely covers the issue and is rendered by a Coordinate
Bench.
39. Rule 8 of Central Excise Rules, 1944, authorises the Central
Government to grant an exemption to any excisable goods from the whole
or any part of duty leviable on such goods. Rule 8 is extracted
hereunder:
“8. Power to authorise an exemption from duty in special cases.— (1)
The Central Government may from time to time, by notification in
the official Gazette, exempt (subject to such conditions as may be
specified in the notification) any excisable goods from the whole or
any part of duty leviable on such goods.
(2) The Central Board of Excise and Customs may by special
order in each case exempt from the payment of duty, under
circumstances of an exceptional nature, any excisable goods.”
The word ‘duty’ is defined under Rule 2(v) to mean the duty as
levied under the Act.
Notification dated 9.9.2003 issued in the present case makes it
40.
clear that exemption was granted under Section 5A of the Act of 1944,
concerning additional duties under the Act of 1957 and additional duties
of excise under the Act of 1978. It was questioned on the ground that it
provided for limited exemption only under the Acts referred to therein.
There is no reference to the Finance Act, 2001 by which NCCD was
37
imposed, and the Finance Acts of 2004 and 2007 were not in vogue. The
notification was questioned on the ground that it should have included
other duties also. The 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. The duty on NCCD, education cess and secondary and higher
education cess are in the nature of additional excise duty and it would
not mean that exemption notification dated 9.9.2003 covers them
particularly when there is no reference to the notification issued under
the Finance Act, 2001. There was no question of granting exemption
related to cess was not in vogue at the relevant time imposed later on
vide Section 91 of the Act of 2004 and Section 126 of the Act of 2007.
The provisions of Act of 1944 and the Rules made thereunder shall be
applicable to refund, and the exemption is only a reference to the source
of power to exempt the NCCD, education cess, secondary and higher
education cess. A notification has to be issued for providing exemption
under the said source of power. In the absence of a notification
containing an exemption to such additional duties in the nature of
education cess and secondary and higher education cess, they cannot be
said to have been exempted. The High Court was right in relying upon
the decision of threeJudge Bench of this Court in Modi Rubber Limited
38
(supra), which has been followed by another threeJudge Bench of this
Court in Rita Textiles Private Limited (supra).
41. The Circular of 2004 issued based on the interpretation of the
provisions made by one of the Customs Officers, is of no avail as such
Circular has no force of law and cannot be said to be binding on the
Court. Similarly, the Circular issued by Central Board of Excise and
Customs in 2011, is of no avail as it relates to service tax and has no
force of law and cannot be said to be binding concerning the
interpretation of the provisions by the courts. The reason employed in
SRD Nutrients Private Limited (supra) that there was nil excise duty, as
such, additional duty cannot be charged, is also equally unacceptable as
additional duty can always be determined and merely exemption granted
in respect of a particular excise duty, cannot come in the way of
determination of yet another duty based thereupon. The proposition
urged that simply because one kind of duty is exempted, other kinds of
duties automatically fall, cannot be accepted as there is no difficulty in
making the computation of additional duties, which are payable under
NCCD, education cess, secondary and higher education cess. Moreover,
statutory notification must cover specifically the duty exempted. When a
particular kind of duty is exempted, other types of duty or cess imposed
39
by different legislation for a different purpose cannot be said to have
been exempted.
42. The decision of larger bench is binding on the smaller bench has
been held by this Court in several decisions such as Mahanagar Railway
Vendors’ Union v. Union of India & Ors. (1994) Suppl. 1 SCC 609, State of
Maharashtra & Ors. v. Mana Adim Jamat Mandal , AIR 2006 SC 3446 and
State of Uttar Pradesh & Ors. v. Ajay Kumar Sharma & Ors. (2016) 15
SCC 289. The decision rendered in ignorance of a binding precedent
and/or ignorance of a provision has been held to be in
per incuriam
Subhash Chandra & Ors. v. Delhi Subordinate Services Selection Board &
Ors. (2009) 15 SCC 458, Dashrath Rupsingh Rathod v. State of
Maharashtra (2014) 9 SCC 129, and Central Board of Dawoodi Bohra
Community & Ors. v. State of Maharashtra & Ors. (2005) 2 SCC 673. It
was held that a smaller bench could not disagree with the view taken by
a larger bench.
Thus, it is clear that before the Division Bench deciding SRD
43.
Nutrients Private Limited and Bajaj Auto Limited (supra), the previous
binding decisions of threeJudge Bench in Modi Rubber (supra) and Rita
Textiles Private Limited (supra) were not placed for consideration. Thus,
40
the decisions in SRD Nutrients Private Limited and Bajaj Auto Limited
(supra) are clearly per incuriam . The decisions in Modi Rubber (supra)
and Rita Textiles Private Limited (supra) are binding on us being of Co
ordinate Bench, and we respectfully follow them. We did not find any
ground to take a different view.
Resultantly, we have no hesitation in dismissing the appeals. The
44.
judgment and order of the High Court are upheld, and the appeals are
dismissed. No costs.
…..………………………J.
(Arun Mishra)
…..………………………J.
(M.R. Shah)
New Delhi; .....………………………J.
December 6, 2019 (B.R. Gavai)