Dear Experts,
I have little confuse and doubtful regarding payment of cess utilised cenvat credit. Different opinion of experts in this regards. Copy of order enclosed for your reference. Pl clerify.
Thanks
Appeal No. V2/380/RAJ/2011 &
Stay Application No. S/200/RAJ/2011
Page 3 of 6
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:: ORDER ::
The present appeal along with stay application has been filed by M/s. Gallant
Metal ltd., Survey No. 176, Near Toll gate, Samakhiyali Bhachau, Dist. Kutchh
(hereinafter referred to as appellant) against Order-In-Original No:
16/ADC/2011 dated 30.08.2011 (hereinafter referred to as the impugned
order) passed by the Additional Commissioner, Central Excise, Rajkot
(hereinafter referred to as Lower Authority).
2. The fact of the case is that during the course of scrutiny of the
monthly returns for the period from July’2009 to March’2010, it was noticed
that the appellant had utilized the Basic Central Excise duty to the tune of `
36,71,292/- for payment of Education Cess and Secondary & Higher Education
Cess. In view of the provisions contained in Rule 3 (4) of the Cenvat Credit
Rules, 2004, the Cenvat credit of basic duty cannot be utilized for payment of
Education Cess and Secondary and Higher Education Cess.
3. The above observations culminated into issuance of Show Cause
Notice No. V.GND/AR-Khar/G’Dham/ADC/153/10 dated 12.07.2010 which was
adjudicated by the Lower Authority vide his impugned order dated 30.08.2011
vide which he disallowed the utilization of Cenvat credit of basic excise duty
to the tune of ` 36,71,292/- for payment of Education Cess and Secondary and
Higher Education Cess and has ordered to recover the same through account
current /PLA under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11
A and confirmed the charging of interest at appropriate rate payable under
Section 11 AB of the Central Excise Act,1944 and has imposed penalty of `
10,00,000/- under Rule 15 (1) of the Cenvat Credit Rules, 2004 read with
Section 11 AC of the Central Excise Act,1944.
4. Being aggrieved with the impugned order, the appellant have
preferred the present appeal on the grounds that: the impugned order is not
legally sustainable; Education Cess and Secondary and Higher Education Cess
are also levied and collected as duty of excise and can be paid out of the
Cenvat credit of basic excise duty in terms of the Rule 3(4) of the Cenvat
Credit Rules, 2004; the sub-rule (4) of Rule 3 of the Rules provides for
utilization of Cenvat credit which can be utilized for payment of any duty of
Appeal No. V2/380/RAJ/2011 &
Stay Application No. S/200/RAJ/2011
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excise on any final product; as per section 93 of the Finance Act, 2004
Education Cess levied under Section 91 in the case of goods specified in the
first schedule to the Central Excise Tariff Act, 1985 being goods manufactured
or produced shall be a duty of excise; there is restriction under Rule 3(7) of
the Cenvat Credit Rules, 2004, which applies to the credit of various duties,
such as additional duties on textile articles, NCCD , Education Cess etc.; in
terms of this restriction, which overrides the provisions of Rule 3(4), the
credit of the named of duties including education Cess can only be utilized for
payment of the said duties alone; this restriction can not be extended to
credit of duties not specifically listed under Rule 3(7); the case law relied
upon by the lower authority in case of CCE Vs Bharat Box Factory reported at
2011 (265) ELT 366 (Tri-Del) is not directly on the issue in the present case.
They refer and relied upon the following case laws:
(i) TTK-LIG ltd Vs CCE Chennai/New Delhi 2006 (193) ELT 169 (Tri-LB)
(ii) Mahidra & Mahindra ltd Vs CCE Mumbai 2007(211) ELT 481 (Tri-Mumbai)
(iii) Vipor Chemicals Pvt. Ltd. Vs. Union of India 2009(233) ELT 44 (Guj.)
(iv) CCE Vapi Vs. Balaji Industries 2008 (232) ELT 693 (Tri. Ahmd.)
(v) Sun Pharmaceutical Inds Vs CCE Jammu 2007(207) ELT 673 (Tri-Del)
5. Hearing in the matter was granted and held on 21.02.2012 which
was attended by Shri R Subramanya, Advocate of the appellant, during which
he reiterated his contentions as given in the appeal memorandum and the
case laws quoted therein. It was his contention that the reliance on M/s
Bharat Box case is not correct in view of the arguments given in grounds of
appeal.
