# M/S. UNICORN INDUSTRIES v. UNION OF INDIA & OTHERS

- **Citation:** [2019] 17 S.C.R. 1013
- **Court:** Supreme Court of India
- **Decided:** 2019-12-06
- **Case number:** Civil Appeal No. 9237 of 2019
- **Bench:** Arun Mishra, M. R. Shah, B. R. Gavai
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-unicorn-industries-v-union-of-india-others-33919
- **Pages:** 35

## Headnote

Central Excise Act, 1944 - Finance Act, 2004 - Finance Act,
2007 - Finance Act, 2001 - The High Court held that duties i.e.
the levy of education cess, higher education cess and National
Calamity Contingent Duty (NCCD) are not the part of the exemption
notification - Appellant contended that the NCCD, education cess,
and secondary and higher education cess form part of the excise
duty and hence the decision of the High Court is bad in law - On
appeal, held: Notification dated 09.09.2003 issued in the present
case makes it clear that exemption was granted u/s. 5A of the Act
1944, concurring additional duties under the Act of 1957 and
additional duties of excise under the Act of 1978 - There was 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 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 - 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 rightly relied on the decision of
the three-Judge Bench of the Supreme Court in Modi Rubber Limited,
which was followed by another three-Judge in Rita Textiles Private
Limited - Therefore, the Judgment and order of the High Court
upheld.
Dismissing the appeals, the Court
HELD: 1. 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
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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, which has been followed by another three-Judge Bench
of this Court in Rita Textiles Private Limited. [Para 40] [1045-H;
1046-A-E]
2. 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

## Text

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M/S. UNICORN INDUSTRIES
v.
UNION OF INDIA & OTHERS
(Civil Appeal No. 9237 of 2019)
 DECEMBER 6, 2019
[ARUN MISHRA, M. R. SHAH AND B. R. GAVAI, JJ.]
Central Excise Act, 1944 - Finance Act, 2004 - Finance Act,
2007 - Finance Act, 2001 - The High Court held that duties i.e.
the levy of education cess, higher education cess and National
Calamity Contingent Duty (NCCD) are not the part of the exemption
notification - Appellant contended that the NCCD, education cess,
and secondary and higher education cess form part of the excise
duty and hence the decision of the High Court is bad in law - On
appeal, held: Notification dated 09.09.2003 issued in the present
case makes it clear that exemption was granted u/s. 5A of the Act
1944, concurring additional duties under the Act of 1957 and
additional duties of excise under the Act of 1978 - There was 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 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 - 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 rightly relied on the decision of
the three-Judge Bench of the Supreme Court in Modi Rubber Limited,
which was followed by another three-Judge in Rita Textiles Private
Limited - Therefore, the Judgment and order of the High Court
upheld.
Dismissing the appeals, the Court
HELD: 1. 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
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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, which has been followed by another three-Judge Bench
of this Court in Rita Textiles Private Limited. [Para 40] [1045-H;
1046-A-E]
2. 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 that there was nil excise duty, as such, additional duty
cannot be charged, is also equally unacceptable as additional duty
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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 exempted. [Para 41] [1046-F-H; 1047-AB]
Union of India v. Modi Rubber Limited (1986) 4 SCC
66 : [1986] 3 SCR 587 ; A three-Judge Bench in Rita
Textiles Private Limited v. Union of India, (1986) SCC
Supp. 557 - relied on.
SRD Nutrients Private Limited v. Commissioner of
Central Excise, Guwahati, (2018) 1 SCC 105 : [2017]
11 SCR 43 ; Bajaj Auto Limited v. Union of India &
others, (2019) SCC OnLine SC 421, decided on
27.3.2019. [2019] 5 SCALE 325 - per incuriam.
Union of India v. Unicorn Industries (Civil Appeal No.
7432 of 2019), decided on 19.9.2019. (2019)
10 SCC 575 ; Rajasthan High Court in Banswara
Syntex Ltd. v. Union of India, (2007) SCC OnLine Raj.
