UTILISED CENVAT CRDIT TO PAY E.CESS&SHE CESS

[RAM SHARMA]

DEAR EXPERTS,

1. CAN WE UTILISED CENVAT TO PAY EDUCATION CESS AND SECONDARY HIGHTER EDUCATION CESS.

2. SECONDLY CAN WE TAKE CENVAT CREDIT OF EDU.CESS AND SHE CESS ON CVD BECAUSE RECENT CHANGE IN CALCULATION OF E.CESS AND SHE CESS IN FINANCIAL BUDGET 2012.

[YAGAY and SUN]

1. As per rule 3(4) read with rule 3(1), the credit of basis duty, specially excise duty, service tax and AED can be utilized for payment of any duty or service tax (except NCCD on Mobile phones), as all together is known as 'CENVAT credit'.  Hence, credit of these duties/taxes can be utilized for payment of education cess/SAH Education Cess/AED, but vice versa is not permissible.
2. Yes, you may avail the same.

[JAMES PG]

Dear Mr Pradeep,

With effect from 17.03.12, method of computation of Education Cess and Secondary & Higher Education cess on imported goods is changed. Prior to this, Cess is first charged on CVD and then on aggregate of Customs duty plus CVD plus Cesses.Now while calculating customs duty, the education cess and SHE cess would be payable only once i.e. after basic customs duty and CVD but before Special CVD . Cess charged now is nothing but Cess on Customs duty and not Cess on CVD. Being so, it appears that credit of Cess paid on imported goods is no more Cenvatable. Further, Cess is collected purely as Cess on Customs Duty and is shown like that only in the Bill of Entry.

The illustration given in  CBEC Circular No D.O.F.No.334/ 3/2012-TRU  dated 16.03.12 is given below for your perusal:

Illustration
		Present	Proposed
A	Assessable value (CIF + Landing Charges)	100.00	100.00
B	Basic customs duty (BCD) 10%	10.00	10.00
C	Value for CVD (A+B)	110.00	110.00
D	CVD equivalent to central excise duty 10%	11.00	11.00
E	Educational Cess on CVD 2%	0.22	0.00
F	Sec. and Higher Educational Cess 1%	0.11	0.00
G	Customs duty for calculation of Cess	21.33	21.00
H	Customs Educational cess 2%	0.43	0.42
I	Customs Secondary and higher educational cess 1%	0.21	0.21
J	Value for SAD	121.97	121.64
K	SAD @ 4%	4.88	4.87
	Total Duty	26 .85	26.495

AI Summary

Cenvat credit: domestic credits may pay education cess, but import cesses reclassified as cess on customs duty are not cenvatable.
Cenvat credit of basic and related duties can be used to pay education cess and secondary and higher education cess, but cesses themselves cannot be credited. After the March 2012 computation change, education and SHE cesses on imports are treated as cess on customs duty (shown in the bill of entry) rather than cess on CVD, and consequently such import cesses are not eligible for Cenvat credit.