M/S Sunshine Industries vs. The Union Of INDIA And 5 Ors.

Facts

The petitioners, M/s Platinum Alloys Pvt. Ltd. and others, are manufacturers who set up industries under the North East Industrial and Investment Promotion Policy (NEIIPP), 2007, entitling them to exemptions from Central Excise Duty. They also paid Education Cess and Secondary and Higher Education Cess, calculated on the excise duty. Initially, relying on the Supreme Court's judgment in M/S SRD Nutrients Private Limited, they claimed and were granted refunds of these cesses. However, the Supreme Court later, in M/s Unicorn Industries, held the SRD Nutrients judgment to be per incuriam. Following this, the respondent authorities issued demand-cum-show cause notices to the petitioners, seeking recovery of the refunded amounts of Education Cess and Secondary and Higher Education Cess, citing Section 11A of the Central Excise Act, 1944.

Held

The Court held that the demand-cum-show cause notices issued for the recovery of Education Cess and Secondary and Higher Education Cess were without jurisdiction and were liable to be set aside. The Court reasoned that the refunds initially granted to the petitioners were pursuant to orders passed by this High Court, relying on the Supreme Court's judgment in M/S SRD Nutrients Private Limited, which was the law at that time. The Court noted that these orders were not challenged by the department, even after the pronouncement of the Unicorn Industries judgment. Furthermore, the Court referred to its own Division Bench judgment in WA No. 162/2021, which upheld the learned Single Judge's view that refunds made when SRD Nutrients was considered good law, and not due to misrepresentation, fraud, or error, could not be recovered. The Division Bench had held that the amount refunded could not be recovered as it was returned in accordance with the law as it stood then, and the matter had attained finality. Therefore, the Court found no justification for the revenue to re-open the matter and recover the amounts. The ratio decidendi is that refunds granted based on a Supreme Court judgment, which was later declared per incuriam, cannot be recovered if the refunds were made in good faith and in accordance with the law prevailing at that time, and if the revenue did not challenge the refund orders promptly.

Key Issues

1. Whether the demand-cum-show cause notices issued by the respondent authorities for recovery of refunded Education Cess and Secondary and Higher Education Cess are valid, considering the subsequent Supreme Court judgment in M/s Unicorn Industries declaring M/S SRD Nutrients Private Limited as per incuriam? Petitioner's arguments: The petitioners contended that the refunds were granted based on the prevailing law at the time, specifically the Apex Court's judgment in M/S SRD Nutrients Private Limited, and subsequently upheld by this Court. They argued that these refunds, once granted and not assailed by the revenue through appeals or reviews, cannot be recovered merely because the earlier judgment was later declared per incuriam. They relied on the principle that actions taken in good faith under a valid law cannot be undone. The petitioners also pointed to a Division Bench judgment of this Court in WA No. 162/2021 which upheld the learned Single Judge's decision setting aside similar show cause notices. Revenue's arguments: The revenue argued that the SRD Nutrients judgment was declared per incuriam by the Supreme Court in Unicorn Industries, rendering the basis for the refunds invalid. They sought to recover the refunded amounts under Section 11A of the Central Excise Act, 1944, asserting that the refunds were erroneously granted.