365 ; 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 : [2006] 2 SCR 1142 ; State of Uttar
Pradesh & Ors. v. Ajay Kumar Sharma & Ors. (2016)
15 SCC 289 ; Subhash Chandra & Ors. v. Delhi
Subordinate Services Selection Board & Ors. (2009)
15 SCC 458 : [2009] 12 SCR 978 ; Dashrath
Rupsingh Rathod v. State of Maharashtra (2014) 9
SCC 129 ; [2014] 11 SCR 921 ; Central Board of
Dawoodi Bohra Community & Ors. v. State of
Maharashtra & Ors. (2005) 2 SCC 673 : [2004]
6 Suppl. SCR 1054 - referred to.
M/S. UNICORN INDUSTRIES v. UNION OF INDIA & OTHERS
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Case Law Reference
[2017] 11 SCR 43
per incuriam
Para 13
[2019] 5 SCALE 325
per incuriam
Para 13
(2019) 10 SCC 575
referred to
Para 14
[1986] 3 SCR 587
relied on
Para 28
(1986) SCC Supp. 557
relied on
Para 38
(1994) Suppl. 1 SCC 609
referred to
Para 42
[2006] 2 SCR 1142
referred to
Para 42
(2016) 15 SCC 289
referred to
Para 42
[2009] 12 SCR 978
referred to
Para 42
[2014] 11 SCR 921
referred to
Para 42
[2004] 6 Suppl. SCR 1054
referred to
Para 42
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9237
of 2019.
From the Judgment and Order dated 11.05.2012 of the High
Court of Sikkim at Gangtok in Writ Petition (C) No. 24 of 2007
With
Civil Appeal No. 9238 of 2019.
Dhruv Aggarwal, Dr. Ashok Saraf, Nakul Dewan, Balbir Singh,
Guru Krishan Kumar, K. V.Viswanathan, S. Ganesh, Tarun Gulati, Sr.
Advs., Ms. Nisha Bagchi, Rupesh Kumar, Ms. Aruna Gupta,
Dharmendra Gupta, B.K. Prasad, Shriram P. Pingle, Gangdeep Sharma,
M.L. Lahoty, Paban K. Sharma, Anchit Sripat, Himanshu Shekhar,
Vishal Gupta, M/s. AP & J Chambers, Kaushik Choudhary, Mukunda
Rao, Pawanshree Agrawal, K.J. John, M/s. K J John & Co. Ajoy K.
Roy, Shantanu Tyagi, Ms. Nandita Chauhan, Ravinder Nijhawan, S.S.
Shroff, Rahul Narayan, Shashwat Goel, Ajay Aggarwal, Ms. Mallika
Joshi, Ishan Narain, Rajan Narain, Ms. Kavita Jha, Ms. Swati Agarwal,
Ms. Devika Jain, Kumar Visalaksh, Udit Jain, Mahfooz A. Nazki, Rana
Ranjit Singh, Vivek Kumar Singh, Ms. Akanksha Singh, Shuvodeep Roy,
Kabir Shankar Bose, Satropp Das, Ms. Neelima Tripathi, Ms. Gunjan
Singh, K.V. Mohan, Vishal Gupta, Sumeet Sharma, Diviyanshu Gupta,
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Rakesh Sinha, Partha Sil, Parthiv K. Goswami, Ishan Bisht, Vivek
Gupta, Ms. Palak Mahajan, Ms. Diksha Rai, Raghvendra Kumar,
Ms. Aruna Mathur, Sunil Murarka, Kunal Chatterji, Ms. Maitrayee
Banerjee, Supratik Sarkar, V. Lakshmikumaran, Ms. Charanya
Lakshmikumaran, Aditya Bhattacharya, Mrs. Ishita Mathur,
Ms. Apeksha Mehta, Ms. Monica Kasturi, R.Parthasarthy, Kshitij
Vaibhav, Ms. Bina Gupta, Ms. Sheona Taqvi, R. Jawahar Lal, Siddharth
Bawa, Shaymal Anand, Mayank Kshirsagar, Nikhil Singhvi, Mohit Seth,
Ms. Sonia Dubey, Obhirup Ghosh, M/s. Legal Option, Gaurav Juneja,
Aayush Jain, M/s. Khaitan & Co., V.K. Sidharthan, Ramendra Lal
Auddy, B. Krishna Prasad, M/s. Arputham Aruna & Co., Satya Mitra,
Ms. Hemantika Wahi, Gopal Singh, Advs. for the appearing parties.
