"REPORTABLE\nIN THE SUPREME COURT OF INDIA\nCIVIL APPELLATE JURISDICTION\nCIVIL APPEAL NOS. 2781-2790 OF 2010\nM/S. SRD NUTRIENTS PRIVATE LIMITED\n.....APPELLANT(S)\nVERSUS\nCOMMISSIONER OF CENTRAL EXCISE\nGUWAHATI\n.....RESPONDENT(S)\nW I T H\nCIVIL APPEAL NO. 812 OF 2013\nCIVIL APPEAL NOS. 1730-1731 OF 2016\nCIVIL APPEAL NO. 5173 OF 2010\nCIVIL APPEAL NO. 4611 OF 2010\nCIVIL APPEAL NO.4596 OF 2010\nCIVIL APPEAL NO. 2987 OF 2010\nCIVIL APPEAL NO. 5175 OF 2010\nCIVIL APPEAL NO. 2988 OF 2016\nCIVIL APPEAL NOS. 3981-3983 OF 2013\nCIVIL APPEAL NOS. 2651-2660 OF 2011\nCIVIL APPEAL NO. 8322 OF 2010\nCIVIL APPEAL NOS. 8323-8324 OF 2010\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 1 of 30\nDigitally signed by\nNIDHI AHUJA\nDate: 2018.02.20\n13:11:30 IST\nReason:\nSignature Not Verified\n\nCIVIL APPEAL NOS. 5927-5929 OF 2010\nCIVIL APPEAL NOS. 3735-3750 OF 2011\nCIVIL APPEAL NOS. 5022-5023 OF 2014\nCIVIL APPEAL NO. 4597 OF 2010\nCIVIL APPEAL NO. 4598 OF 2010\nCIVIL APPEAL NO. 4599 OF 2010\nCIVIL APPEAL NO. 4600 OF 2010\nCIVIL APPEAL NO. 4601 OF 2010\nCIVIL APPEAL NO. 4602 OF 2010\nCIVIL APPEAL NO. 4603 OF 2010\nCIVIL APPEAL NO. 4604 OF 2010\nCIVIL APPEAL NO. 4605 OF 2010\nCIVIL APPEAL NO. 4606 OF 2010\nCIVIL APPEAL NO. 4607 OF 2010\nCIVIL APPEAL NO. 4608 OF 2010\nCIVIL APPEAL NO. 4609 OF 2010\nCIVIL APPEAL NO. 4610 OF 2010\nCIVIL APPEAL NOS. 5300-5303 OF 2011\nCIVIL APPEAL NO. 5926 OF 2010\nCIVIL APPEAL NOS. 6085-6092 OF 2010\nCIVIL APPEAL NO. 18437 OF 2017\n(ARISING OUT OF SLP (C) NO. 26126 OF 2012)\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 2 of 30\n\nCIVIL APPEAL NO. 18438 OF 2017\n(ARISING OUT OF SLP (C) NO. 26134 OF 2012)\nCIVIL APPEAL NO. 18439 OF 2017\n(ARISING OUT OF SLP (C) NO. 21896 OF 2012)\nCIVIL APPEAL NO. 18440 OF 2017\n(ARISING OUT OF SLP (C) NO. 22201 OF 2012)\nCIVIL APPEAL NO. 18441 OF 2017\n(ARISING OUT OF SLP (C) NO. 21563 OF 2012)\nCIVIL APPEAL NO. 18442 OF 2017\n(ARISING OUT OF SLP (C) NO. 26133 OF 2012)\nCIVIL APPEAL NOS. 8732-8735 OF 2013\nCIVIL APPEAL NOS. 10253-10258 OF 2010\nCIVIL APPEAL NOS. 10245-10252 OF 2010\nCIVIL APPEAL NO. 8330 OF 2010\nCIVIL APPEAL NO. 8326 OF 2010\nCIVIL APPEAL NO. 8331 OF 2010\nCIVIL APPEAL NO. 8328 OF 2010\nCIVIL APPEAL NO. 8336 OF 2010\nCIVIL APPEAL NO. 8335 OF 2010\nCIVIL APPEAL NO. 8332 OF 2010\nCIVIL APPEAL NO. 8329 OF 2010\nCIVIL APPEAL NO. 8178 OF 2012\nCIVIL APPEAL NO. 813 OF 2013\nCIVIL APPEAL NO. 7605 OF 2012\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 3 of 30\n\nCIVIL APPEAL NO. 8181 OF 2012\nCIVIL APPEAL NO. 8180 OF 2012\nCIVIL APPEAL NO. 811 OF 2013\nCIVIL APPEAL NO. 8185 OF 2012\nCIVIL APPEAL NO. 8186 OF 2012\nCIVIL APPEAL NO. 8179 OF 2012\nCIVIL APPEAL NO. 7876 OF 2012\nCIVIL APPEAL NO. 8182 OF 2012\nCIVIL APPEAL NOS. 8504-8509 OF 2012\nCIVIL APPEAL NOS. 1445-1446 OF 2011\nCIVIL APPEAL NOS. 1443-1444 OF 2011\nCIVIL APPEAL NO. 720 OF 2012\nCIVIL APPEAL NO. 18443-18446 OF 2017\n(ARISING OUT OF SLP (C) NOS. 35647-35650 OF 2011)\nCIVIL APPEAL NO.4321-4322 OF 2013\nCIVIL APPEAL NO.4292-4319 OF 2013\nCIVIL APPEAL NO.4323-4325 OF 2013\nJ U D G M E N T\nA.K. SIKRI, J.\nLeave granted in the special leave petitions.\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 4 of 30\n\n2) In order to encourage the business community to set up\nmanufacturing units in industrially backward areas like the North-\nEastern States, viz. Assam, Jammu & Kashmir, Meghalaya,\nTripura, Mizoram, Manipur, Nagaland, Arunachal Pradesh as well\nas Sikkim, notifications were issued by the Excise Department,\nGovernment of India, exempting goods specified in the First\nSchedule to the Central Excise Tariff Act, 1985 (other than those\nmentioned in the annexure to these notifications) from payment of\nexcise duty in respect of the goods manufactured and cleared\nfrom units located in the aforesaid States. The methodology\nwhich was adopted and prescribed in these notifications was that\nthe manufacturer was initially supposed to pay the excise duty\nleviable on such goods at the time of clearance as per the Tariff\nAct and thereafter claim the refund thereof. It was also\nmentioned in these notifications that exemption contained therein\nshall be available subject to the condition that the manufacturer\nfirst utilises whole of the CENVAT credit available to him on the\nlast date of the month under consideration for payment of duty of\ngoods cleared during such period and was to pay only the\nbalance amount in cash. It is this balance amount which was\nrefundable to him. Insofar as payment of the excise duty after\navailing the CENVAT credit and refund thereof subsequently is\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 5 of 30\n\nconcerned, there is no dispute about the same. We are\nconcerned with altogether different aspect which is associated\nwith the aforesaid notification granting exemption from payment\nof excise duty.