Whether an assessee is eligible to claim refund of education cess paid as a part of central excise duty?

PJ/Case Laws/2012-13/1123

Case: LOYAL TEXTILE MILLS LTD. V/S JT. SCRETARY, M.F. (D.R.)

Citation: 2012 (280) E.L.T 8 (MADRAS)

Issue:- Whether an assessee is eligible to claim refund of education cess paid as a part of central excise duty?

Brief Facts:- Petitioner is engaged in the manufacture of cotton yarn and polyester cotton yarn, falling under Chapter heading 52 of the Central Excise Tariff Act, 1985. They pay the central excise duty with respect to clearances, affected for the domestic requirements, as also for the export.

According to the Government Notification, the party is entitled to rebate for all the duties and excise paid, on the goods exported.

Petitioner-company exported cotton yarn on payment of duty and education cess and claimed refund of excise duty and education cess under the Notification under the Finance Act, 2004. The benefit of rebate of whole of the duty paid on all excisable goods, falling under the First Schedule to the Central Excise Tariff Act, 1985, exported to any country, was under Notification dated 26-6-2001. The Notification was adopted subsequently. The Notification, imposing central excise and education cess with effect from 9-7-2004 was by way of partial modification, superseding the notification thus in force. After this government issued explanation to Notification no. 90/2004 clarifying the duties which were refundable.

Petitioner claimed that Notification no. 90/2004, dated 6-9-2004 was effected from on 9-7-2004 and was not prospective.

They, accordingly, claimed refund of education cess paid as a part excise duty. The claim was rejected by the Assistant Commissioner. Against this the Petitioner has filed appeal before the Commissioner (Appeals) which was rejected.

Petitioner filed revision application. The Government held that no rebate of education cess is admissible to the applicants during the period from 9.7.2004 to 3.9.2004.

Hence, petitioner have before the High Court filed writ petition for issuance of a writ, in the nature of certiorari, for quashing order passed by the respondent No.1, dated 28.04.2006, declining the claim of the petitioner, for the refund of education cess.

Petitioner’s Contention:- Petitioner contended that education cess is a part of central excise and was also paid as such. Therefore, the petitioner was entitled to the refund of central excise, inclusive of the education cess. In any case, if there was any doubt regarding interpretation of the notification, that stood clarified by way of explanation. The explanation being explanatory in nature, was required to be read as part of original notification, and could not be treated as prospective, as held by the authorities under the Act.

Petitioner contended that the judgments, relied upon by the Revisional Authority in the order, has no application to the facts of the present case, as the petitioner had complied with the terms of notification, and the claim raised was not by stressing the word, as the case was of Tata Iron & Steel Co. Ltd Vs. State of Jharkhand and others [(2005) 4 S.C.C.272.

Reasoning of Judgment:- The High Court found force in the petition. It was held that the Custom Authorities were not right in rejecting the claim of refund of education cess, by treating the explanatory notification to be prospective. The explanatory notification is in the nature of judgment of courts, which only interprets the existing rights. The explanatory notification thus is to be treated as apart and parcel of notification, which is clarified, by explanatory notification, there is operative from the date of original notification, as in absence of clarificatory notification, the original notification is required to be read, as explained in the subsequent notification. These views were supported by the decisions laid down in the case of Banswara Syntex Ltd., vs. Union of India [2007(216)E.L.T.16(Raj.).

In the end, the High Court set aside the impugned orders. The writ petition being mandamus in nature, is issued to refund the claimed education cess to the petitioner within a period of two months of the receipt of certified copy of this order.

Decision:- Writ Petition allowed.

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PJ/Case Laws/2012-13/1123

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