09 January 2011
IN THE CESTAT, SOUTH ZONAL BENCH, BANGALORE
Dr. S.L. Peeran, Member (J)
SHREYA PETS PVT. LTD.
Versus
COMMISSIONER OF CUS. & C. EX., HYDERABAD-IV
Final Order No. 1076/2008, dated 15-9-2008 in Appeal No. E/9/2008
Cenvat/Modvat - Quantum of - Education Cess - Cenvat credit of Education Cess sought to be restricted to 50% in respect of supplies by 100% EOU - Mumbai Bench of Tribunal in 2008 (225) E.L.T. 513 (Tribunal) held that credit of Education Cess available in full in case of supplies by EOU - Impugned order restricting credit set aside - Rules 3 and 14 of Cenvat Credit Rules, 2004. [paras 1, 3, 5]
Appeal allowed
CASES CITED
Das and Co. v. Collector — 2000 (121) E.L.T. 275 (Tribunal-LB) — Referred............................................................................................................. [Para 3]
Jindal Poly Films Ltd. v. Commissioner — 2006 (198) E.L.T. 3 (S.C.) — Referred..................................................................................................... [Para 3]
REPRESENTED BY : S/Shri Ramakrishna, Advocate and Debasis Ghosh, Cost Accountant, for the Appellant.
Ms. Sudha Koka, SDR, for the Respondent.
[Order (oral)]. - This appeal arises from Order-in-Appeal No. 44/2007-C.E., dated 21-9-2007 filed by the appellants who have been denied the Cenvat credit in respect of Education Cess availed by them on the inputs received from a 100% EOU unit. The short finding given by the Commissioner (A) in Para 5 is noted herein below.
5. The short question that is required to be determined is whether the appellant is entitled for credit of full education cess paid on the goods supplied by the 100% EOU or 50% as stated in Rule 3(7)(a) of Cenvat Credit Rules, 2004. As rightly held by the original authority, the supplier was paying duty under Sl. No. 2 of Notification No. 23/2003 which is an indisputed fact. Hence the appellants would be entitled to credit as per Rule 3(7)(a) of Cenvat Credit Rules, 2004 on the goods cleared by the 100% EOU. In view of the above, I pass the following order :
ORDER
The appeal is rejected.
2. As can be noted from the above findings, the findings are not speaking and does not deal with the question at length as brought out by him in the facts of the case as noted in Paras 3 and 4 including submissions made by the assessee.
3. The learned Cost Accountant submits that the issue is no longer res integra and the Mumbai Bench in the case of Emcure Pharmaceuticals Ltd. v. CCE, Pune - 2008 (225) E.L.T. 513 (Tri-Mumbai) has held that assessee is eligible to take credit of Education Cess over the goods supplied to them by 100% EOU in terms of Rule 3(7)(a) and the provisions of Rule 3(7)(b) of the Cenvat Credit Rules. The learned Vice-President has followed the Larger Bench judgment rendered in the case of Das and Co. v. Collector - 2000 (121) E.L.T. 275 (Tribunal-LB) and also Apex Court judgment rendered in the case of Jindal Poly Films Ltd. v. Commissioner - 2006 (198) E.L.T. 3 (S.C.). The relevant findings in Paras 6 and 7 are reproduced herein below.
“6. According to the Revenue, since Rule 3(7)(a) begins with a non-obstante clause, it overrides the provisions contained in sub-rule (1) and (4) of Rule 3 and, therefore, the only credit available to the appellants in respect of the inputs supplied by EOU will be the amount as specified under the formula given therein. However, this stand is not tenable for the reason that the non-obstante clause is a legislative device which is usually employed to give overriding effect to certain provisions over some contrary provisions that may be found in the same enactment or some other enactment, and not all provisions contained therein. My view is fortified by the Apex Court’s decision in UOI v. G.M. Kokil - (1984) Supp SCC 196, wherein the Apex Court has held as under :-
“Section 70, so far as is relevant, says “the provisions of the Factories Act shall, notwithstanding anything contained in that Act, apply to all persons employed in and in connection with a factory”: it is well-known that a non obstante clause is a legislative device which is usually employed to give overriding effect to certain provisions over some contrary provisions that may be found either in the same enactment or some other enactment, that is to say, to avoid the operation and effect of all contrary provisions. Thus the non obstante clause in Section 70, namely, “notwithstanding anything contained in that Act” must mean notwithstanding anything to the contrary contained in that Act and as such it must refer to the exempting provisions which would be contrary to the general applicability of the Act. In other words, as all the relevant provisions the Act are made applicable to a factory notwithstanding anything to the contrary contained in it, it must have the effect of excluding the operation of the exemption provisions. Just as because of the non obstante clause the Act is applicable even to employees in the factory who might not be ‘workers’ under Section 2(1), the same non obstante clause will keep away the applicability of exemption provisions qua all those working in the factory. The Labour Court, in our view, was, therefore, right in taking the view that because of the non obstante clause Section 64 read with Rule 100 itself would not apply to the respondents and they would be entitled to claim overtime wages under Section 59 of that Act read with Section 70 of the Bombay Shops and Establishments Act, 1948.”
The above decision has been followed by the larger bench of the Tribunal in Das & Co. v. CCE, 2000 (121) E.L.T. 275, holding that a non obstante clause is used where contrary provisions exist. Similar view has been expressed by the apex court in the case of Jindal Poly Films Ltd. v. CCE, 2006 (198) E.L.T. 3 (S.C.) in the context of the Modvat Rules. Rule 3(1) is applicable to all manufacturers or producers of final products or providers of taxable services including 100% EOU. Rule 3(7)(b) allows utilisation of Cenvat credit by all categories of manufacturers or producers of final products or providers of taxable services, including 100% EOU, in respect of AED for payment of AED, NCCD for payment of NCCD, education cess for payment of education cess, etc. Rule 3(7)(b) also opens with the non obstante clause. Therefore, if the interpretation canvassed by the Revenue is accepted as correct, there would have been no question of utilisation of education cess for payment of education cess if the taking of the credit itself, according to the Revenue, is barred by Rule 3(7)(a), and the provisions of Rule 3(7)(b) would, therefore, be rendered redundant.
7. In the light of the above discussion, I am of the view that credit of education cess is admissible to the appellants herein, and accordingly set aside the impugned order and allow the appeal.”
3.1 The learned Cost Accountant taking me to the provisions of law and the citations referred to supra submits that they are eligible to avail the Cenvat credit in respect of Education Cess and hence, he prays for allowing the appeal.
4. The learned SDR reiterates the department’s contentions.
5. On a careful consideration, I find that Mumbai Bench has given a clear cut finding that appellants are entitled to avail 100% credit of Education Cess on the goods supplied to them by a 100% EOU in terms of the above findings. The findings given by the Commissioner (A) is not legal and proper and the same is set aside by allowing the appeal with consequential relief.
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