\n3) It so happened that vide Finance Act, 2004, the Education Cess\nand Higher Education Cess were also imposed, which are\nsurcharge on the excise duty. These Education Cess and Higher\nEducation Cess were also levied and collected from the\nmanufacturers who had set up their units in the aforesaid areas,\nalong with the excise duty. However, while refunding the excise\nduty paid by these manufacturers, the Education Cess and the\nHigher Education Cess that were paid by the manufacturers\nalong therewith were not refunded. The dispute, thus, which\narises for consideration in these appeals is as to whether the\nEducation Cess and Higher Education Cess which were paid\nalong with the excise duty was also liable to be refunded along\nwith the central excise duty in terms of the exemption\nnotifications. This is the issue which is common in all these\nappeals and the factual background in which the matter has\ntravelled up to this Court is also almost the same. Therefore, for\nthe sake of convenience, purpose would be served in tracing the\nfactual events from Civil Appeal Nos. 2781-2790 of 2010.\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 6 of 30\n\n4) The appellant in these appeals is M/s. SRD Nutrients Private\nLimited (hereinafter referred to as the ‘assessee’). It is engaged\nin the manufacture and clearance of Malted Milk Food (Horlicks)\nusing sweetened milk powder since April 12, 2008 and has set up\nits factory in the State of Assam. This unit is duly registered with\nthe Central Excise Department. \n5) Industrial Policy dated April 01, 2007 for the North-Eastern States,\nincluding the State of Assam, was announced by the Ministry of\nCommerce and Industry (Department of Industrial Policy and\nPromotion), Government of India to set up a special package for\nthe North-Eastern States to accelerate industrial development of\nthe State. As per this package, new industrial units were entitled\nto 100% excise duty exemption for a period of 10 years from the\ndate of commencement of commercial production. Pursuant to\nthe said Industrial Policy, the Central Government issued\nNotification No. 20/2007-Ex. dated April 25, 2007 granting\nexemption from duties of excise levied under the Central Excise\nAct, 1944 (hereinafter referred to as the ‘Act’) read with Section\n3(3) of the Additional Duties of Excise (Goods of Special\nImportance) Act, 1957 and Section 3(3) of the Additional Duties of\nExcise (Textiles & Textile Articles) Act, 1978 to goods cleared\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 7 of 30\n\nfrom the notified areas within the North-Eastern States. The said\nNotification provided that the assessee would be entitled to\nrefund of duty paid other than the duty paid by way of utilization of\nCENVAT credit under the CENVAT Credit Rules, 2004.\nReproduction of the first three paragraphs of this Notification\nwould be sufficient, which are as follows:\n“NOTIFICATION: 20/2007-C.E. dated 25-Apr-2007\nNorth-East – Exemption to all goods, except as\nspecified, cleared from Assam, Tripura,\nMeghalaya, Mizoram, Manipur, Nagaland,\nArunachal Pradesh or Sikkim from duty paid other\nthan by utilisation of Cenvat Credit.\nIn exercise of the powers conferred by sub-section\n(1) of section 5A of the Central Excise Act, 1944 (1 of\n1944), the Central Government, being satisfied that it\nis necessary in the public interest so to do, hereby\nexempts the goods specified in the First Schedule to\nthe Central Excise Tariff Act, 1985 (5 of 1986) other\nthan those mentioned in the Annexure and cleared\nfrom a unit located in the States of Assam or Tripura or\nMeghalaya or Mizoram or Manipur or Nagaland or\nArunachal Pradesh or Sikkim, as the case may be,\nfrom so much of the duty of excise leviable thereon\nunder the said Act as is equivalent to the amount of\nduty paid by the manufacturer of goods other than the\namount of duty paid by utilization of CENVAT credit\nunder the CENVAT Credit Rules, 2004.\n2. In cases where all goods produced by a\nmanufacturer are eligible for exemption under this\nnotification, the exemption contained in this notification\nshall be available subject to the condition that, the\nmanufacturer first utilises whole of the CENVAT credit\navailable to him on the last day of the month under\nconsideration for payment of duty on goods cleared\nduring such and pays only the balance amount in\ncash.\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 8 of 30\n\n3. The exemption contained in this notification shall\nbe given effect to in the following manner, namely:-\n(a) \nthe manufacturer shall submit a\nstatement of the duty paid other than the\namount of duty paid by utilisation of\nCENVAT credit under the CENVAT credit\nRules, 2004, to the Assistant\nCommissioner\n \nor\n \nthe\n \nDeputy\nCommissioner of Central Excise, as the\ncase may be, by the 7th of the next month\nin which the duty has been paid other\nthan the amount of duty paid by utilization\nof CENVAT credit under the CENVAT\nCredit Rules, 2004;\n(b) the Assistant Commissioner of Central\nExcise or the Deputy Commissioner of\nCentral Excise, as the case may be, after\nsuch verification, as may be deemed by\nutilisation of CENVAT credit under the\nCENVAT Credit Rules, 2004, during the\nmonth under consideration to the\nmanufacturer by the 15th of the next\nmonth.