Cenvat credit on Sugar Cess upheld, with related demand, interest and penalty set aside.

Cenvat credit was treated as admissible on Sugar Cess because it was regarded as duty of excise under the Sugar Cess Act, 1982, and therefore fell within Rule 3 of the Cenvat Credit Rules, 2004. Following the view taken in the assessee's own case and supported by the Karnataka High Court, the Tribunal held that credit could be availed on Sugar Cess and that the corresponding demand for reversal, with interest and penalty, could not survive.

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Issues: Whether Cenvat credit was admissible on Sugar Cess and the Education Cess and Secondary and Higher Education Cess relatable to it, and whether the corresponding demand, interest and penalty could be sustained.

Analysis: The issue turned on the character of Sugar Cess under the Sugar Cess Act, 1982 and the scope of admissible credit under Rule 3 of the Cenvat Credit Rules, 2004. The Tribunal followed the view already taken in the appellant's own case, as supported by the Karnataka High Court, that Sugar Cess is treated as a duty of excise and, once such duty is paid, credit is available under the Cenvat scheme. In that view, the contrary demand for reversal of credit, along with interest and penalty founded on the alleged wrongful availment, could not survive.

Conclusion: Cenvat credit on Sugar Cess was held admissible, and the related recovery, interest and penalty were set aside in favour of the assessee.

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