The Judgment of the Court was delivered by
ARUN MISHRA, J.
1. Leave granted.
2. The question involved in the appeals is with respect to the levy
of education cess, higher education cess, and National Calamity
Contingent Duty (NCCD) on it. The appeals arise out of common
judgment. The High Court has held that duties in question are not part
of the exemption notification. The writ petitions have been dismissed.
Hence, the appeals have been preferred.
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 Sikkim.
4. 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
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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 cash.
5. The Unicorn Industries established a unit in 2006 for
manufacturing "Indian Mouth Freshener" an excisable commodity
covered under Chapter 21 of the First Schedule of Central Excise Tariff
Act, 1985. It was registered under the Central Excise Act. In June
2006, the appellant had started manufacturing its product.
6. The appellant has submitted that following excise duties were
recovered under diverse names/nomenclature and rates on Indian
Mouth Freshener manufactured and cleared by the appellant:
a. 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); and
d. Education Cess @ 2% ad valorem (under Section 91
of the Finance Act, 2004) aggregating to 68% ad
valorem.
7. 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 duty.
8. 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,
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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 penalty.
9. 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., 27.6.2006.
10. 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 India.
11. 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
15.11.2010.
12. 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
M/S. UNICORN INDUSTRIES v. UNION OF INDIA & OTHERS
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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.
13. Learned counsel appearing on behalf of the appellant
submitted that NCCD, education cess, and secondary and higher
education cess form part of the excise duty. Hence, the decision of
the High Court is bad in law. Reliance has been placed on SRD
Nutrients Private Limited v. Commissioner of Central Excise,
Guwahati, (2018) 1 SCC 105 and the decision of this Court in Bajaj
Auto Limited v. Union of India & others, 2019 SCC OnLine SC 421,
decided on 27.3.2019. It is submitted that the education cess was
introduced by Sections 91 and 93 of the Finance Act, 2004 and higher
education cess by the Finance Act, 2007 and the NCCD was imposed
under Section 136 of the Finance Act, 2001. The imposition is in the
nature of a duty of excise and in addition to any other duty of excise
chargeable under the Central Excise Act, 1944 ('the Act of 1944'). It
is further provided that the provisions of the Act of 1944 and Rules
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made thereunder relating to refunds and exemptions from duties and
imposition of penalty, shall, as far as may be, apply with respect to the
abovementioned duties in question. Reliance has also been placed on
circulars dated 10.8.2004 and 8.4.2011, issued by Central Board of
Excise and Customs, on the subject of education cess and secondary
and higher education cess.
14. Learned counsel appearing on behalf of respondents has
submitted that the decision of the High Court is appropriate and no case
for interference is made out. The benefit of exemption granted, w.e.f.
9.9.2003 from payment of excise duty was withdrawn vide notification
dated 25.4.2007. Tobacco and Tobacco products including cigarettes,
cigars and gutkha, were excluded from the benefit of exemption of
the excise duty. The notification dated 25.4.2007 was set aside by the
High Court. The decision of the High Court has been reversed by this
Court in Union of India v. Unicorn Industries (Civil Appeal No. 7432
of 2019), decided on 19.9.2019. Apart from that, when exemption
notifications were issued, the NCCD, education cess and secondary
and higher education cess were not even imposed, as such, it could
not be said that they were covered under the exemption notification.
The duty described above had been imposed by separate legislation,
which was not covered under the exemption notification. It was an
additional duty imposed in the nature of excise duty. They were not
covered under the exemption notification. As such, the High Court has
rightly dismissed the writ application filed by the appellants. Hence,
no case for interference is made out.
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 production.