\nProvided that in cases, where the\nexemption contained in this notification is\nnot applicable to some of the goods\nproduced by a manufacturer, such refund\nshall not exceed the amount of duty paid\nless the amount of the CENVAT credit\navailed of, in respect of the duty paid on\nthe inputs used in or in relation to the\nmanufacture of goods cleared under this\nnotification;\n(c) if there is likely to be any delay in the\nverification, Assistant Commissioner of\nCentral Excise or the Deputy\nCommissioner of Central Excise, as the\ncase may be, shall refund the amount on\nprovisional basis by the 15th of the next\nmonth to the month under consideration\nand thereafter may adjust the amount of\nrefund by such amount as may be\nnecessary in the subsequent refunds\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 9 of 30\n\nadmissible to the manufacturer.”\n6) It may be mentioned at this stage that power to grant exemption\nfrom payment of excise duty is conferred upon the Central\nGovernment vide Section 5A of the Act, which authorises the\nCentral Government to exempt generally, either absolutely or\nsubject to such conditions to be fulfilled, before or after removal,\nas may be specified in the notification, excisable goods of any\nspecified description from the whole or any part of duty of excise\nleviable there, if the Central Government is satisfied that it is\nnecessary, in public interest, so to do. The notifications in\nquestion have been issued in exercise of the said power\nconferred by sub-section (1) of Section 5A of the Act. Thus, the\ncentral excise duty, which is payable at the rates specified in the\nTariff Act, can be exempted, in respect of specified goods, wholly\nor partly.\n7) As mentioned above, the Parliament levied Education Cess by\nFinance (No.2) Act, 2004. Chapter VI of the said Finance Act\ndeals with Education Cess. Sections 91 to 93 thereof are\nrelevant and are reproduced below:\n“91. Education Cess. – (1) Without prejudice to the\nprovisions of sub-section (11) of section 2, there shall\nbe levied and collected, in accordance with the\nprovisions of this Chapter as surcharge for purposes\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 10 of 30\n\nof the Union, a cess to be called the Education Cess,\nto fulfil the commitment of the Government to provide\nand finance universalisd quality basic education.\n(2) The Central Government may, after due\nappropriation made by Parliament by law in this\nbehalf, utilise, such sums of money of the Education\nCess levied under sub-section (11) of section 2 and\nthis Chapter for the purposes specified in sub-section\n(1), as it may consider necessary.\n92. Definition. – The words and expressions used in\nthis Chapter and defined in the Central Excise Act,\n1944 (1 of 1944), the Customs Act, 1962 (52 of 1962)\nor Chapter V of the Finance Act, 1994 (32 of 1994),\nshall have the meanings respectively assigned to\nthem in those Acts or Chapter, as the case may be.\n93. Education Cess on excisable goods. – (1) The\nEducation Cess levied under section 91, in the case of\ngoods specified in the First Schedule to the Central\nExcise Tariff Act, 1985 (5 of 1986), being goods\nmanufactured or produced, shall be a duty of excise\n(in this section referred to as the Education Cess on\nexcisable goods), at the rate of two per cent,\ncalculated on the aggregate of all duties of excise\n(including special duty of excise or any other duty of\nexcise but excluding Education Cess on excisable\ngoods) which are levied and collected by the Central\nGovernment in the Ministry of Finance (Department of\nRevenue), under the provisions of the Central Excise\nAct, 1944 (1 of 1944) or under any other law for the\ntime being in force.\n(2) The Education Cess on excisable goods shall be in\naddition to any other duties of excise chargeable on\nsuch goods, under the Central Excise Act, 1944 (1 of\n1944) or any other law for the time being in force.\n(3) The provisions of the Central Excise Act, 1944 (1 of\n1944) and the rules made thereunder, including those\nrelating to refunds and exemptions from duties and\nimposition of penalty shall, as far as may be, apply in\nrelation to the levy and collection of the Education\nCess on excisable goods as they apply in relation to\nthe levy and collection of the duties of excise on such\ngoods under the Central Excise Act, 1944 or the rules,\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 11 of 30\n\nas the case may be.”\n8) As the assessee was denied refund of the Education Cess and\nHigher Education Cess, he challenged the order of the Assessing\nOfficer by filing appeal before the Commissioner of Central\nExcise and Customs (Appeals), Guwahati. However, these\nappeals were dismissed by the Commissioner and the order of\nthe Commissioner has been upheld by the Customs Excise &\nService Tax Appellate Tribunal (CESTAT) by the impugned\njudgment. Said order is the subject matter of these appeals.\n9) It may be pointed out at the outset that in its brief order, the\nService Tax Appellate Tribunal (hereinafter referred to ‘Tribunal’)\nhas taken note of two of its earlier judgments which were relied\nupon by the appellant. These are :\n(i) Bharat Box Factory Ltd. v. Commissioner of C. Ex.,\nJammu1 \n(ii)Cyrus Surfactants Pvt. Ltd. v. Commissioner of Central\nExcise, Jammu2 \nIn both these decisions, the Delhi Bench of the Tribunal had\nopined that the Education cess and Higher Education Cess were\nalso refundable along with the excise duty.\n1\n2007 (214) ELT 534 (Tri.-Del.)\n2\n \n2007 (215) ELT 55 (Tri.-Del.)