Biostadt INDIA LTD. Th. Sahil Dutt vs. Union Of INDIA Th. Secretary, Ministry Of Finance, And Others

Facts

The petitioner, Biostadt India Ltd., is challenging a show cause notice dated April 22, 2024, issued by the Deputy Commissioner, Central Goods and Services Tax, Jammu. This notice calls upon the petitioner to explain why its refund claims for Education Cess and Higher Education Cess, amounting to approximately Rs. 2,80,000,000, should not be rejected. The petitioner had previously been held entitled to these refunds by the CESTAT, Chandigarh, based on the Supreme Court's ruling in SRD Nutrients Pvt. Ltd. vs. Commissioner of Central Excise. However, the Supreme Court later declared the SRD Nutrients judgment per incuriam in Unicorn Industries vs. Union of India. Following this, the Revenue issued notices in 2020 seeking recovery of the refunded cess. The petitioner complied under protest and filed a writ petition which was disposed of with the condition that the notices would remain dormant pending Supreme Court decisions. Subsequently, based on a later Supreme Court judgment in Sarswati Agro Chemicals Ltd., the petitioner sought a refund of the cess it had redeposited, leading to the current show cause notice.

Held

The Court held that the petitioner is entitled to the refund of the Education Cess and Higher Education Cess that it had paid back to the Revenue under protest. The reasoning is based on the principle established in M/s Sarswati Agro Chemicals Ltd., where the Supreme Court clarified that decisions that had attained finality based on the SRD Nutrients Pvt. Ltd. judgment, even if subsequently overruled, would not be reopened. The Court emphasized that the judgment in SRD Nutrients Pvt. Ltd. had attained finality for the period it held the field, and reopening such settled matters would lead to endless litigation, which is against public policy. The Court noted that the refunds were initially granted based on the law then in vogue and that the petitioner had complied with the subsequent notices under protest. To balance equities and safeguard the Revenue's interest, the Court directed that the refund would be subject to the outcome of any pending appeals before the Supreme Court and the furnishing of a bank guarantee by the petitioner.

Key Issues

1. Whether the petitioner is entitled to the refund of Education Cess and Higher Education Cess, which was initially granted based on the SRD Nutrients Pvt. Ltd. judgment, despite that judgment being later declared per incuriam by the Supreme Court in Unicorn Industries Pvt. Ltd. (2020 (3) SCC 492)? Petitioner's contention: The petitioner argues that the refund of cess, once settled based on the law in vogue at the time (SRD Nutrients), cannot be recovered or rejected based on a subsequent overruling judgment (Unicorn Industries). They rely on the Supreme Court's clarification in Sarswati Agro Chemicals Ltd. (2022) and this Court's decisions in Coromandel International Ltd. and Lupin Ltd. Revenue's contention: The Revenue contends that in light of Unicorn Industries Pvt. Ltd., which upheld the position in Modi Rubber Ltd., the petitioner was never entitled to the refund. They argue that the petitioner cannot claim a refund of the cess paid back to the Revenue until appeals against the CESTAT orders are disposed of by the Supreme Court and any review petitions are decided.