Cenvat credit on education cess cannot be used for duty payment, but bona fide mistake may excuse penalty.

Education cess and higher education cess credit earned before 01.03.2015 could not be used to pay duty, so the duty demand and interest were sustained. The Tribunal followed its prior decisions on the ineligibility of such credit for duty payment and rejected the challenge to the demand. Penalty, however, was waived because the assessee's utilisation was found to have been based on a bona fide belief, including in the context of Notification No. 12/15-CE dated 13.04.2015. The fiscal liability remained intact, but the penal consequence was removed, granting partial relief.

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Issues: (i) Whether Cenvat credit of education cess and higher education cess earned prior to 01.03.2015 could be utilized for payment of duty. (ii) Whether penalty was leviable for such utilization.

Issue (i): Whether Cenvat credit of education cess and higher education cess earned prior to 01.03.2015 could be utilized for payment of duty.

Analysis: The Tribunal followed its earlier decisions holding that education cess and higher education cess credit earned prior to 01.03.2015 could not be used for payment of duty. On that basis, the challenge to the duty demand did not survive.

Conclusion: The utilization of such credit was not permitted and the demand of duty along with interest was sustained.

Issue (ii): Whether penalty was leviable for such utilization.

Analysis: The Tribunal found that the assessee had acted under a bona fide belief regarding the availability of credit for duty payment, particularly in the context of Notification No. 12/15-CE dated 13.04.2015. In the facts of the case, this was treated as a bona fide mistake warranting relief from penalty.

Conclusion: The penalty was set aside.

Final Conclusion: The fiscal demand was upheld, but the penal consequences were removed, resulting in partial relief to the assessee.

Ratio Decidendi: Education cess and higher education cess credit earned prior to 01.03.2015 could not be utilized for payment of duty, but penalty may be waived where the incorrect utilization occurred under a bona fide mistake.

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