\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 12 of 30\n\n10)\nThe Revenue, on the other hand, had relied upon another\njudgment of Tribunal in the case of Commissioner of Central\nExcise, Jammu v. Jindal Drugs Ltd.3. In this judgment which\nwas also rendered by the Delhi Bench of the Tribunal, a contrary\nview has been taken, viz., the Excise Department was under no\nobligation to refund the Education Cess and Higher Education\nCess as the notification exempted only the excise duty and,\ntherefore, it is the excise duty which was to be refunded. \n11)\nThe CESTAT, by impugned judgment, has preferred to\nfollow the view taken by the Tribunal in Jindal Drugs Ltd. case\non the ground that it is later in point of time in which earlier\njudgment in Cyrus Surfactants Pvt. Ltd. case has also been\nconsidered.\n12)\nIn the aforesaid backdrop, learned counsel for the appellant\nwas vehement in his criticism of the view taken by the Tribunal.\nHis first submission was that in case the Division Bench of the\nTribunal in Jindal Drugs Ltd. decided to differ from the view\ntaken by earlier Division Bench in Cyrus Surfactants Pvt. Ltd. ,\nan appropriate course of action was to refer the matter to the\nlarger Bench. That apart, submitted the learned counsel, the view\n3\n 2011 (267) ELT 653 (Tri.-Del.)\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 13 of 30\n\ntaken in Cyrus Surfactants Pvt. Ltd. needs to be approved. In\nthis behalf, he argued that reading of the exemption Notification\ndated April 25, 2007 would make it clear that there was 100%\nexemption granted by the said Notification from levy of excise\nduty which was clear from the reading of para 1 thereof. Para 2\nof the Notification simply laid down the mechanism as to how the\nsaid exemption was to be applied, with the specification that the\nduty was to be paid first after adjusting the CENVAT credit and\nthereafter claim for refund was to be made. He further submitted\nthat Education Cess was levied @ 2% on the excise duty. When\nthe levy of excise duty itself was exempted, the Education Cess\nalso got exempted thereby. He also submitted that Education\nCess is in the nature of surcharge and in the absence of the\nprimary tax (i.e. Excise), the question of payment of any\nsurcharge thereupon would not arise. He also referred to Circular\nNo. 134/3/211/ST dated April 08, 2011 issued by the Excise\nDepartment amply clarifying that since the Education Cess is\nlevied and collected as percentage of service tax, no Education\nCess would be payable when and wherever service tax is Nil by\nvirtue of exemption. His plea was that though the aforesaid\nCircular was issued in the context of service tax, the principle\naccepted therein by the Department would apply in the present\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 14 of 30\n\ncase also, more so, when Notification dated October 06, 2007\nexempting service tax was pari materia. He also pointed out that\nunder similar circumstances, Income Tax Department has been\nrefunding the Education Cess. He also argued that in the\nscenario where there are two divergent views and two possible\ninterpretations, one that is in favour of the assessee should be\nfollowed. In support of his aforesaid arguments, apart from\nrelying upon the reasoning given by the Tribunal in Cyrus\nSurfactants Pvt. Ltd., he referred to the judgment of this Court\nAssistant Commissioner of Commercial Taxes (Asstt.)\nDharwar v. Dharmendra Trading Company Etc. Etc.4 \n13)\nHe also relied upon the decision in the case of\nCommissioner of Central Excise, Mangalore v. Suzlon wind\nInternational5 rendered by Bangalore Bench of the Tribunal\nwhich had decided the case in favour of the assessee referring to\nCircular dated April 04, 2011. Even the Rajasthan High Court has\nleaned in favour of the assessee in the case of Banswara\nSyntex Ltd. v. Union of India6 holding that since Education Cess\nin the form of surcharge is levied and collected, there was no\nquestion of retaining this amount once the excise duty itself got\n4\n \n(1998) 3 SCC 570\n5\n \n2012-TIOL-1837-CESTAT-BANG\n6\n \n2007 (216) ELT 16 (Raj.)\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 15 of 30\n\nexempted.\n14)\nHe also read out the following passage from the judgment\nof this Court in R.S. Joshi, Sales Tax Officer, Gujarat and\nOthers v. Ajit Mills Limited and Another7:\n“34. Section 37(1) uses the expressions, in relation to\nforfeiture, “any sum collected by the person . . . shall\nbe forfeited'. What does “collected” mean here? Words\ncannot be construed effectively without reference to\ntheir context. The setting colours the sense of the\nword. The spirit of the provision lends force to the\nconstruction that “collected” means “collected and kept\nas his” by the trader. If the dealer merely gathered the\nsum by way of tax and kept it in suspense account\nbecause of dispute about taxability or was ready to\nreturn it if eventually it was not taxable, it was not\ncollected. “Collected', in an Australian Customs Tariff\nAct, was held by Griffith, C.J., not “to include money\ndeposited under an agreement that if it was not legally\npayable it will be returned' : (Words & Phrases, p.274).\nWe therefore semanticise “collected” not to cover\namounts gathered tentatively to be given back if found\nnon-exigible from the dealer.”