M/s Topcem India v. Union of India & Ors (2021) - Subsequent change in law will not reverse the position of parties to a case

CRUX: M/s Topcem India v. Union of India & Ors. (12th March 2021)- The issue that the present case deals with is whether a subsequent change in law reverses the position of the parties to a case.

DATE OF JUDGMENT: 12th March, 2021.
JUDGE: Soumitra Saikia.

PARTIES

• M/s Topcem India (Appellant)
• Union of India & Ors. (Respondent)

SUMMARY: The following case deals with the issue of whether or not a subsequent change in law reverse the position of the parties to a case in relation to their rights which were declared and concluded by way of an earlier judicial proceeding.

OVERVIEW

1. The present case was heard by the court which was handling a series of petitions filed on the issue by several parties. The court clubbed all petitions together and heard them all at the same time.
2. The matter before the Court was with respect to entitlement of industrial units in North-Eastern states, with regards to the refund of education cess and Secondary and Higher education cess paid by them. The appellants were excluded from payment of excise duty as they were a part of a scheme to encourage and promote industrial development in the region.
3. The appellants had, therefore, sought relief from education cess payable on excise duty Secondary and Higher education cess.
4. The matter was decided by the Supreme Court in the case of SRD Nutrients Pvt. Ltd. v. Commissioner of Central Excise, Guwahati1, which held that the specified industries were entitled to refund of Education cess and Secondary and Higher Education cess.
5. However, the decision was overturned by the court in the case of Unicorn Industries v. Union of India2, which held that in the absence of notifications containing an exemption to additional duties in the nature of Education cess and Secondary & Higher Education cess, it cannot be said that same are exempted.
6. Pursuant to this, the Department of Excise held that the refund given to the appellants was erroneous and that it issued a notice under Sec. 11A of the Central Excise Act seeking recovery of the refund.
7. Aggrieved by the notice issued by the Department of Excise, the appellants approached the High Court seeking relief.

ISSUE

The following issues were analyzed by the High Court:

• Whether the notice issued by the Department of Excise is valid.
• Whether or not a subsequent change in law reverse the position of the parties to a case in relation to their rights which were declared and concluded by way of an earlier judicial proceeding.

IMPORTANT PROVISIONS

• Sec. 11A of the Central Excise Act, 1944: Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded.
• Sec. 11AA of the Central Excise Act, 1944: Interest on delayed payment of duty.
• Sec. 35 of the Central Excise Act, 1944: Appeals against orders passed by the Central Excise Officer.
• Art. 226 of the Constitution: Power of High Courts to issue certain writs.
• Art. 141 of the Constitution: Law declared by Supreme Court to be binding on all courts.

