Cenvat balance of Basic exise duty to be utilized for payment of Edu Cess

[deepak kalambate]

Dear Sir,

Pl let us know whether Cenvat balance of Basic Excise Duty can be utilized for payment of Education Cess and Higher Secondary Education Cess.

[YAGAY andSUN]

Dear Sir,

Basic duty of excise can't be utilized against the payment of Ed Cess and SHE Cess.  Kindly refer CC& C Ex., J & K versus Bharat Box Factory Ltd. (Unit no.1), final order Nos. 115-130/2011 -Ex(PB), dated 19-01-2011 in Appeal Nos E/3075-3090/2009.

Please also refer sub Rule 7(b) of Rule 3 of the Cenvat Credit Rule,  2004 as amended time to time.

Best Regards,

Pradeep Khatri

[rajkumar shukla]

I DO NOT KNOW ABOUT THE CASE LAW BUT RULES RESTRICT UTILISATION OF CREDIT OF CESS FOR CESS ONLY NOT OF BASIC FOR CESS

[Vijay Chitte]

In terms of Rule 3 (4)(a), credit of duty of excise may be utilized for payment of ‘any duty of excise' on any final product and as mentioned above ‘duties of excise' includes both ECess and SHE Cess as well. there is no such specific restriction on utilization of credit of duty of excise (or basic excise duty) which is governed by Rule 3 (4)(a).

Following case laws are support of this views.

Commissioner of Central Excise, VAPI v BALAJI INDUSTRIES - CESTAT- AHM,
CCE , Shillong Vs Godrej Consumer Products Ltd - CESTAT- Kol ,
Sun Pharmaceutical Industries Vs CCE , CESTAT-Del,
CCE Vapi Vs.  M/s. Madura Industries Textiles- CESTAT - AHM

which support the above view.

[YAGAY andSUN]

Dear Vijay Sir,

The case law mentioned by you (speacially Sun Pharma Case) in support of your point of view has been overruled in Bharat Box Factory judgment. Please go through it.

Best Regards,

Pradeep Khatri

[Vijay Chitte]

Dear Pradeepji,

I appreciate your concern, in Bharat Box Factory judgment, the rule 3(4)(a) of Cenvat Credit Rule, 2004  are not addressed, in the said judgement all the rules & other case laws are not properly argued, rule 3(7) of Cenvat Credit Rule, 2004 applies restriction to the credit of various duties, such as additional duties on textiles and textile articles, NCCD, Education Cess etc. There is nothing in this rule which restrict the use of CENVAT credit of basic excise duty for payment of Education cess and S. & H. education cess. When there is no restriction prescribed under rule 3(7) of Cenvat Rules about such utilization of credit of basic duty there is no reason to deny it. Therefore, in absence of any restriction and as provided under rule 3(4) of Cenvat Credit Rule, 2004 the CENVAT credit of basic duty may be utilized for payment of any duty of excise on any final product.

Thanks

[YAGAY andSUN]

Dear Vijay Sir,

Thanks for your valuable insights and analysis on the aforesaid matter.

Best Regards,

Pradeep Khatri

[Guest]

I fully agree with the post of Mr. Vijay. There is no restiriction in rule 3(7) of CCR, 2004,.

[Jayant Kuvelkar]

An interesting situation. Pradeepji has correctly given the present legal position which has emerged by way of two member judgment of CESTAT which has brazenly overruled the earlier single member rulings on the subject. The judgment strangely has avoided any discussion on Rule 3(4) in a threadbare manner as has been rightly pointed out by Vijayji. Also there is a clever mention that this is in relation to claiming benefit under Notn.56/02.

The fact that Education Cess is a duty of excise has been clearly stated in Finance Act 2004. This has been further confirmed by a larger bench judgment of CESTAT. As long as these facts prevail, I do not think utilisation of BED credit for payment of ECess can be disallowed in normal situations.

[NEERAJ KUMAR, RANCHI]

Dear Sirs,

Credit of BED and service tax can be utilized for payment of education cess and SAH cess but not vice versa.

AI Summary

Cenvat credit utilization: Basic Excise Duty credit may be applied to Education Cess payment, though contested. The document records a contested question whether Cenvat credit of Basic Excise Duty may be applied to payment of Education Cess and Secondary & Higher Education Cess. One position invokes the Cenvat credit rule permitting utilization of duty credit for payment of any duty of excise and cites tribunal precedents supporting use of BED credit for cesses. An opposing position relies on a tribunal decision (Bharat Box Factory) and rule based restrictions to contend BED credit should not discharge cess liabilities, producing a divided practice.