\n15)\nRebutting the aforesaid arguments of the appellants, Mr.\nYashank P. Adhyaru, learned senior counsel appearing for the\nRevenue commended this Court to approve the view taken by the\nTribunal in Jindal Drugs Ltd. case which has been accepted by\nthe High Court as well. His argument was that the exemption\nnotification exempts only the excise duty. However, duty has to\nbe paid first and along with that Education Cess and Higher\nEducation Cess also become payable. He also emphasised the\n7\n \nAIR 1977 SC 2279 : (1977) 40 STC 497\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 16 of 30\n\nfact that excise duty is payable under the Excise Act, Education\nCess and Higher Education Cess are payable under the Finance\nAct, by virtue of Section 11 thereof. Therefore, the mandate and\nsource of charging Education Cess is altogether different. The\nexemption notification which is issued under Section 5A of the\nExcise Act could exempt only the excise duty payable under the\nsaid statute and not Education Cess which is payable under a\ndifferent statute. He further submitted that since the duty is to be\npaid first, education cess also becomes payable. When it comes\nto refund of the excise duty in terms of Notification dated April 25,\n2007, it is only excise that would be refunded and not the cess.\nHe also argued that circular dated April 08, 2011 was not binding\non the Court. His further submission was that even Calcutta High\nCourt had taken identical view in Biswanath Hosiery Mills Ltd.\n& Anr. v. Union of India & Ors.8.\n16)\nIt is clear from the arguments of the counsel for the parties\nthat divergent views are expressed by the CESTAT as well as\nHigh Courts. Even one Bench of the same Tribunal has differed\nfrom its earlier Division Bench decision. In this scenario, it\nbecomes important as to how the Department has viewed the\nposition regarding Education Cess and Higher Education Cess\n8\n \n(2017) 346 ELT 353\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 17 of 30\n\nwhich is payable as surcharge on the excise duty, once the\nexcise duty is exempted. Two Circulars are relevant in this\nbehalf, one is Circular dated August 10, 2004 which clarifies that\nEducation Cess is part of excise. In this Circular, certain\nclarifications are given by the Ministry of Finance (Department of\nRevenue), Government of India and relevant portion thereof\nreads as under:\n“Subject: Issues relating to imposition of\nEducation Cess on excisable goods and on\nimported goods, as pointed out by the trade and\nthe field formations-reg.\nThe undersigned is directed to state that\nsubsequent to Budget 2004 announcements, a\nnumber of representations/ references have been\nreceived from the trade as well as from the field\nformations pertaining to imposition of Education Cess\non excisable goods and on imported goods. The\npoints raised and the clarifications thereon are as\nfollows. \nIssue No. (1): Whether Education Cess on\nexcisable goods is leviable on goods manufactured\nprior to imposition of Cess but cleared after imposition\nof such cess?\nClarification: Education Cess on Excisable goods\nis a new levy. In similar cases, it has been held by the\nSupreme Court that if a levy is not there at the time\nthe goods are manufactured or produced in India, it\ncannot be levied at the stage of removal of the said\ngoods. Thus, Education Cess is not leviable on\nexcisable goods manufactured prior to imposition of\ncess but cleared after imposition of such cess.\nIssue No. (2): Whether goods that are fully\nexempted from excise duty/customs duty or are\ncleared without payment of excise duty/customs duty\n(such as clearance under bond or fulfillment of certain\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 18 of 30\n\nconditions) would be subjected to Cess\nClarification: The Education Cess is leviable at the\nrate of two per cent of the aggregate of all duties of\nexcise/customs (excluding certain duties of customs\nlike anti dumping duty, safe guard duty etc.), levied\nand collected. If goods are fully exempted from\nexcise duty or customs duty, are chargeable to NIL\nduty or are cleared without payment of duty under\nspecified procedure such as clearance under bond,\nthere is no collection of duty. Thus, no education cess\nwould be leviable on such clearances. In this regard,\nletter D.O. No. 605/54/2004-DBK, dated 21st July,\n2004 issued by Member (Customs) may also be\nreferred to.”\n17)\nOther Circular is dated April 08, 2011 issued by the Central\nBoard of Excise and Customs, New Delhi on the subject\n“education cess and secondary and higher education cess-reg.”.\nWe would like to reproduce this Circular in its entirety: \n“Education Cess and Secondary and Higher\nEducation Cess also exempted when notifications\nexempt whole of Service tax \nCircular No. 134/3/2011-S.T., dated 8-4-2011\nF.No. 354/42/2011-Tru\nGovernment of India\nMinistry of Finance (Department of Revenue)\nCentral Board of Excise & Customs, New Delhi\nSubject : Education Cess and Secondary and Higher \nEducation Cess – Reg.