M/S Topcem India v. Union of India & Ors 2021 : Case study

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– An article by Lavanya Goinka, Arnav Raj and Siddharth Sharma

This article examines whether a subsequent change in the law will have an impact on the parties’ position. The Guwahati High Court answered this question in the landmark case of M/s Topcem India v. Union of India & Ors (2021). The lawsuit concerned the exemption of employees working in north-eastern states’ industrial units from the education cess, as well as secondary and higher education cess, as part of the Industrial Policy 1997 and 2007, which aimed to encourage workers to produce excise items. The appellants, who were workers employed by industrial units in north-eastern states, claimed that they were exempt from paying the cess in particular. This article examines whether a subsequent change in the law will have an impact on the parties’ position. The Guwahati High Court answered this question in the landmark case of M/s Topcem India v. Union of India & Ors (2021). The lawsuit concerned the exemption of employees working in north-eastern states’ industrial units from the education cess, as well as secondary and higher education cess, as part of the Industrial Policy 1997 and 2007, which aimed to encourage workers to produce excise items. The appellants, who were workers employed by industrial units in north-eastern states, claimed that they were exempt from paying the cess in particular.

M/S Unicorn Industries v. Union of India (2019) rejected M/S SRD Nutrients Pvt Ltd v. Commissioner of Central Excise Guwahati (2021), which concluded that the parties should be repaid the cess that they had already paid because they were exempted from it. The case of Unicorn Industries v. Union of India (2019) overturned the judgement of M/S SRD Nutrients Pvt. Ltd v. Commissioner of Central Excise Guwahati (2021), declaring the judgement as ‘per incuriam,’ meaning ‘through lack of care,’ stating that the refunds made to people working in industrial units in north-eastern states were incorrect and should be revoked.

An overview of the case:

M/S Topcem is the case’s appellant.

Union of India & Others are the case’s Respondents.

– Several petitions were filed in this issue by people who worked in industrial enterprises in the state of north-east India and were denied reimbursements by the Guwahati High Court. The appellant claimed that the 1997 and 2007 industrial policies precluded them from paying the education cess, as well as the secondary and higher education cess. They prayed for a refund even though they had already paid it.

– In the case of SRD Nutrients Pvt Ltd v. Union of India (2021), the Supreme Court found that because industrial workers were exempted from paying both the cess and the tax, they are entitled to a refund, and the Department of Excise Duty should take care of it.

– The reimbursement was approved by the Supreme Court under Section 11A of the Central Excise Act of 1944, which deals with the collection of duties that have not been paid, levied, or erroneously refunded.

– In the case of M/S Unicorn Industries v. Union of India (2019), the Guwahati High Court overruled the judgement of SRD Nutrients Pvt Ltd v. Union of India (2021), holding that no notification was published stating that this group of society is exempt from paying the education cess and secondary and higher education cess, and thus they are not exempt.

– In view of the earlier judgement being held ‘per incuriam,’ the Department of Excise Duty contended that the reimbursement was erroneous and had to be revoked.

– The Central Excise Department served the appellants with a show-cause notice, requiring them to explain why the refunds should not be cancelled under Section 11A of the Central Excise Act, 1944.

Issues Involved:

1. Whether the reimbursements awarded in M/S SRD Nutrients Pvt Ltd v. Union of India (2021) were correct, given that Unicorn Industries v. Union of India (2019) rejected it and decided on the SRD case incuriam?

2. Is it possible for a quasi-judicial body within the Department of Central Excise Duty to review a refund order made by a collateral authority under the Central Excise Act?

THE CONTENTIONS OF BOTH PARTIES IN THE CASE
Petitioner’s contentions
· The petitioner argued that the circulars issued by the Government of India from time to time regarding the Industrial Policy Resolution, 1997, state that wherever any excise duty is charged, the education cess, as well as secondary and higher education cess, is calculated together and not separately. All excisable commodities are subject to excise tax and an education cess, and if excise duty is not imposed on industrial unit workers, there will be no education cess.

· The petitioners claimed that the refund they received was based on the decision of the Court in the case of SRD Nutrients Pvt Ltd v. Union of India (2021), which was applicable and enforceable at the time, and that it didn’t matter because a later case changed the law. As a result, the Central Excise Department’s show-cause notice does not fall within Section 11A(i) of the Central Excise Act, 1944.

· The experienced counsel argued that subsection(4) of the Central Excise Act, 1944, must be satisfied in order to apply Section 11A of the Act.

· The respondent’s sole basis for issuing a show-cause notice, according to counsel, is that the case of SRD Nutrients Pvt Ltd v. Union of India (2021) was overruled by M/S Unicorn Industries, which declared the earlier verdict as per incuriam.

