2011 (1) TMI 222 - AT - Central Excise

Appeals allowed, refund claims disallowed as Cenvat credit misuse for cess payment violates notification.

The appeals were allowed, and the refund claims were disallowed as the Tribunal's decision allowing the utilization of Cenvat credit for education cess ... Cenvat credit utilisation - education cess - refund claim under Notification No. 56/2002-C.E., dated 14-11-2002 - sub-rule 7(b) of Rule 3 of the Cenvat Credit Rules, 2004 - precedent held per incuriamCenvat credit utilisation - education cess - sub-rule 7(b) of Rule 3 of the Cenvat Credit Rules, 2004 - refund claim under Notification No. 56/2002-C.E., dated 14-11-2002 - Whether credit of basic excise duty availed as Cenvat credit could be utilised for payment of education cess so as to enable refund claims under Notification No.56/2002-C.E., dated 14-11-2002. - HELD THAT: - The Tribunal concluded that the statutory scheme embodied in sub-rule 7(b) of Rule 3 expressly governs utilisation of Cenvat credit of education cess and specifies the items on which such cess-credit may be utilised; it does not permit utilisation of Cenvat credit of basic excise duty for payment of education cess. The adjudicating authority's view that basic excise duty credit could be so utilised was correct and the Commissioner (Appeals) erred in allowing refunds by following Sun Pharmaceutical Industries, whose contrary observation was held to be per incuriam. The Tribunal, relying on its analysis in C.C.E., Jammu v. Jindal Drugs Ltd., held that subsequent orders based on Sun Pharmaceutical do not state the correct proposition of law. In consequence the impugned appellate orders allowing refund were set aside and the original orders of the adjudicating authority were restored. [Paras 6, 7, 8]Refunds allowed by the Commissioner (Appeals) set aside; orders of the adjudicating authority restored because sub-rule 7(b) does not permit utilisation of basic excise duty Cenvat credit for payment of education cess.Final Conclusion: Appeals allowed; the Commissioner (Appeals) order granting refunds set aside and the adjudicating authority's orders restored on the ground that Cenvat credit of basic excise duty cannot be utilised for payment of education cess, and the contrary view in Sun Pharmaceutical Industries is to be treated as per incuriam. Issues:Appeal against common order allowing refund claims based on utilization of Cenvat credit for education cess paid through PLA.Analysis:1. Background: The appeals arose from a common order by the Commissioner (Appeals) setting aside the orders passed by the adjudicating authority and allowing refund claims by the respondents.2. Refund Claims: The respondents, engaged in manufacturing printed cartons, filed refund claims for central excise duty paid through PLA for specified months under Notification No. 56/2002-C.E., dated 14-11-2002. The adjudicating authority disallowed the claims, citing that Cenvat credit of basic excise duty cannot be used for education cess payment as per Rule 3 of Cenvat Credit Rules, 2004.3. Appellate Decision: The Commissioner (Appeals) set aside the adjudicating authority's orders, following a Tribunal decision in Sun Pharmaceutical Industries case. The Tribunal held that the Cenvat credit could have been utilized for cess payment, contrary to the adjudicating authority's stance.4. Legal Interpretation: The issue revolved around whether Cenvat credit could be used for cess payment under Notification No. 56/2002-C.E., dated 14-11-2002. The law, specifically Rule 3 sub-rule 7(b), prohibits such utilization for education cess. The Tribunal's reliance on Sun Pharmaceutical Industries case was deemed incorrect as it contradicted the law's provisions.5. Inconsistencies: The Tribunal's decision in Sun Pharmaceutical Industries case was deemed in curiam as it conflicted with the legal provisions. The subsequent orders based on this case were considered incorrect. The judgment emphasized that the law does not permit using Cenvat credit for cess payment.6. Final Decision: The impugned order was set aside, and the adjudicating authority's orders were restored. The appeals were allowed, and the refund claims were disallowed, emphasizing the correct interpretation of the law. The judgment was pronounced on 19-1-2011.