\nRepresentations have been received from the field\nformations, seeking clarification regarding the\napplicability of service tax exemption to Education\nCess (refers to both Education Cess leviable under\nFinance (No.2) Act, 2004 and Secondary and Higher\nEducation Cess leviable under Finance Act, 2007),\nunder notifications where 'whole of service tax'\nstands.exempted. Apparently the doubt arises in the\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 19 of 30\n\ncontext of Tribunal's Order in the matter of MIs.\nBalasore Alloys Ltd. Vs CCE, Customs and Service\nTax, BBSR-I (2010-TIOL-16S9-CESTAT-KOL) =\n2010(20)W.T.R. 506 (Tribunal). \n2. The issue has been examined. Though Tribunal's\nOrder referred above is in favor of revenue, it is\ninconsistent with the policy intention of the\nGovernment to exempt education cess in addition to\nservice tax, where 'whole of service tax' stands\nexempted. According to section 95(1) of Finance\n(No.2) Act, 2004 and section 140(1) of Finance Act,\n2007, Education Cess and Secondary and Higher\nEducation Cess are leviable and collected as service\ntax, and when whole of service tax is exempt, the\nsame applies to education cess as well. Since\nEducation Cess is levied and collected as percentage\nof Page 1 of 2 service tax, when and wherever service\ntax is NIL by virtue of exemption, Education Cess\nwould also be NIL.\n3. This being the principle, field formations are\ndirected not to initiate proceedings to recover the\neducation cess, where 'whole of service tax' stands\nexempted under the notification. Extending the same\nprinciple, where education cess has been refunded to\nexporters along with service tax, by virtue of\nexemption notifications where 'whole of service tax' is\nexempt, the same need not be recovered. \n4. Field formations may be instructed accordingly. \n5. Please acknowledge the receipt ofthis circular:\nHindi version to follow.\n18)\nNo doubt, it clarified the position in relation to the exemption\nfrom payment of service tax that was given vide Notification No.\n41/2007-ST dated October 06, 2007. We have gone through that\nNotification as well, which is in pari materia with Notification dated\nApril 25, 2007. What is important is that this Circular dated April\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 20 of 30\n\n08, 2011 refers to the judgment of the Tribunal in Balasore\nAlloys Ltd. v. CCE, Customs and Service Tax, BBSR-I9 which\nwas a decision rendered in favour of the Revenue as it was held\ntherein that the Education Cess and Higher Education Cess\nwould not be refunded while giving back the exempted service\ntax. Notwithstanding the same, the Circular mentions that the\nsaid order of the Tribunal is inconsistent with the policy intention\nof the Government to exempt Education Cess in addition to\nservice tax, ‘whole on service tax’ stands exempted.\n19)\nDuring arguments, when these circulars were referred to\nand relied upon by the learned counsel for the assessees, Mr.\nAdhyaru had asked for some time to seek instructions from the\nDepartment in this behalf. In order to give him a chance to seek\nthe clarification, matter was directed to be listed for direction on\nOctober 10, 2017. On that day, Mr. Adhyaru produced the copy\nof letter dated October 4, 2017 addressed by the Office of the\nCommissioner of Central Goods & Services Tax to The\nCommissioner, Directorate of Legal Affairs, Central Board of\nExcise & Customs. In this communication, it is simply stated that\nrefund of central excise duty has been provided by exemption\nNotification dated July 8, 1999 and dated April 25, 2007 to the\n9\n (2010-TIOL-1659-CESTAT-KOL)\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 21 of 30\n\nmanufacturing units in the North Eastern Region to give effect to\nthe North Eastern Industrial Promotion Policy 1997 (NEIPP 97).\nThere are no provisions for any refund/exemption of service tax.\nIt is further stated that in respect of income tax, exemption is\ngranted under Section 80IC of the Income Tax Act. When we\nconfronted the learned senior counsel with the fact that it does\nnot give specific answer to the query raised, the learned senior\ncounsel took further time to file written submissions by October\n23, 2017. However, till date, no such written submissions are\nfiled nor any clarification provided.\n20)\nOne aspect that clearly emerges from the reading of these\ntwo circulars is that the Government itself has taken the position\nthat where whole of excise duty or service tax is exempted, even\nthe Education Cess as well as Secondary and Higher Education\nCess would not be payable. These circulars are binding on the\nDepartment. \n21)\nEven otherwise, we are of the opinion that it is more rational\nto accept the aforesaid position as clarified by the Ministry of\nFinance in the aforesaid circulars. Education Cess is on excise\nduty. It means that those assessees who are required to pay\nexcise duty have to shell out Education Cess as well. This\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 22 of 30\n\nEducation Cess is introduced by Sections 91 to 93 of the Finance\n(No.2) Act, 2004. As per Section 91 thereof, Education Cess is\nthe surcharge which the assessee is to pay. Section 93 makes it\nclear that this Education Cess is payable on ‘excisable goods’ i.e.