Whether amount of Education Cess and Secondary and Higher Education Cess which have already been refunded in terms of decision of a Supreme Court can again be demanded by issuance of show cause notice u/s 11A of the Central Excise Act.
Forum-Gauhati High Court
Date-15th March 2021
Citation-Topcem India Vs Union of India

In a landmark decision rendered by the Gauhati High Court in a bunch of appeals involving 41 appellants with revenue implications running into more than several crores, the court was called upon to decide whether the refund of Education Cess and Secondary and Higher Education Cess which was granted to the petitioners on the basis of law laid down by the Apex Court in the case of SRD Nutrients which was prevailing at the point in time when the refund was granted , can be said to be erroneous refund simply on the ground that the Apex Court in the subsequent decision rendered in M/S Unicorn Industries held that judgment passed by the Apex Court earlier in SRD Nutrients Pvt. Ltd to be per incuriam.

The court noted that the petitioners in this case have all set up their industries or undertook substantial expansion of the industries and are manufacturing excisable items and the excise duty on these items are exempted under the Industrial Policy of 1997 and 2007. Thereafter the court noted several decisions and observed that a change of law subsequently would not make an action taken earlier by Quasi Judicial Authority in terms of law as it stood then, to be held to be erroneous so as to enable the Departmental Officer to invoke powers under Section 11A of the Central Excise Act. On perusal of Section 11A reveals that the power under Section 11A for recovery of duties not levied or not paid or short levied or short paid or erroneously refunded will be available to the departmental Officer only on the decisions mentioned in Sub-section (4) unless the concerned departmental Officer is satisfied that the refund granted earlier was because of any or all of the conditions mentioned under sub-Section (4), the refunds cannot be treated to be erroneous. The mandate of section requires the departmental Officer to apply its mind and only upon satisfaction of the conditions mentioned under sub-Section (4) of Section 11A can any refund granted earlier be treated to have been erroneously.

Finally the court observed the the Officers of the Central Excise Department exercise Quasi judicial functions. The orders passed by the Department Officers being in exercise of Quasi Judicial powers cannot be co-laterally revoked/reviewed except when permitted under the Statute. It is seen that against sanction orders passed the concerned officers, the statute does not provide for any review of such order passed. However, under Section 35, there is a provision for appeal, which however has not been resorted to by the Department seeking revocation/recall of orders already passed sanctioning the refund in terms of ” M/S SRD Nutrients (supra)”. The refund orders passed cannot be unilaterally revoked by application of Section 11A unless the requirements of sub-Section (4) of Section 11A are satisfied.

In view of this the show cause notices as issued were quashed.

In continuation of the recent judgement of Supreme Court in the case of Canon India, this is another land mark decision which is definitely going to travel to supreme court. This judgement deals with the interpretation of the term erroneous and will be helpful in the context of the income-tax as well as other acts also while dealing with the revision proceedings.

Ramesh Patodia
19-03-2021