Unutilised CENVAT credit of cess survived amendment and could be used after the cess regime changed.

Accumulated CENVAT credit of Education Cess and Secondary and Higher Education Cess lying unutilised on 28.02.2015 was held to remain utilisable for payment of Central Excise duty after 01.03.2015, because Notification No. 12/2015-CE(NT) amended the credit rules without expressly providing for lapsing of the balance credit. The Tribunal treated the credit as an accrued benefit, noted the absence of any clear statutory prohibition or lapsing mechanism, and held that the resulting demand was not sustainable; interest and penalty were also set aside, with penalty found unwarranted in light of the interpretative nature of the issue.

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Issues: Whether the accumulated CENVAT credit of Education Cess and Secondary and Higher Education Cess lying unutilised as on 28.02.2015 could be utilised towards payment of Central Excise duty after 01.03.2015, and whether the consequential demand, interest and penalty were sustainable.

Analysis: Notification No. 12/2015-CE(NT) amended Rule 3(7)(b) of the CENVAT Credit Rules, 2004 to permit utilisation of credit of Education Cess and Secondary and Higher Education Cess in specified situations, but it did not expressly provide that the balance credit already lying in account on 28.02.2015 would lapse. The absence of an express lapsing provision was significant, particularly in light of the statutory power under Section 37(2)(xxviii) of the Central Excise Act, 1944 to provide for lapsing of unutilised credit on an appointed date. The credit was treated as a vested and accrued benefit, and the material relied on from the transition provisions of the Central Goods and Services Tax Act, 2017 supported the conclusion that accumulated credit was not to be treated as extinguished merely because the cesses were subsumed. The Tribunal also held that the issue was at least one of interpretation, so the assessee's utilisation of the credit could not attract penalty.

Conclusion: The accumulated credit was held to be utilisable, and the demand based on its utilisation was not sustainable against the assessee. The penalty was also not warranted.

Final Conclusion: The order under challenge was set aside and the appeal succeeded.

Ratio Decidendi: Where a taxing or credit-regime amendment does not expressly provide for lapsing of accumulated credit, such credit cannot be treated as extinguished by implication and may be utilised in the absence of a clear statutory prohibition.

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