ANALYSIS OF THE JUDGMENT

1. The counsel appearing for the appellants held that under Section 11A of the Central Excise Act, 1944, the power for recovery of duties not levied or not paid or short levied or short paid or erroneously refunded, can only be invoked by the Department upon fulfillment of the circumstances provided under Sub-section 4 of Section 11 A of the Central Excise Act, 1944. The counsel held that the reason as to why the Department held that the refunds were granted erroneously was solely on the ground that judgment of the Apex Court rendered in the SRD Nutrients case had been held to a judgment rendered “per incuriam” by the Supreme Court in the recent judgment given in the M/S Unicorn Industries case.
2. The counsel for the appellants further submitted that the condition precedent for exercise of power under Section 11A(1) of the Act are wholly missing in the present case inasmuch as refund of Education cess and Secondary and Higher Education cess was neither on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of the Act or the rules made there under nor by reason of fraud, collusion or any willful misstatement or suppression of facts or contravention of any of the provisions of the Act or the rules made there under with intent to evade payment of duty.
3. The counsel for the appellants referred to the Judgment of the Supreme Court in Malabar Industrial Co. Ltd. v. Commissioner of Income Tax, Kerala State3 which held that incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous.
4. The counsel, therefore, submitted that since the refunds made earlier by the Department in terms of the judgment of the Supreme Court rendered in the SRD Nutrients case and were not on incorrect assumption of facts or incorrect application of law or non-application of mind, the same cannot be treated to be “erroneous” in order to bring it within the ambit of Section 11A of the Central Excise Act 1944. The counsel further argued that the refunds orders passed by the Department in respect of refunds of Education cess and Secondary and Higher Education cess cannot be said to be erroneous, inasmuch as, the same where refunded by the Department on the basis of the law existing at the relevant pointing time as was laid down by the Apex Court in the SRD Nutrients case. The counsel further submitted that the decision given in the M/s Unicorn Industries case will not render any proceedings concluded to be illegal and thereby making the refunds already granted erroneous.
5. The counsel for the appellants concluded by stating that the provisions of Sec. 35 of the Central Excise Act, which allow for an appeal against the order passed by a Central Excise officer in a lower rank, was not preferred by the Departmental authorities and, therefore, the refunds granted has long attained finality.
6. The counsel for the Department denied the contentions of the appellants that the recovery of refunds sought to be made is barred by limitation under the provisions of Section 11A of the Central Excise Act or that the impugned show cause notices issued by the Department for the recovery of the refunds of Education cess and Secondary and Higher Education cess are void and without jurisdiction. The counsel for the respondents pleaded before the court to uphold the decision given in the M/s Unicorn Industries case, which overruled the decision given in the SRD Nutrients case by declaring it to be per incuriam.
7. The counsel contended that when a judgment has been held to be per incuriam, it amounts to overruling the judgment and, therefore, it is deemed to be applicable from a retrospective period except otherwise when indicated in the Judgment itself. The refunds allowed to the petitioners earlier are now required to be recovered as they have become refunds erroneously made in view of the Judgment of the Supreme Court in the M/s Unicorn Industries case.
8. The counsel further argued that the appellants are under a clear obligation to pay back the amounts which were received by them in terms of the judgment of SRD Nutrients case which have been overruled presently. As the refunds granted earlier to the petitioners have become erroneous in view of the judgment of the Supreme Court in the M/s Unicorn Industries case, the demand-cum-show cause notices were rightly issued by the Department under Section 11A.
9. The court, on hearing the arguments made by both counsels, held that a change of law subsequently would not make an action taken earlier by a quasi-judicial authority in terms of law as it stood then, to be held to be erroneous so as to enable the Departmental Officer to invoke powers under Section 11A of the Central Excise Act. On perusal of Section 11A reveals that the power under Section 11A for recovery of duties not levied or not paid or short levied or short paid or erroneously refunded will be available to the departmental Officer only on the decisions mentioned in Sub-section (4) unless the concerned departmental Officer is satisfied that the refund granted earlier was because of any or all of the conditions mentioned under sub-Section (4), the refunds cannot be treated to be erroneous.
10. The court held that the refund granted to the appellants in view of decision given in the SRD Nutrients case cannot be revoked by the Department or a quasi-judicial authority of the Department without taking recourse to the statutory and/or judicial remedies available to the Department.
11. The court concluded by stating that the notices issued to the appellants were issued without any jurisdiction and allowed the appeal by the appellants to be filed.

CONCLUSION

The issue that the present case deals with is whether or a subsequent change in law reverse the position of the parties to a case in relation to their rights which were declared and concluded by way of an earlier judicial proceeding. The court, in the present case, held in the negative, and held that such a change will not, ipso facto, reverse the position of a party to a case.

It can be stated that unless, the findings of a Court arrived at by way of legal proceeding is sought to be reopened in the manner discussed above, the operative portions in the judgment in relation to parties will attain finality. A subsequent change in law arrived at by a Court by way of the separate judicial proceeding, wherein the earlier law laid down has been held to be not a good law or that the earlier law will cease to have precedential value, will not ipso facto reverse the position of the party in relation to their rights which were declared and concluded by way of an earlier judicial proceedings.

The issue of whether notices issued by the Department in the present case were also analyzed by the court. Although, the High Court, in exercise of judicial review under Article 226 of the Constitution, would not ordinarily interfere with the show cause notices issued, however, where a show cause notice has been issued by an authority wholly without jurisdiction or by way of wrongful usurpation of power, the person aggrieved need not be relegated to avail any statutory alternative remedy available.

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