16. The benefit of the said notification was extended to the State
of Sikkim vide notification dated 17.2.2003. Following benefits were
extended to the new and the existing industrial units:
"i) New industrial units and existing industrial units on their
substantial expansion as defined, set up in Growth Center,
M/S. UNICORN INDUSTRIES v. UNION OF INDIA & OTHERS
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Industrial Infrastructure Development Centers (IIDCs) and other
locations like Industrial Estates, Export Processing Zones, Food
Parks, IT Parks, etc., as notified by the Central Government are
entitled to 100% (hundred percent) income tax and excise duty
exemption for a period of 10 years from the date of
commencement of commercial production. Thrust Sector
Industries as mentioned in Annexure-II are entitled to similar
concessions in the entire State of Sikkim without area
restrictions."
17. The Government decided to exempt 100 per cent income tax
and excise duty for ten years. In accordance with the policy decision
the Notification No.71/2003 was issued on 9.9.2003 by the Central
Government in exercise of powers conferred by Section 5A(1) of the
Act of 1944 read with Section 3(3) of the Additional Duties of Excise
(Goods of Special Importance) Act, 1957 ('the Act of 1957') and
Section 3(3) of the Additional Duties of Excise (Textiles and Textiles
Articles) Act, 1978 ('the Act of 1978'), exempted goods specified in
the First Schedule and the Second Schedule to the Central Excise Tariff
Act, 1985, other than goods specified in Annexure I in the State of
Sikkim. The exemption from payment of so much of excise duty or
additional duty of excise, as the case may be, leviable thereon under
any of the said Act. The relevant portion is extracted hereunder:
"Notification No.71/2003 - Central Excise
In exercise of the powers conferred by sub-section (1) of section
5A of the Central Excise Act, 1944 (1 of 1944), read with subsection (3) of section 3 of the Additional Duties of Excise (Goods
of Special Importance) Act, 1957 (58 of 1957) and sub-section
(3) of Section 3 of the Additional Duties of Excise (Textiles and
Textiles Articles) Act, 1978 (40 of 1978), the Central Government,
being satisfied that it is necessary in the public interest so to do,
hereby exempts the goods specified in the First Schedule and
the Second Schedule to the Central Excise Tariff Act, 1985 (5
of 1986), other than goods specified in Annexure I appended
hereto, and cleared from a unit located in the Industrial Growth
Centre or Industrial Infrastructure Development Centre or Export
Promotion Industrial Park or Industrial Estate or Industrial Area
or Commercial Estate or Scheme Area, as the case may be, in
the State of Sikkim, specified in Annexure - II appended hereto,
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from so much of the duty of excise or additional duty of excise,
as the case may be, leviable thereon under any of the said Acts
as is equivalent to the amount of duty paid by the manufacturer
of the said goods, other than the amount of duty paid by utilization
of CENVAT credit under the CENVAT Credit Rules, 2002."
(emphasis supplied)
18. Section 136 of the Finance Act, 2001 provides imposition of
the NCCD. Section 136 is extracted hereunder:
"136. National Calamity Contingent Duty.-(1) In the case of
goods specified in the Seventh Schedule, being goods
manufactured or produced, there shall be levied and collected
for the purposes of the Union, by surcharge, a duty of excise, to
be called the National Calamity Contingent Duty (hereinafter
referred to as the National Calamity Duty), at the rates specified
in the said schedule.
(2) The National Calamity Duty chargeable on the goods
specified in the Seventh Schedule shall be in addition to
any other duties of excise chargeable on such goods
under the Central Excise Act, 1944 (1 of 1944) or any
other law for the time being in force.
(3) The provisions of the Central Excise Act, 1944 (1 of
1944) and the rules made thereunder, including those
relating to refunds and exemptions from duties and
imposition of penalty, shall, as far as may be, apply in
relation to the levy and collection of the National
Calamity Duty leviable under this section in respect of
the goods specified in the Seventh Schedule as they
apply in relation to the levy and collection of the duties
of excise on such goods under that Act or those rules,
as the case may be."