\nin respect of goods specified in the first Schedule to the Central\nExcise Tariff Act, 1985. Further, this Education Cess is to be\nlevied @ 2% and calculated on the aggregate of all duties of\nexcise which are levied and collected by the Central Government\nunder the provisions of Central Excise Act, 1944 or under any\nother law for the time being in force. Sub-section (3) of Section\n93 provides that the provisions of the Central Excise Act, 1944\nand the rules made thereunder, including those related to refunds\nand duties etc. shall as far as may be applied in relation to levy\nand collection of Education Cess on excisable goods. A conjoint\nreading of these provisions would amply demonstrate that\nEducation Cess as a surcharge, is levied @ 2% on the duties of\nexcise which are payable under the Act. It can, therefore, be\nclearly inferred that when there is no excise duty payable, as it is\nexempted, there would not be any Education Cess as well,\ninasmuch as Education Cess @ 2% is to be calculated on the\naggregate of duties of excise. There cannot be any surcharge\nwhen basic duty itself is Nil. \nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 23 of 30\n\n22)\nIt is rightly pointed out by the learned counsel for the\nappellants that the CESTAT in the earlier two judgments given in\nBharat Box Factory Ltd. and Cyrus Surfactants Pvt. Ltd. held\nthat Education Cess and Higher Education Cess would also be\nrefundable along with excise duty and in view thereof, another co-\nordinate Bench of CESTAT could not take a contrary view in\nJindal Drugs Ltd. Judicial discipline warranted reference of the\nmatter to the Larger Bench which it did not do. In the impugned\njudgment, while preferring to follow the view taken in Jindal\nDrugs Ltd., the Tribunal has not given any reasons for adopting\nthis course of action. The Rajasthan High Court in the case of\nBanswara Syntex Ltd. while holding that surcharge taken in the\nform of Education Cess shall also be refundable has given the\nfollowing reasons in support of the said view:\n“15. The very fact that the surcharge is collected as\npart of levy under three different enactments goes to\nshow that scheme of levy of Education Cess was by\nway of collecting special funds for the purpose of\nGovernment project towards providing and financing\nuniversalised quality of basic education by enhancing\nthe burden of Central Excise Duty, Customs Duty, and\nService Tax by way of charging surcharge to be\ncollected for the purpose of Union. But, it was made\nclear that in respect of all the three taxes, the\nsurcharge collected along with the tax will bear the\nsame character of respective taxes to which surcharge\nwas appended and was to be governed by the\nrespective enactments under which Education Cess in\nthe form of surcharge is levied & collected.\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 24 of 30\n\n16. Apparently, when at the time of collection,\nsurcharge has taken the character of parent levy,\nwhatever may be the object behind it, it becomes\nsubject to the provision relating to the Excise Duty\napplicable to it in the manner of collecting the same\nobligation of the tax payer in respect of its discharge\nas well as exemption concession by way of rebate\nattached with such levies. This aspect has been made\nclear by combined reading of sub-sections (1), (2) &\n(3) of Section 93.\nxxx\nxxx\nxxx\n18. The Explanation appended to Notification dated\n26.6.2001 included within the ambit of Excise Duty\nany special Excise Duty collected under any Finance\nAct when under Finance Act, 2004 it was ordained that\nEducation Cess to be collected as surcharge on\nExcise Duty payable on excisable goods and shall be\na Duty of Excise, it became a special Duty of Excise\nby way of Education Cess chargeable and collected\nunder Finance Act, 2004 and fell within the ambit of\nclause (3) of Explanation appended to Notification\ndated 26/6/2001. Consequently, rebate became\navailable on collection of surcharge on Excise Duty\nunder Finance Act, 2004 in terms of existing\nNotification dated 26/6/2001 immediately. Later\nNotification including the Education Cess in\nenumerative definition in the circumstances was only\nclarificatory and by way of abandoned caution, but not\na new rebate in relation to Excise Duty or any part\nthereof as statutorily pronounced as well as specified\nExcise Duty levied and collected under the Finance\nAct.”\nWe are in agreement with the aforesaid reasons accorded\nby the Rajasthan High Court, since it is in consonance with the\nlegal principle enunciated by this Court. For this purpose, we\nmay refer to the judgment in the case of Collector of Central\nExcise, Patna v. Tata Engineering and Locomotive Co.10 In\n10\n \n1997 (92) ELT 303 (SC)\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 25 of 30\n\nthat case, issue pertained to valuation of cess which was levied\n@ 1/8 per cent of ad valorem ‘value’ of the central excise duty.