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Bajaj Auto Limited v. Union of India

Civil Appeal · 2019 INSC 407Decided 27 Mar 2019
Civil Appeal No. 3239 of 2019
Justice L. Nageswara Rao · Justice Sanjay Kishan Kaul

Background

To encourage industrial investment in Uttarakhand and Himachal Pradesh, the Central Government announced a package in 2003 giving new manufacturing units a 100% excise duty exemption for ten years. Bajaj Auto set up a unit availing this exemption, but the tax authorities still demanded National Calamity Contingent Duty (NCCD), Education Cess, and Secondary & Higher Education Cess on the ground that these were not excise duty and so fell outside the exemption notification.

Decision Breakdown

The Supreme Court relied on its earlier ruling in SRD Nutrients Pvt. Ltd., which held that such cesses, being surcharges calculated on and taking the character of excise duty, could not survive once the underlying excise duty itself was exempted. The Court held that NCCD, despite being levied on the product rather than on the value of excise duty, remains in the nature of excise duty, and therefore an exemption from "the whole of the duty of excise" necessarily covers NCCD as well as the two education cesses. It quashed the show cause notice and held Bajaj Auto was not liable to pay these amounts, allowing the appeal.

Lesson Learnt

When the government grants a tax exemption described broadly (such as "the whole of the duty of excise"), related surcharges and cesses that are legally characterized as that same duty cannot be carved out and charged separately: a business is entitled to rely on the full scope of the exemption as worded.

Official source (sci.gov.in)View Judgment (PDF)

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