2024 (5) TMI 4 - AT - Central Excise

CESTAT allows Cenvat credit usage for Education Cess payment, sets aside recovery demand under Rule 3(7)(b)

Birla Carbon India Pvt. Ltd. Versus The Commissioner of Central Excise, Chennai II Commissionerate

CESTAT Chennai set aside demand for recovery of wrongly utilized Cenvat credit where appellant used credit availed on Basic Excise Duty for payment of ... Recovery of wrongly utilized credit - utilization of Cenvat Credit availed on Basic Excise Duty (BED) for payment of EC and SHEC - violation of Rule 3 (7)(b) of Cenvat Credit Rules, 2004 - Period between April 2013 and January 2014 - HELD THAT:- The very same issue was considered by Tribunal in the case of M/S. VEDANTA LTD. VERSUS CCE, TIRUNELVELI [2018 (7) TMI 158 - CESTAT CHENNAI] and the Tribunal held that the demand confirmed alleging that the appellant cannot utilize the credit availed on Basic Excise Duty for discharging Education Cess and Secondary Higher Education Cess cannot be sustained. In the said case the Tribunal followed various decisions in which Rule 3 (7)(b) of Cenvat Credit Rule was also analysed. In the case of COMMISSIONER OF C. EXCISE, DIBRUGARH VERSUS PRAG BOSIMI SYNTHETICS LTD. [2013 (11) TMI 487 - GAUHATI HIGH COURT], the Hon’ble Guwahati High Court considered the issue in detail as to whether National Calamity Contingent Duty (NCCD) is a duty exempted under Notification No.32/99 - CE dated 08.07.1999 and if not whether CENVAT credit availed under Cenvat Credit Rules, 2004 can be utilized for payment of such duty which is not exempted under such Notification - Hon’ble High Court held that NCCD is nothing but a duty of Excise and in para 8 of the said judgment the question whether the CENVAT credit can be utilized for payment of NCCD was discussed and held in favour of assessee. The Hon’ble Supreme Court in the case Unicorn Industries [2019 (12) TMI 286 - SUPREME COURT] has observed that ‘the duty on NCCD, Education Cess and Secondary Higher Education Cess are in the nature of additional Excise duty and it would not mean that the area based exemption Notification dated 09.09.2003 would be applicable to these duties (NCCD), particularly, when there is no reference to the Notification issued under Finance Act 2001. The Hon’ble jurisdictional High Court had considered the decision in the case of M/s, Unicorn Industries also to reach the conclusion that Cess being duty of excise the importer can pay Cess using MEIS Scrips. From the above, there are no hesitation to hold that the decision of the Tribunal in the case of M/s. Vedanta Ltd. is squarely applicable. The demand therefore cannot be sustained. The impugned order is set aside. The appeal is allowed. Issues Involved:1. Whether CENVAT Credit availed on Basic Excise Duty can be utilized for payment of Education Cess and Secondary/Higher Education Cess.2. Interpretation of Rule 3(7)(b) of Cenvat Credit Rules, 2004.3. Applicability of the decision in M/s. Unicorn Industries Vs. UOI.Summary:Issue 1: Utilization of CENVAT Credit for Payment of CessThe appellant, engaged in manufacturing 'carbon black' and registered for Cenvat Credit on inputs, utilized Cenvat Credit of Basic Excise Duty (BED) for payment of Education Cess (EC) and Secondary/Higher Education Cess (SHEC) from April 2013 to January 2014. The department issued a show cause notice alleging this utilization was against the provisions of Cenvat Credit Rules, 2004, leading to a demand for recovery of the wrongly utilized credit along with interest and a penalty of Rs.1,00,00,000/- u/r 15(1) of Cenvat Credit Rules, 2004. The original authority confirmed the demand, prompting the appellant to file the present appeal.Issue 2: Interpretation of Rule 3(7)(b) of Cenvat Credit Rules, 2004The appellant argued that Rule 3(4) of Cenvat Credit Rules, 2004 allows the utilization of Cenvat Credit for payment of 'any duty of excise,' which should include EC and SHEC. The Tribunal in M/s. Vedanta Ltd. and various High Court decisions supported this view, holding that Cenvat Credit availed on BED can be utilized for payment of EC and SHEC. The department, however, contended that EC and SHEC are not duties of excise under the Central Excise Act, 1944, and thus credit on BED cannot be used for their payment.Issue 3: Applicability of the Decision in M/s. Unicorn Industries Vs. UOIThe department relied on the Supreme Court's decision in M/s. Unicorn Industries, which dealt with the non-applicability of area-based exemption notifications to NCCD, EC, and SHEC. The Tribunal distinguished this case, noting that the issue in Unicorn Industries was about exemption notifications and not the utilization of credit. The Tribunal emphasized that Cenvat Credit Rules comprehensively deal with the utilization of credit for various duties and cesses, and the imposition of cess is in the nature of duty of excise.Conclusion:The Tribunal concluded that the utilization of Cenvat Credit availed on BED for payment of EC and SHEC is permissible. The impugned order was set aside, and the appeal was allowed with consequential reliefs. The Tribunal also allowed the miscellaneous application filed by the appellant for a change of cause title.