Availment of Cenvat credit

[mrk fast]

X company received inputs from Y company[100%EOU]and took cenvat credit of CVD [BED-14%]and Education Cess and SHE Cess. But some of the manufacturers say that X company can avail Cenvat credit as per the formula mentioned in Rule 3(7) of the  Cenvat Credit Rules i.e X multiplied by [(1+BCD/400) Multiplied by (CVD/100)] and no credit on Education cess or SHE cess is allowed as Cenvat credit eventhough the 100% EOU has paid the same. I request the members of the forum to give their opinion on this matter.

[Surender Gupta]

The formula given in the rule 3(7) is in line with exemption notifications and applicable to basic excise duty only. Therefore despite the fact that there is no reference to education cess in the rule 3(7), X can avail the credit of education cess paid by Y (an EOU), and moreover, without applying any formula.

[RadheyShyam Mangal]

the credit is to be taken as per the formula mentioned in Rule 3(7) of the Cenvat Credit Rules. however there are tribunal decisions holding that credit of EC and HEC can be taken in full.

AI Summary

Cenvat credit: whether education cess and SHE cess paid by an EOU qualify for credit under the rule.
The issue is whether a manufacturer receiving inputs from a 100% EOU may claim Cenvat credit of duties and cesses paid by the EOU and whether the multiplicative formula in Rule 3(7) governs that credit; one forum position applies the formula generally while another treats the formula as relevant to basic excise duty only and allows full credit of education cess and SHE cess, a view supported by tribunal decisions.