CENVAT credit utilisation for sugar cess upheld where no express exclusion barred payment through credit.

Sugar cess was treated as a levy in the nature of duty of excise, and Rule 3(4) of the CENVAT Credit Rules, 2004 was read as permitting utilisation of CENVAT credit for payment of duty of excise. Because no express exclusion barred sugar cess from such utilisation, the Tribunal distinguished clean energy cess cases that depended on a specific exclusion by notification. On that basis, CENVAT credit was held to be validly usable to discharge sugar cess, and the demand, interest and penalty premised on cash payment only were unsustainable.

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Issues: Whether sugar cess could be discharged by utilising CENVAT credit taken on inputs, capital goods and input services under Rule 3(4) of the CENVAT Credit Rules, 2004.

Analysis: Sugar cess was treated as a levy in the nature of duty of excise, and the earlier decision in the assessee's own case, affirmed by the High Court, was relied upon. The Tribunal noted that Rule 3(4) permitted utilisation of CENVAT credit for payment of duty of excise and that no specific restriction excluded sugar cess from such utilisation. The contrary reliance on clean energy cess cases was distinguished because that cess had been expressly excluded by a separate notification, unlike sugar cess.

Conclusion: CENVAT credit could validly be used to pay sugar cess, and the demand, interest and penalty founded on cash payment only were unsustainable in favour of the assessee.

Ratio Decidendi: Where a cess is judicially recognised as a duty of excise and no express exclusion bars its discharge through CENVAT credit, the credit available under Rule 3(4) of the CENVAT Credit Rules, 2004 may be utilised for that liability.

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