2013 (8) TMI 956 - AT - Central Excise

Tribunal allows Cenvat credit for education cess, directs repayment of excise duty credit

The Tribunal upheld the appellant's eligibility for Cenvat credit of education cess and set aside the demands related to education cess. However, the ... 100% EOU - CENVAT Credit on the 3rd education cess paid - Service recipient - Held that:- If education cess on CVD portion is admissible, 3rd time cess which is payable according to the Department on the ground that what is required to be paid by the 100% EOU is excise duty and the total excise duty arises only after calculation of equal amount to customs duty and therefore the 3rd time cess should be paid supports the assessee’s case. If the 3rd education cess is considered as a levy on total excise duty, the obvious conclusion would be that the credit also admissible - credit allowed. Whether the appellant is eligible for Cenvat credit on education cess paid to the extent of full amount or not? - Held that:- The decision of the Tribunal in Emcure Pharmaceuticals Ltd. [2008 (1) TMI 147 - CESTAT, MUMBAI] case is squarely applicable in respect of the Cenvat credit of education cess in respect of the appellant - credit allowed. Whether the appellant can take Cenvat credit of excise duty paid equal to the amount of cess paid on the additional customs duty or the amount calculated in accordance with formula as per Rule 3(7)(a) of CCR? - Held that:- When the statutory provisions clearly provide that appellant can take credit as per the formula, the question of availing the credit equal to the additional duty indicated in the invoice does not arise as far as credit of duty is concerned - the credit of ₹ 82,965/- availed by the appellant is clearly not admissible and therefore is required to be paid back - credit cannot be allowed. Appeal allowed in part. Issues Involved:1. Eligibility of appellant for Cenvat credit of education cess on overall excise duty.2. Eligibility of appellant for Cenvat credit of education cess paid by EOU.3. Interpretation of Rule 3(7)(a) of Cenvat Credit Rules, 2004.4. Admissibility of Cenvat credit of excise duty paid equal to the amount of cess paid on additional customs duty.Analysis:1. Eligibility for Cenvat Credit of Education Cess on Overall Excise Duty:The dispute revolved around the appellant's eligibility for Cenvat credit of education cess paid on overall excise duty, specifically the 3rd education cess. The appellant, a 100% EOU, had taken credit of education cess paid on the CVD portion and overall duty for the 3rd time. The Department objected to this credit. The Tribunal referred to settled principles and held that if education cess has been paid, it cannot be denied. Citing the case of Emcure Pharmaceuticals Ltd., the Tribunal concluded that the appellant's claim for credit of 3rd education cess was valid. The Tribunal found no grounds to reject the Cenvat credit on the 3rd education cess.2. Eligibility for Cenvat Credit of Education Cess Paid by EOU:Another issue was the appellant's eligibility for Cenvat credit of education cess paid by EOU on invoices. The Department contended that the appellant was not entitled to such credit as education cess was not mentioned under Rule 3(7) of Cenvat Credit Rules, 2004. However, the Tribunal, relying on the Emcure Pharmaceuticals Ltd. case, held that the appellant could avail the Cenvat credit of education cess paid by EOU. The demands against the appellant were set aside in this regard.3. Interpretation of Rule 3(7)(a) of Cenvat Credit Rules, 2004:The Tribunal analyzed Rule 3(7)(a) which restricts the availment of credit in the case of inputs supplied by EOU. It was observed that the rule does not cover all duties paid by EOU, specifically education cess. The Tribunal emphasized that the non obstante clause in Rule 3(7)(a) does not override all provisions, and the appellant was entitled to claim Cenvat credit of education cess as per Rule 3(7)(b).4. Admissibility of Cenvat Credit of Excise Duty on Additional Customs Duty:The final issue was whether the appellant could take Cenvat credit of excise duty paid equal to the amount of cess paid on additional customs duty or as per the formula under Rule 3(7)(a) of CCR. The Tribunal clarified that the appellant must adhere to the formula specified in the rule for availing credit. The credit availed by the appellant, not in accordance with the formula, was deemed inadmissible, and the appellant was directed to pay back the amount.In conclusion, the Tribunal upheld the appellant's eligibility for Cenvat credit of education cess and set aside the demands related to education cess, while directing the appellant to pay back the inadmissible credit of excise duty.