Education cess credit on inputs from export oriented undertakings is admissible despite Rule 3(7)(a) restriction.

Credit of education cess on inputs received from a hundred percent export oriented undertaking is admissible under Rule 3 of the Cenvat Credit Rules, 2004, because the restriction in Rule 3(7)(a) is confined to credit calculated on basic excise duty payable by such undertakings under Section 3 of the Central Excise Act, 1944. The provision does not expressly extend to education cess, and the non obstante clause cannot be used to bar credits outside that specific restriction. Rule 3(7)(b) also supports utilisation of education cess credit, confirming that disallowance of such credit is unsustainable.

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Issues: Whether credit of education cess is admissible on inputs received from a hundred percent export oriented undertaking under Rule 3 of the Cenvat Credit Rules, 2004, despite the restriction in Rule 3(7)(a).

Analysis: Rule 3(1) permits credit of specified duties and cesses, while Rule 3(4) permits utilisation of such credit. The special restriction in Rule 3(7)(a) is confined to credit calculated on basic excise duty payable by a hundred percent export oriented undertaking under Section 3 of the Central Excise Act, 1944, and the linked notification. The provision does not expressly extend to education cess, and the non obstante clause cannot be read as excluding credits not covered by the specific restriction. Rule 3(7)(b) also contemplates utilisation of credit for education cess, supporting the view that credit on education cess was not intended to be barred in this situation.

Conclusion: Credit of education cess on such inputs is admissible, and the disallowance was unsustainable.

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