Cenvat credit for education cess is restricted by rule, making refund claims based on basic excise duty credit inadmissible.

Cenvat credit of basic excise duty could not be used to discharge education cess liability because Rule 3(7)(b) of the Cenvat Credit Rules, 2004 permits utilisation of education cess credit only for payment of education cess on excisable goods or taxable services. A contrary earlier view was treated as per incuriam for being inconsistent with the statute, and refund claims founded on that impermissible utilisation were therefore inadmissible.

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Issues: Whether credit availed towards basic excise duty could be utilised for payment of education cess while claiming the benefit of Notification No. 56/2002-C.E. dated 14-11-2002, and whether refund based on such utilisation was admissible.

Analysis: Rule 3(7)(b) of the Cenvat Credit Rules, 2004 permits utilisation of the credit of education cess only for payment of education cess on excisable goods or taxable services, as specifically provided therein. The provision does not permit utilisation of cenvat credit of basic excise duty for discharge of education cess liability. The contrary view taken in the earlier decision relied upon by the assessee was held to be inconsistent with the statutory provision and, therefore, per incuriam. As the refund claims were founded on an impermissible mode of utilisation of credit, the orders granting refund could not be sustained.

Conclusion: The claim for refund based on utilisation of basic excise duty credit towards education cess was not admissible, and the relief granted by the lower authority was set aside.

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