\nThe Court held that the calculation of 1/8 per cent ad valorem of\nthe motor vehicle for the purposes of the levy and collection of the\nautomobile cess must be made that was being calculated since\nautomobile cess was to be levied and calculated as if it was\nexcise duty. As a fortiorari, the Education Cess and Higher\nEducation Cess levied @ 2% of the excise duty would partake the\ncharacter of excise duty itself. \nInsofar as judgment of Calcutta High Court in Biswanath\nHosiery Mills Ltd. case is concerned, we find that the same\nwould have no bearing in the present case. In the said case,\ncess was payable under Section 5A of the Textiles Committee\nAct, 1963. After going through the provisions of Textiles\nCommittee Act, 1963 and the Textile’s Committee (Cess) Rules,\n1975, the High Court found that as per the scheme of Textiles\nCommittee Act and the rules framed therein, levy of cess was\nindependent of excise under the Act which was a complete code\ncontaining all the provisions relating to levy, collection, exemption\nand application of cess. Therefore, even the legislative\nintendment underlying Textiles Committee (Amendment) Act and\nrules read with the preamble, aims and objects of the Act was\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 26 of 30\n\nclearly discernable, namely, the legislature intended to levy the\ncess under the Act independent of and in addition to the excise\nduty which was payable under the Central Excise and Salt Act,\n1944. \n23)\nIt is also trite that when two views are possible, one which\nfavours the assessees has to be adopted. \n24)\nFor the aforesaid reasons, we allow these appeals and hold\nthat the appellants were entitled to refund of Education Cess and\nHigher Education Cess which was paid along with excise duty\nonce the excise duty itself was exempted from levy. There shall,\nhowever, be no order as to cost. \n.............................................J.\n(A.K. SIKRI)\n.............................................J.\n(ASHOK BHUSHAN)\nNEW DELHI;\nNOVEMBER 10, 2017\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 27 of 30\n\nITEM NO.1501 COURT NO.6 SECTION XVI\n S U P R E M E C O U R T O F I N D I A\n RECORD OF PROCEEDINGS\nCivil Appeal Nos. 2781-2790/2010\nM/S. SRD NUTRIENTS PRIVATE LIMITED \nAppellant(s)\nVERSUS\nCOMMISSIONER OF CENTRAL EXCISE, \nGUWAHATI \nRespondent(s)\nWITH\nC.A. No. 812/2013 (XIV)\nC.A. No. 1730-1731/2016 (XIV)\nC.A. No. 5173/2010 (XIV)\nC.A. No. 4611/2010 (XIV)\nC.A. No. 4596/2010 (XIV)\nC.A. No. 2987/2010 (XIV)\nC.A. No. 5175/2010 (XIV)\nC.A. No. 2988/2016 (XIV)\nC.A. No. 3981-3983/2013 (XIV)\nC.A. No. 2651-2660/2011 (XIV)\nC.A. No. 8322/2010 (XVI -A)\nC.A. No. 8323-8324/2010 (XVI -A)\nC.A. No. 5927-5929/2010 (XIV)\nC.A. No. 3735-3750/2011 (XIV)\nC.A. No. 5022-5023/2014 (XIV)\nC.A. No. 4597/2010 (XIV)\nC.A. No. 4598/2010 (XIV)\nC.A. No. 4599/2010 (XIV)\nC.A. No. 4600/2010 (XIV)\nC.A. No. 4601/2010 (XIV)\nC.A. No. 4602/2010 (XIV)\nC.A. No. 4603/2010 (XIV)\nC.A. No. 4604/2010 (XIV)\nC.A. No. 4605/2010 (XIV)\nC.A. No. 4606/2010 (XIV)\nC.A. No. 4607/2010 (XIV)\nC.A. No. 4608/2010 (XIV)\nC.A. No. 4609/2010 (XIV)\nC.A. No. 4610/2010 (XIV)\nC.A. No. 5300-5303/2011 (XIV)\nC.A. No. 5926/2010 (XIV)\nC.A. No. 6085-6092/2010 (XIV)\nSLP(C) No. 26126/2012 (XIV)\nSLP(C) No. 26134/2012 (XIV)\nSLP(C) No. 21896/2012 (XIV)\nSLP(C) No. 22201/2012 (XIV)\nSLP(C) No. 21563/2012 (XIV)\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 28 of 30\n\nSLP(C) No. 26133/2012 (XIV)\nC.A. No. 8732-8735/2013 (XIV)\nC.A. No. 10253-10258/2010 (XIV)\nC.A. No. 10245-10252/2010 (XIV)\nC.A. No. 8330/2010 (XVI -A)\nC.A. No. 8326/2010 (XVI -A)\nC.A. No. 8331/2010 (XVI -A)\nC.A. No. 8328/2010 (XVI -A)\nC.A. No. 8336/2010 (XVI -A)\nC.A. No. 8335/2010 (XVI -A)\nC.A. No. 8332/2010 (XVI -A)\nC.A. No. 8329/2010 (XVI -A)\nC.A. No. 8178/2012 (XIV)\nC.A. No. 813/2013 (XIV)\nC.A. No. 7605/2012 (XIV)\nC.A. No. 8181/2012 (XIV)\nC.A. No. 8180/2012 (XIV)\nC.A. No. 811/2013 (XIV)\nC.A. No. 8185/2012 (XIV)\nC.A. No. 8186/2012 (XIV)\nC.A. No. 8179/2012 (XIV)\nC.A. No. 7876/2012 (XIV)\nC.A. No. 8182/2012 (XIV)\nC.A. No. 8504-8509/2012 (XVI -A)\nC.A. No. 1445-1446/2011 (XIV)\nC.A. No. 1443-1444/2011 (XIV)\nSLP(C) No. 35647-35650/2011 (XIV)\nC.A. No. 720/2012 (XIV)\nC.A. No. 4321-4322/2013 (XIV)\nC.A. No. 4292-4319/2013 (XIV)\nC.A. No. 4323-4325/2013 (XIV)\nDate : 10-11-2017 \nThese matters were called on for pronouncement of\njudgment today.\nFor parties\nMr. Rakesh Dahiya, AOR\nMr. Mohd. Irshad Hanif, AOR\nMr. Pratap Venugopal, Adv.\nMs. Surekha Raman, Adv.\nMr. Anuj Sarma, Adv.\nMs. Kanika Kalaiyarasan, Adv.\nM/S. K J John And Co, AOR\nMr. Rajesh Kumar, AOR\nMr. Mukesh Kumar Maroria, AOR\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 29 of 30\n\nMrs. Anil Katiyar, AOR\nMr. Anil K. Jha, AOR\nMr. R. K. Ojha, Adv.\nMr. Ravindra Keshavrao Adsure, AOR\nDr. Kailash Chand, AOR\nMr. B. Krishna Prasad, AOR\nMr. Arvind Kumar Sharma, AOR\nMr. Abhimanyu Bhandari, Adv.\nMs. Roohina Dua, Adv.\nMr. Naveen Kumar, AOR\nMr. B. Krishna Prasad, AOR\nMr. L. Badri Narayanan, Adv.\nMr. Aditya Bhattacharya, Adv.\nMr. Victor Das, Adv.\nMs. Apeksha Mehta, Adv.\nMr. Yogendra Aldak, Adv.\nMr. M. P. Devanath, AOR\nMr. Anil Dutt, Adv.\nMr. Praveen Kumar, AOR\nMr. Jay Savla, AOR\nMs. Renuka Sahu, Adv.\nMr. Mukesh Kumar Maroria, AOR\n \nHon'ble Mr. Justice A. K. Sikri pronounced the\njudgment of the Bench comprising His Lordship and\nHon'ble Mr. Justice Ashok Bhushan.\nLeave granted in the special leave petitions.\nThe appeals are allowed in terms of the signed\nreportable judgment.\n(NIDHI AHUJA) (MALA KUMARI SHARMA)\nCOURT MASTER \n COURT MASTER\n[Signed reportable judgment is placed on the file.]\nCivil Appeal Nos. 2781-2790 of 2010 & Ors.\nPage 30 of 30\n"