(emphasis supplied)
19. The education cess came to be imposed vide notification
dated 10.9.2004 issued under the Finance Act, 2004. Sections 91 and
93 are extracted hereunder:
"91. Education Cess-(1) Without prejudice to the provisions of
sub-section (11) of Section 2, there shall be levied and collected,
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in accordance with the provisions of this Chapter as surcharge
for purposes of the Union, a cess to be called the Education Cess,
to fulfil the commitment of the Government to provide and
finance universalized quality basic education.
(2) The Central Government may, after due appropriation made
by Parliament by law in this behalf, utilize, such sums of money
of the Education Cess levied under sub-section (11) of Section
2 and this Chapter for the purposes specified in sub-section (1),
as it may consider necessary.
***
93. Education Cess on Excisable Goods- (1) The Education Cess
levied under Section 81, in the case of goods specified in the First
Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), being
goods manufactured or produced, shall be a duty of excise (in
this section referred to as the Education Cess on excisable
goods), at the rate of two per cent, calculated on the aggregate
of all duties of excise (including special duty of excise or any
other duty of excise but excluding Education Cess on excisable
goods) which are levied and collected by the Central Government
in the Ministry of Finance (Department of Revenue) under the
provisions of the Central Excise Act, 1944 (1 of 1944) or under
any other law for the time being in force.
(2) The Education Cess on excisable goods shall be in addition
to any other duties of excise chargeable on such goods under
the Central Excise Act, 1944 (1 of 1944) or any other law for
the time being in force.
(3) The provisions of the Central Excise Act, 1944 (1 of 1944)
and the rules made thereunder, including those relating to refunds
and exemptions from duties and imposition of penalty shall, as
far as may be, apply in relation to the levy and collection of the
Education Cess on excisable goods as they apply in relation to
the levy and collection of the duties of excise on such goods under
the Central Excise Act, 1944 or the rules, as the case may be."
(emphasis supplied)
20. The Central Government introduced the secondary and higher
education cess at the rate of 1 per cent of the total excise duty under
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Sections 126 and 128 of the Finance Act, 2007, which are reproduced
hereunder:
"126. (1) Without prejudice to the provisions of sub-section (12)
of section 2, there shall be levied and collected, in accordance
with the provisions of this Chapter as surcharge for purposes of
the Union, a cess to be called the Secondary and Higher Education
Cess, to fulfil the commitment of the Government to provide and
finance secondary and higher education.
(2) The Central Government may, after due appropriation made
by Parliament by law in this behalf, utilize, such sums of money
of the Secondary and Higher Education Cess levied under subsection
(12) of section 2 and this Chapter for the purposes specified in
subsection (1) as it may consider necessary.
XXXXXX XXXXXX XXXXXX XXXXXX
128. (1) The Secondary and Higher Education Cess levied under
section 126, in the case of goods specified in the First Schedule
to the Central Excise Tariff Act, 1985, being goods manufactured
or produced, shall be a duty of excise (in this section referred to
as the Secondary and Higher Education Cess on excisable
goods), at the rate of one per cent., calculated on the aggregate
of all duties of excise (including special duty of excise or any
other duty of excise but excluding Education Cess chargeable
under section 93 of the Finance (No. 2) Act, 2004 and Secondary
and Higher Education Cess on excisable goods) which are levied
and collected by the Central Government in the Ministry of
Finance (Department of Revenue), under the provisions of the
Central Excise Act, 1944 or under any other law for the time
being in force.
(2) The Secondary and Higher Education Cess on excisable goods
shall be in addition to any other duties of excise chargeable on
such goods, under the Central Excise Act, 1944 or any other law
for the time being in force and the Education Cess chargeable
under section 93 of the Finance (No. 2) Act, 1944.
(3) The provisions of the Central Excise Act, 1944 and the rules
made thereunder, including those relating to refunds and
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exemptions from duties and imposition of penalty shall, as far as
may be, apply in relation to the levy and collection of the
Secondary and Higher Education Cess on excisable goods as they
apply in relation to the levy and collection of the duties of excise
on such goods under the Central Excise Act, 1944 or the rules
made thereunder, as the case may be."
