Tribunal allows cenvat credit for Education Cess. Interest and penalty set aside.

The Tribunal held that the demand of cenvat credit in respect of Education Cess and Secondary & Higher Education Cess was maintained. However, the demand of interest and penalty was set aside as the appellant had not wrongly availed or utilized the credit. The appeal was allowed in favor of the appellant, and the penalty under Section 11AC was deemed not imposable due to no suppression of facts and non-utilization of the credit after reversal.

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Issues:
1. Liability to pay interest on the credit of Education Cess and Secondary & Higher Education Cess subsumed in the opening balance of cenvat credit as on 01.03.2015.
2. Liability for penalty under Section 11AC.

Analysis:

Issue 1: Liability to pay interest on the credit of Education Cess and Secondary & Higher Education Cess subsumed in the opening balance of cenvat credit as on 01.03.2015:
The appellant had subsumed the balance of Education Cess and Secondary & Higher Education Cess into the cenvat credit of basic excise duty and service tax. The department contended that the appellant was not entitled to carry forward the balance of Education Cess and Secondary & Higher Education Cess as on 01.03.2015 due to changes in the Union Budget 2015-16. The appellant had shown the balance separately in the ER-1 Returns of February 2015 but later subsumed it in the opening balance of cenvat credit for March 2015. The appellant reversed the credit upon audit scrutiny and subsequent notice of demand. The adjudicating authority confirmed the demand and imposed penalties. However, the appellant argued that no interest should be charged as the credit was not utilized after being reversed. The Tribunal found that the interest is chargeable only when the credit is wrongly availed and utilized, which was not the case here. Therefore, the demand of interest was set aside.

Issue 2: Liability for penalty under Section 11AC:
The appellant contended that there was no suppression of facts as they had declared the balance of Education Cess and Secondary & Higher Education Cess separately in their returns. The Tribunal agreed that there was no suppression of facts, and since the appellant had not utilized the credit after reversal, the penalty under Section 11AC was deemed not imposable. The Tribunal also referenced a similar case where no interest was payable and no penalty was imposable, which had attained finality. Therefore, the penalty imposed under Section 11AC was set aside.

In conclusion, the Tribunal held that while the demand of cenvat credit in respect of Education Cess and Secondary & Higher Education Cess was maintained, the demand of interest and penalty was set aside. The appeal was allowed in favor of the appellant.

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