Court says amounts refunded under CESTAT orders and later repaid under protest cannot be recovered merely because SRD Nutrients was later overruled; refund made subject to pending Supreme Court proceedings and bank guarantee.
The Jammu and Kashmir and Ladakh High Court has held that Biostadt India Ltd. is entitled to refund of Education Cess and Secondary and Higher Education Cess that it had repaid under protest to the Revenue after earlier receiving refunds under CESTAT orders.
A Division Bench comprising Justice Sanjeev Kumar and Justice Shahzad Azeem disposed of the writ petition filed by the company against a show cause notice dated 22 April 2024 issued by the Deputy Commissioner, CGST Division-1, Jammu. The notice had proposed rejection of the company’s refund claim after the Revenue sought to reopen the matter following the Supreme Court’s later ruling in Unicorn Industries, which overruled the earlier decision in SRD Nutrients Pvt. Ltd.
The dispute arose from refund claims filed by Biostadt India Ltd. for the period April 2008 to March 2009 and December 2010 to April 2016. The jurisdictional Commissionerate had rejected the claim, but the CESTAT later allowed the refund relying on SRD Nutrients, where the Supreme Court had held that Education Cess and Higher Education Cess were refundable when excise duty itself stood exempted.
After the Revenue’s appeals before the High Court were found not maintainable and returned to be filed before the appropriate forum, the refund had initially been granted. However, once the Supreme Court in Unicorn Industries declared SRD Nutrients per incuriam, the Revenue issued notices in 2020 seeking recovery of the refunded cess. The petitioner then deposited the amount back under protest.
The company argued that, in light of the Supreme Court’s subsequent clarification in Commissioner of CGST and Central Excise (J&K) v. Saraswati Agro Chemicals Ltd., refunds that had already attained finality under the law prevailing at the time could not be recovered merely because the legal position changed later. The High Court accepted this contention.
Relying on Saraswati Agro Chemicals Ltd. and earlier decisions including Coromandel International Ltd. and Lupin Ltd., the Bench observed that once a refund had been settled on the basis of the law then in force, a later overruling of that law could not unsettle completed matters. The Court noted that reopening such matters would “open a Pandora’s box” and lead to endless litigation, which would be contrary to public policy.
At the same time, the Court balanced the equities in favour of the Revenue. It directed that Biostadt India Ltd. would be entitled to refund of the entire amount paid back under protest, but the refund would remain subject to the outcome of any pending appeals before the Supreme Court against the CESTAT refund orders, as well as any review or other proceedings. The company was also required to furnish a bank guarantee of an equivalent amount from a nationalised bank, which could be encashed if the Revenue ultimately succeeds.
The petition was accordingly disposed of.
Bottom Line :
Central Excise/Refund - Education Cess and Secondary & Higher Education Cess earlier refunded pursuant to CESTAT orders following SRD Nutrients and later redeposited under protest on basis of Unicorn Industries - Held, in view of Supreme Court decision in Commissioner of CGST and Central Excise (J&K) v. M/s Sarswati Agro Chemicals Ltd., such settled refunds are not recoverable merely because of subsequent change in law - Petitioner entitled to refund, subject to outcome of pending Supreme Court appeals/review and furnishing bank guarantee.
Statutory provision(s): Central Excise Act, 1944, Exemption Notification No. 56/2002-CE dated 14.11.2002
Biostadt India Ltd. v. Union of India, (J&K and Ladakh)(DB) : Law Finder Doc id # 2984481
