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Excise duty cenvat utilized

Ram kr. (Buisness) (883 Points)

28 July 2012

DEAR EXPERTS,

CAN WE UTILIZED CENVAT CREDIT TO PAY EDUCATION CESS AND SECONDARY & HIGHER EDUCATION CESS. PL PROVIDE ANY NOTIFICATION OR CIRCULAR FOR CLERIFICATION.

THANKS

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10 Replies

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 30 July 2012

each type has diff accounting code. so its not possible as on now

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Ram kr. (Buisness) (883 Points)
Replied 30 July 2012

DEAR SIR,

AS PER CENVAT CREDIT RULE 2004 UNDER RULE 3(4) WE CAN PAYMENT ANY DUTY ON FINAL PRODUCT. SO WHY NOT CESS?

(4)    The CENVAT credit may be utilized for payment of –
a)  any duty of excise on any final product; or
b)  an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed; or
c)  an amount equal to the CENVAT credit taken on capital goods if such capital goods are removed as such; or
d)  an amount under sub rule (2) of rule 16 of Central Excise Rules, 2002; or
e)  service tax on any output service:

THANKS

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 31 July 2012

yes, the rules are perfect,

cenvat credit has three parts, 1) Basic Excise duty 2) Education Cess 3) Secondary and Higher Secondary Higher secondary education cess.

all three are unique in nature as per accounting codes prescribed by department, but can be used for other payments, viz BED can be used for a) payment of duty on final product b) clearance of inputs on as such removal c) payment of duty for capital goods removal d) seervice tax,

similer way E Cess and S&HSEC can be used for payment of ECess and SHEC on aforsaid a/b/c/d, but these three accounting codes can not be used in interchangable way. i.e BED is always BED, ECess is always E Cess and S&HSEC is always S&HSEC.

Ram kr. (Buisness) (883 Points)
Replied 31 July 2012

Can you provide me any notification or clerification in this regards.

thanks

Ram kr. (Buisness) (883 Points)
Replied 31 July 2012

what do you say about this article?

TIOL-DDT 1183
26.08.2009
Wednesday

THIS is an oft repeated question by many manufacturers who are at the receiving end of the Departmental Authorities and is also the subject of many audit objections resulting in show cause notices against the manufacturers.

Kindly enlighten us as to whether CENVAT Credit of Basic Excise Duty can be used for payment of Education Cess / Secondary Higher Education Cess?

This question was posed to us by a leading manufacturer and we decided to explain the relevant provisions in this regard to clear the air.

In terms of sub clauses (i), (ii), and (via) of Rule 3(1) of the CENVAT Credit Rules, 2004 a manufacturer is allowed to avail CENVAT Credit of duty of excise, education cess (‘ ECess ') and secondary & higher education cess (‘SHE Cess') and Rule 3(4) (a) thereof allows the same to be utilized for payment of ‘any duty of excise' on any final product. It may be noted that ECess and SHE Cess are also duties of excise.

However, in terms of Rule 3(7) (b) (iii) & (iiia) and the two provisos to sub clause (b) therein, the credit of ECess and SHE Cess can be utilized only towards ECess and SHE Cess respectively and cannot be utilized to pay any duty of excise other than those for which it is permitted under the said provisions. So if there is any excess credit of ECess and SHE Cess is lying in the CENVAT Credit account, the same cannot be utilized for payment of basic excise duty on the final products (or output services as the case may be).

Incidentally, sub-rule (7) of Rule 3 starts with a non-obstante clause which states that the provisions therein are applicable notwithstanding anything contained in sub rules (1) and (4) of Rule 3. This non-obstante clause is probably the reason for all the confusion in the field.

While the provisions of Rule 3(7) (b) (iii) & (iiia) restricts utilization of ECess and SHE Cess for payment of ECess and SHE Cess only [while allowing for cross utilization for goods and services as per the two provisos under sub clause (b)], there is no such specific restriction on utilization of credit of duty of excise (or basic excise duty) which is governed by Rule 3(4)( a).

Hence, in terms of Rule 3(4) (a), credit of duty of excise may be utilized for payment of ‘any duty of excise' on any final product and as mentioned above ‘duties of excise' includes both ECess and SHE Cess as well.

And fortunately, we have a few decided cases on this issue –in

Commissioner of Central Excise, VAPI v BALAJI INDUSTRIES - 2008-TIOL-2629-CESTAT- AHM.

CCE , Shillong Vs Godrej Consumer Products Ltd - 2007-TIOL-1174 CESTAT- Kol , and

Sun Pharmaceutical Industries Vs CCE , Jammu - 2006-TIOL-1444-CESTAT-Del which support the above view.

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U S Sharma (glidor@gmail.com) (21063 Points)
Replied 01 August 2012

the cases you have cited are prior to the imposition of S&HSE, which got in frame after budget 2007.

again, Excise duty is only BED, and not Cess(s) for your reference i m posting the CCR2004 rule in this regard

4)    The CENVAT credit may be utilized for payment of –
a)  any duty of excise on any final product; or
b)  an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed; or
c)  an amount equal to the CENVAT credit taken on capital goods if such capital goods are removed as such; or
d)  an amount under sub rule (2) of rule 16 of Central Excise Rules, 2002; or
e)  service tax on any output service:

when we take credit of BED/EC/S*HSEC, all such credit is referred as CENVAT credit, and not BED only,

the post may be a personal view of some respected person, but its not interpretating the correct view of rules in force.

Ram kr. (Buisness) (883 Points)
Replied 01 August 2012

Can you provide me any cases which are related to after the imposition of S&HSE budget 2007.

Achyut Churi (Officer) (21 Points)
Replied 26 August 2013

Please provide us latest decision of supreme court regarding utilization of 2% & 1% Cess from Basic Excise Duty.

Mallikharjun (Deputy Manager) (304 Points)
Replied 10 September 2013

Cenvat Credit of Education cess and SHE Cess can be utilised only for payment of Education cess and SHE Cess respectively. It cannot be utilised for making payment of Basic Excise duty.

But Cenvat credit of BED can be utilised for making payment of Education Cess and SHE Cess liability. There is no restriction.

Please go through Cenvat Credit Rules once again. There are several case laws on this.

Mallikharjun (Deputy Manager) (304 Points)
Replied 10 September 2013

Relevant case laws supporting my view are given below

PRAG BOSIMI SYNTHETICS LTD. Vs. CCE., DIBRUGARH – 2007 (216) E.L.T. 254 (Tri-Kolkata)
EURO COTSPIN LTD., Vs. CCE., CHANDIGARH – 2008 (223) E.L.T. 618 (Tri – Delhi)
SANATHAN TEXTURISERS Vs. CCE., VAPI – 2007 (209) E.L.T. 445 (Tri – Ahmedabad)
CCE., VAPI Vs. BALAJI INDUSTRIES – 2008 (232) E.L.T. 693 (Tri – Ahmedabad)