21. The appellant challenged the exemption Notification No.71/
2003 dated 9.9.2003, before the High Court only to the extent that it
limits the exemption only in relation to basic excise duty under the Excise
Act, additional duties under the Act of 1957 and the additional duties
under the Act of 1978. It is submitted that though various Finance Acts
imposed these duties, they were recoverable as excise duty,
notwithstanding their nomenclature. The notification dated 17.2.2003
indicated that 100 per cent income tax and excise duty exemption for
ten years was granted. The exemption should cover the NCCD,
education cess and the secondary and higher education cess imposed
by the notifications issued under Finance Acts of 2001, 2004, and 2007.
22. The main question arising for consideration is when 100 per
cent exemption had been granted for excise duty for a period of 10
years, whether the exemption notification issued for the State of Sikkim
on 9.9.2003 shall be confined to the basic excise duty under the Act of
1944, additional duty under the Act of 1957 and additional duty under
the Act of 1978, which were specifically mentioned in the notification
issued on 9.9.2003, or it also include cess/duty imposed by Finance Acts
of 2001, 2004 and 2007.
23. The submission raised on behalf of appellant is that the duty
and cess in the nature of excise duty cannot be realized, particularly in
view of the provisions in the Finance Acts of 2001, 2004 and 2007
relating to refund and exemption, which have made applicable, the
provisions of the Act of 1944 and the Rules made thereunder relating
to exemption. As such, in view of the decisions of Division Bench of
this Court in SRD Nutrients Private Limited (supra) and Bajaj Auto
Limited (supra), the decision of the High Court deserves to be set aside.
24. 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
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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 vogue.
25. A Division Bench of this Court in SRD Nutrients Private
Limited (supra) has considered the Finance Acts of 2004 and 2007, by
which education and secondary and higher education cess were
imposed. Under the Industrial Policy dated 1.4.2007 for the NorthEastern States, the notification dated 25.4.2007, issued by the Central
Government, came up for consideration before this Court. The said
notification and the industrial policy, have been dealt with in paragraphs
4 and 5 of the SRD Nutrients Private Limited (supra), which are
extracted hereunder:
"4. Industrial Policy dated 1-4-2007 for the North-Eastern States,
including the State of Assam, was announced by the Ministry of
Commerce and Industry (Department of Industrial Policy and
Promotion), Government of India to set up a special package for
the North-Eastern States to accelerate industrial development of
the State. As per this package, new industrial units were entitled
to 100% excise duty exemption for a period of ten years from
the date of commencement of commercial production. Pursuant
to the said Industrial Policy, the Central Government issued
Notification No. 20/2007-Ex. Dated 25-4-2007 granting exemption
from duties of excise levied under the Central Excise Act, 1944
(hereinafter referred to as "the Act") read with Section 3(3) of
the Additional Duties of Excise (Goods of Special Importance)
Act, 1957 and Section 3(3) of the Additional Duties of Excise
(Textiles & Textile Articles) Act, 1978 to goods cleared from the
notified areas within the North-Eastern States. The said
Notification provided that the assessee would be entitled to refund
of duty paid other than the duty paid by way of utilisation of
CENVAT credit under the CENVAT Credit Rules, 2004.
5. Reproduction of the first three paragraphs of this Notification
would be sufficient, which are as follows:
"NOTIFICATION No.: 20/2007-CE dated 25-4-2007
North-East - Exemption to all goods, except as specified,
cleared from Assam, Tripura, Meghalaya, Mizoram,
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Manipur, Nagaland, Arunachal Pradesh or Sikkim from duty
paid other than by utilisation of CENVAT credit.
In exercise of the powers conferred by sub-section (1) of Section
5-A of the Central Excise Act, 1944 (1 of 1944), the Central
Government, being satisfied that it is necessary in the public
interest so to do, hereby exempts the goods specified in the First
Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) other
than those mentioned in the Annexure and cleared from a unit
located in the States of Assam or Tripura or Meghalaya or
Mizoram or Manipur or Nagaland or Arunachal Pradesh or
Sikkim, as the case may be, from so much of the duty of excise
leviable thereon under the said Act as is equivalent to the amount
of duty paid by the manufacturer of goods other than the amount
of duty paid by utilisation of CENVAT credit under the CENVAT
Credit Rules, 2004.
