Case: M/S UNICORN INDUSTRIES Vs. UNION OF INDIA

3. The Government of India in order to promote industrial 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 Sikkim4. 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 re-credit of the duties paid in cash6. The appellant has submitted that following excise duties were recovered under diverse names/nomenclature and rates on Indian Mouth Freshener manufactured and cleared by thea. 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); andd. Education Cess @ 2% ad valorem (under Section 91 of the Finance Act, 2004) aggregating to 68% ad valorem7. As per Notification No.71/2003-CE dated 9.9.2003, the appellant was entitled to refund of the abovesaid duties of excise. The respondents extended benefits and used to grant refund to the appellant as per the abovementioned notification. The Excise Authorities used to issue a certificate of re-utilization of excise duty for the particular month. The appellant used to re-credit the amount of excise duty8. 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 11-A of the Central Excise Act along with the interest and penalty9. Notification No.71/2003-CE 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 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., 27.6.200610. 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 India11. Vide Notifications dated 27.3.2008 and 10.6.2008, the benefit of 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 15.11.201012. Akshay Ispat and Ferro Alloys Private Limited, the manufacturer of 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 re-credit 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 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.71/2003-CE 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.

Court's reasoning:
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 North-Eastern region. The decision was taken for converting the Growth Centres and IIDCs into total tax-free zones for the next ten years. All industrial activities in these zones would be free from income tax and excise duty for ten years from the commencement of production24. It is not in dispute that when initial exemption notification was issued in 1997 for the North-Eastern 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 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 vogue40. Notification dated 9.9.2003 issued in the present case makes it 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 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 three-Judge Bench of this Court in Modi Rubber Limited (supra), which has been followed by another three-Judge 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 by different legislation for a different purpose cannot be said to have been exempted42. 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 per incuriam in 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 bench43. Thus, it is clear that before the Division Bench deciding SRD Nutrients Private Limited and Bajaj Auto Limited (supra), the previous binding decisions of three-Judge Bench in Modi Rubber (supra) and Rita Textiles Private Limited (supra) were not placed for consideration. Thus, 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 view32. The provisions of Section 32 are pari materia to the 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.