In Brief
The Supreme Court held that when excise duty is wholly exempted under notifications for industrial units in North-Eastern States, Education Cess and Higher Education Cess (levied as 2% surcharge on excise duty) must also be refunded. Since Education Cess is calculated only on excise duties levied and collected, no cess is payable when excise duty is nil due to exemption. The Court agreed with two Ministry of Finance circulars confirming that when primary excise duty is exempted, the surcharge (Education Cess) is also not payable. Therefore, manufacturers exempted from excise duty are entitled to full refund of Education Cess and Higher Education Cess previously paid.
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