2. In cases where all goods produced by a manufacturer are
eligible for exemption under this Notification, the exemption
contained in this Notification shall be available subject to the
condition that, the manufacturer first utilises whole of the
CENVAT credit available to him on the last day of the month
under consideration for payment of duty on goods cleared during
such month and pays only the balance amount in cash.
3. The exemption contained in this notification shall be given
effect to in the following manner, namely-
(a) the manufacturer shall submit a statement of the duty
paid other than the amount of duty paid by utilisation of
CENVAT credit under the CENVAT Credit Rules, 2004,
to the Assistant Commissioner or the Deputy
Commissioner of Central Excise, as the case may be,
by the 7th of the next month in which the duty has been
paid other than the amount of duty paid by utilisation of
CENVAT credit under the CENVAT Credit Rules, 2004;
(b) the Assistant Commissioner of Central Excise or the
Deputy Commissioner of Central Excise, as the case
may be, after such verification, as may be deemed
necessary, shall refund the amount of duty paid other
than the amount of duty paid by utilisation of CENVAT
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credit under the CENVAT Credit Rules, 2004, during the
month under consideration to the manufacturer by the
15th of the next month:
Provided that in cases, where the exemption contained in this
Notification is not applicable to some of the goods produced by
a manufacturer, such refund shall not exceed the amount of duty
paid less the amount of the CENVAT credit availed of, in respect
of the duty paid on the inputs used in or in relation to the
manufacture of goods cleared under this Notification;
(c) if there is likely to be any delay in the verification,
Assistant Commissioner of Central Excise or the Deputy
Commissioner of Central Excise, as the case may be,
shall refund the amount on provisional basis by the 15th
of the next month to the month under consideration and
thereafter may adjust the amount of refund by such
amount as may be necessary in the subsequent refunds
admissible to the manufacturer."
Circulars have also been referred to in the decision of this Court
in SRD Nutrients Private Limited (supra). The same is extracted
hereunder:
"17. It is clear from the arguments of the counsel for the parties
that divergent views are expressed by the CESTAT as well as
High Courts. Even one Bench of the same Tribunal has differed
from its earlier Division Bench decision. In this scenario, it
becomes important as to how the Department has viewed the
position regarding education cess and higher education cess which
is payable as a surcharge on the excise duty, once the excise
duty is exempted. Two circulars are relevant in this behalf, one
is Circular dated 10-8-2004 which clarifies that education cess
is part of excise duty. In this circular, certain clarifications are
given by the Ministry of Finance (Department of Revenue),
Government of India and the relevant portion thereof reads as
under:
"Subject: Issues relating to imposition of education cess on
excisable goods and on imported goods, as pointed out by
the trade and the field formations-Reg.
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The undersigned is directed to state that subsequent to Budget
2004 announcements, a number of representations/references
have been received from the trade as well as from the field
formations pertaining to imposition of education cess on excisable
goods and on imported goods. The points raised and the
clarifications thereon are as follows:
Issue (1): Whether education cess on excisable goods is leviable
on goods manufactured prior to imposition of cess but cleared
after imposition of such cess?
Clarification: Education cess on excisable goods is a new levy.
In similar cases, it has been held by the Supreme Court that if a
levy is not there at the time the goods are manufactured or
produced in India, it cannot be levied at the stage of removal of
the said goods. Thus, education cess is not leviable on excisable
goods manufactured prior to imposition of cess but cleared after
imposition of such cess.
Issue (2): Whether goods that are fully exempted from excise
duty/customs duty or are cleared without payment of excise duty/
customs duty (such as clearance under bond or fulfilment of
certain conditions) would be subjected to cess.
Clarification: The education cess is leviable at the rate of two
per cent of the aggregate of all duties of excise/customs
(excluding certain duties of customs like anti-dumping duty,
safeguard duty, etc.), levied and collected.