· The petitioners argued that in order to revoke refunds, causes such as fraud, collusion, misstatements, and so on must be cited under Section 11A of the Central Excise Act, 1944, and hence Section 11A cannot be applied.

· According to the learned counsel, if a decision is declared incuriam, only its precedential value is harmed, not its binding facts, and it still functions as a decisive judgement.

· The show cause notice, according to the learned counsel, is in violation of Section 11A of the Act and is only sent because it is incorrect.

· The petitioners claimed that no officer of the concerned department can revisit orders made by him or his predecessor officer, and that only an appeal under Section 35 of the Act can be filed if he is aggrieved by the concerned order, but no such appeal has been filed, and thus the writ petitions have reached finality.

· They cannot reopen the question that was already determined in finality in the preceding case under the concept of res judicata.

Respondent’s contentions

· Following the Supreme Court’s decision in M/S Unicorn India v Union of India (2019), the department sent show-cause notices to the appellants, requiring them to demonstrate cause why they are entitled to a refund. Because the Court agreed with the Guwahati High Court’s conclusion in SRD Nutrients Pvt Ltd v Union of India (2021) that the petitioners were entitled to a refund, the judgement was rendered per incuriam and is not binding on later case law.

· The respondents served the appellant with show-cause notices, asking why they should not be questioned regarding the refund recovery. The respondent further presented the show cause in a tabular format, telling the petitioners of the sum to be taken from each of them, the authority issuing the notice, and the commodities they created.

· The writ petitions represent all of the petitioners because they deal with common legal issues. Because the prior case of SRD Nutrients was declared per incuriam in M/S Unicorn Industries v Union of India (2019), the show-cause notifications were issued in accordance with the law and were not erroneous.

· The respondents served the appellant with show-cause notes, inquiring why they should not be questioned regarding the refund recovery. The respondent further presented the show cause in a tabular format, telling the petitioners of the sum to be taken from each of them, the authorities that issued the notice, and the commodities they created.

· The petitioners are all represented in the writ petitions since they deal with common legal issues. The show-cause notifications were issued in accordance with the law and were not erroneous, since the judgement in M/S Unicorn Industries v Union of India (2019) pronounced the earlier case of SRD Nutrients per incuriam.

Observation of the court of law
· The Guwahati High Court observed that the main issue in this case was that the refunds that were granted were erroneous, and that, as the meaning of the word ‘erroneous’ is defined in several judgments by the Apex Court, an error of law or deviating from law and/or an order that is not in accordance with law can be treated as erroneous, but where a law has been changed or reversed, it cannot permit the revisional authority to re

· A later modification in the law will have no influence on decisions that have already been made conclusively, and will not have a retroactive effect, making the cases that have already been resolved wrong and illegal. And, if the effect is applied retroactively, it will result in unending litigation and a waste of time and resources on the part of the Court. If a subsequent law has a retroactive effect, it will be noted in the specific judgement. In the aforementioned example, there is no basis for declaring the reimbursements erroneous under Section 11A of the Central Excise Act. The sole reason is that the Supreme Court is hearing the SRD case per incuriam.

· The second question in this case was whether or not the Department of Central Excise Duty, which has quasi-judicial jurisdiction, can reopen or re-evaluate an order made by the Court. The officers of the department can revisit or re-evaluate the decisions made under the provisions of the statute or judicial remedies, according to the provisions of the Central Excise Act. And, according to Section 35 of the Act, it can be done by filing an appeal or a review application.

· The primary issue decided in M/S Topcem v. Union of India (2021) is whether a subsequent change in law will influence the parties’ position. In this case, the Court held that after a case has been decided in finality and the parties’ rights have been determined, any future reversal or change in law will not impact the parties’ position. The decision will no longer be precedent-setting, but it will still be binding.

· The Department’s show cause notices were dismissed and quashed because they were issued without jurisdiction under Section 11A, but the petitioners’ writ petitions were allowed.

Conclusion

In response to the question of whether a later change in law will influence the parties’ position, the Court found that a later change in law will not ipso facto reverse or alter the parties’ position in a matter that has already been decided and the parties’ rights defined in finality. The res judicata principle applies, and the Department of Central Excise Duty has no ability to reopen or re-evaluate a court order.

An appeal or review application can be submitted under Section 25 of the relevant Act, which can be done through statutory or judicial remedies. Only the precedential value will be determined by the former ruling, which will be binding and final. M/S Topcem v. Union of India & Ors (2021) also established that if a show-cause notice is issued by the Department without jurisdiction, it would be dismissed and quashed, but where it is issued by authority incorrectly or there has been a misuse of power, the aggrieved party can go to court.

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