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M/S Unicorn Industries v. Union of India & Others

Civil Appeal · 2019 INSC 1336Decided 6 Dec 2019
Civil Appeal No. 9237 of 2019
Justice Arun Mishra · Justice M.R. Shah · Justice B.R. Gavai

Background

As part of an industrial incentive scheme for Sikkim, the Central Government in 2003 exempted manufacturers from basic excise duty and certain named additional duties for ten years. The appellant, a manufacturer of "Indian Mouth Freshener" (pan masala) in Sikkim, argued that this exemption should also extend to National Calamity Contingent Duty (NCCD) and education cess, surcharges introduced by later Finance Acts in 2001, 2004 and 2007, even though the 2003 notification never mentioned them. When the tax authorities demanded repayment of these cesses, the company's writ petitions were dismissed by the High Court, leading to this appeal.

Decision Breakdown

The Supreme Court held that an exemption notification must be strictly construed according to its actual wording, and since NCCD and the education cesses did not even exist when the 2003 notification was issued, the government could not be presumed to have intended to exempt duties it did not yet know would be created. Importantly, the Court found that two of its own earlier two-judge decisions (SRD Nutrients and Bajaj Auto), which had held such cesses were automatically covered once the base excise duty was exempted, were decided "per incuriam" because they failed to consider a binding three-judge bench precedent (Union of India v. Modi Rubber Limited) directly on point, and a smaller or coordinate bench cannot depart from that binding precedent. Following Modi Rubber, the Court dismissed the appeals and upheld the High Court's judgment.

Lesson Learnt

Tax exemption notifications are read strictly and narrowly: a company cannot assume that relief granted for one named duty automatically extends to a different duty or cess created later by separate legislation, unless the exemption notification is itself amended to say so.

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

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