North East Roofing (P) LTD. vs. Union Of INDIA And 2 Ors.

Held

The Court, considering the arguments and the interim orders granted in similar cases, directed that the demand-cum-show cause notice dated 22.09.2020 shall remain suspended until the returnable date of the connected writ petition WP(C) No. 4046/2020. The Court did not delve into the merits of the writ petition itself but granted interim relief to the petitioner. The application for interim orders was allowed and disposed of. The core issue of whether the refunds were indeed erroneous and recoverable was left to be decided in the main writ petition.

Facts

The petitioner, North East Roofing (P) Ltd., received refunds of Education Cess and Secondary and Higher Education Cess based on the Supreme Court's judgment in SRD Nutrients Private Limited. Subsequently, the Supreme Court in Unicorn Industries held that SRD Nutrients and Bajaj Auto Limited were per incuriam, and that Union of India v. Modi Rubber Limited and Rita Textile (P) Limited were binding. Following the Unicorn Industries judgment, the GST authorities issued a demand-cum-notice dated 21.09.2020 to the petitioner, deeming the earlier refunds erroneous and seeking recovery under Section 11(A)-1 of the Central Excise Act, 1954. The petitioner challenged this notice in a connected writ petition, arguing that refunds granted under the prevailing law at the time should not be deemed erroneous due to a subsequent change in legal interpretation. This application seeks interim protection pending the decision on the writ petition.

Key Issues

1. Whether the demand-cum-notice dated 21.09.2020, seeking recovery of refunds previously granted, is illegal and unconstitutional, considering the refunds were based on a Supreme Court judgment that was later overruled? Petitioner's arguments: The petitioner contended that the refunds were granted based on the law as laid down by the Supreme Court in SRD Nutrients Private Limited, which was the prevailing law at the time of the refund. Therefore, a subsequent change in legal interpretation in Unicorn Industries should not render the earlier refunds erroneous, and the petitioner should not be required to return the refunded amounts. The petitioner also referred to earlier interim orders granted by the Court to similarly situated petitioners. Revenue's arguments: The revenue authorities, by issuing the demand-cum-notice, implicitly argued that the refunds were erroneous in light of the Unicorn Industries judgment, which declared SRD Nutrients as per incuriam. They sought to recover the amounts based on this later binding precedent.