6. I have carefully gone through the facts of the case, impugned
order and appeal memorandum. I find that the issue to be decided in the
present appeal is whether the impugned order of the Lower Authority
disallowing the utilization of Cenvat credit of basic excise duty
for payment of Education Cess and Secondary and Higher Education Cess and
ordering for recovery of the amount along with interest and imposing of
penalty under Rule 15 (1) of the Cenvat Credit Rules, 2004 read with Section
11 AC of the Central Excise Act, 1944, is just, fair and correct or otherwise.
As the appellant has also filed stay application, I dispense with the
requirement of pre-deposit of duty, interest and penalty and proceed to
decide the appeal itself on merits.
Appeal No. V2/380/RAJ/2011 &
Stay Application No. S/200/RAJ/2011
Page 5 of 6
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7. I find that the appellant has referred and relied upon decisions
delivered by single/double member bench or larger bench of the hon’ble
tribunal which are either not pertaining to the area based exemption or are
not squarely applicable to the present case. However the decision relied upon
in case of area based exemption, i.e. in case of M/s Sun Pharmaceuticals
Industries, is delivered by Single member bench. Where as the hon’ble
tribunal, two member bench, comprising of President and Member (T) has
delivered a judgment in case of CCE Vs Bharat Box Factory ltd reported at
2011 (265) ELT 366 (Tri-Delhi) wherein it has been interalia held that Cenvat
credit cannot be utilized for payment of education cesses. While disposing off
almost one and a half dozen appeals filed by the department on similar issue
on hand the hon’ble president of tribunal went on to add that all orders
passed based on M/s Sun Pharmaceuticals Industries case, wherein it was held
that cess is also a kind of excise duty, do not lay down correct position of the
law and also the decisions passed on the basis of the decision in case of M/s
Sun Pharmaceuticals Industries has to be held to have been passed per in
curium. In light of the judgment delivered by double member bench of the
hon’ble tribunal in case of CCE Vs Bharat Box Factory ltd., the decisions
passed on the basis of the decision in case of M/s Sun Pharmaceuticals
Industries have to be held to have been passed per in curium. I find that this
is the correct legal position as on today. In view of the above, I find that the
appellant could not have utilized the Cenvat credit of the basic excise duty
for the payment of education cesses.
8. In view of the abovementioned facts and circumstances, legal
position and relying on the aforesaid decisions, I hold that the lower authority
has correctly held that the case laws cited by the appellant are differentiable
on the basis of the judgment delivered by Double member bench of the
hon’ble tribunal in case of CCE Vs Bharat Box Factory ltd., reported at 2011
(265) ELT 366 (Tri-Delhi) wherein it has been interalia held that Cenvat credit
cannot be utilized for payment of education cesses.
9. As regards to penalty under 15(1) of the Cenvat Credit Rules,
2004 imposed by the lower authority, I find that there are various conflicting
decisions given by the various benches of CESTAT where the assessee have
Appeal No. V2/380/RAJ/2011 &
Stay Application No. S/200/RAJ/2011
Page 6 of 6
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also succeeded in some cases. In the circumstance, I am of the view that the
penalty under Rule 15 of the Cenvat Credit Rules, 2004 is not leviable, which
is set aside. My views are also supported by the hon’ble Supreme Court’s
judgments in case of (i) Maruti Suzuki ltd Vs CCE reported at 2009(240) ELT
641 (SC) and (ii) CCE Vs Gujarat Narmada Fertilisers Co. reported at
2009(240) ELT 661 (SC).
10. In view of the above discussion the impugned order does not
suffer from any infirmity, and is upheld but for the penalty under 15 of
Cenvat Credit Rules, 2004. The appeal and the stay application are disposed
of accordingly.
(R. B. TIWARI)
COMMISSIONER (APPEALS)
By R.P.A.D.
To,
M/s. Gallant Metal ltd.,
Survey No. 176, Near Toll gate,
Samakhiyali Bhachau, Dist. Kutchh
Copy To:
1) The Chief Commissioner, Central Excise, Ahmedabad.
2) The Commissioner, Customs and Central Excise, Rajkot.
3) The Deputy Commissioner, Central Excise Division, Gandhidham.
4) The Superintendent, Central Excise, AR-Kharirohar.
5) Guard File.
6) Spare Copy.
CAclubindia
