2013 (9) TMI 345
X X X X Extracts X X X X
X X X X Extracts X X X X
....es, the respondent had paid the education cess and S & H Cess by utilizing the BED Credit and as a result of which, they paid higher amount of basic excise duty through PLA and thus, claimed higher amount of refund in terms of Notification No. 56/2002-C.E. The Jurisdictional Assistant Commissioner in all these cases holding that an assessee availing of exemption under Notification No. 56/2002-C.E. cannot pay education cess and S & H through BED credit, as these cesses are not exempted under this notification and utilization of BED Credit for payment of education cess and S & H cess amounts to permitting refund of these cesses also under this notification, disallowed the refund of excess Basic Excise Duty paid through PLA on account of diversion of BED credit towards payment of education cess and S & H Cess. These orders of the Assistant Commissioner were set aside by the Commissioner (Appeals) vide order-in-appeal dated 23-12-2008 holding that in terms of Cenvat Credit Rules, 2004, there is no restriction on utilization of BED credit for payment of education cess and S & H Cess. Against the order of the Commissioner (Appeals), these appeals have been filed by the Revenue. 1.1 Thou....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... cess. (c) The education cess/S & H cess levied under Section 91 of Finance Act, 2004 and Section 136 of Finance Act, 2007 respectively is not duty of excise levied under Section 3(1) of Central Excise Act, 1944 and, hence, the same is not covered by this notification and, therefore, for the purpose of para (1A) of the Notification, BED credit cannot be utilized for payment of these education cess; and (d) The issue involved in this group of cases stands decided in favour of the Department by the Tribunal's judgment in the case of CCE, J&K v. Bharat Box Factory Ltd. reported in 2011 (265) E.L.T. 366 (Tri.-Del.) He, therefore, pleaded that the impugned orders passed by the CCE (Appeals) are not sustainable. 4. Shri S.K. Malhotra, Chartered Accountant, defending the impugned orders pleaded that the Notification No. 56/2002-C.E. exempts the education cess and S & H education cess also, that in this regard they rely upon judgments of the Tribunal in the cases of Bharat Box Factory Ltd. v. CCE, Jammu reported in 2007 (214) E.L.T. 534 (Tri.-Del.) and Cyrus Surfactant Pvt. Ltd. reported in 2007 (215) E.L.T. 55 (Tri.-Del.); that when the education cess is a duty exempted un....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the month for payment of duty on the goods cleared during the month, so that he pays only the balance amount of duty, if any payable, through PLA, can utilize BED credit for payment of education cess and S & H cess, before fully utilizing the BED credit available at the end of the month for payment of BED. Before going into the above question, it would be worthwhile having a look at - (a) The relevant provisions of Notification No. 56/2002-C.E.; (b) Provisions regarding levy of education cess and S & H cess; and (c) Relevant provisions of Cenvat Credit Rules; 5.1 Relevant portions of the exemption Notification No. 56/2002-C.E., as it existed during the period of dispute, read as under :- Notification No. 56/2002-C.E. Exemption to all goods (except cigarettes, cigars, tobacco and its product and soft drinks and their concentrates) produced in Jammu & Kashmir by units located in Industrial Growth Centre, Industrial Infrastructure Development Centre or Export Promotion Industrial Park; or Industrial Estate or Industrial Area or Commercial Estate or Scheme Area. - In exercise of the powers conferred by sub‑section (1) of section 5A of the Central Excise Act, 1944 (1 of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....facturer, such refund shall not exceed the amount of duty paid less the amount of the CENVAT Credit availed of, in respect of the duty paid on the inputs used in or in relation to the manufacture of goods cleared under this notification.; (c) If there is likely to be any delay in the verification, the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall refund the amount on provisional basis by the 15th day of the next month to the month under consideration, and thereafter may adjust the amount of refund by such amount as may be necessary in the subsequent refunds admissible to the manufacturer. 2A. Notwithstanding anything contained in paragraph 2, - (a) the manufacturer at his own option, may take credit of the amount of duty paid during the month under consideration, other than by way of utilisation of CENVAT credit under the CENVAT Credit Rules, 2002, in his account current, maintained in terms of Part V of the Excise Manual of Supplementary Instruction issued by the Central Board of Excise and Customs. Such amount credited in the account current may be utilised by the manufacture for payment of duty, in the manner ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons of the Central Excise Act, 1944 (1 of 1944) or under any other law for the time being in force. (2) The Education Cess on excisable goods shall be in addition to any other duties of excise chargeable on such goods, under the Central Excise Act, 1944 (1 of 1944) or any other law for the time being in force. (3) The provisions of the Central Excise Act, 1944 (1 of 1944) and the rules made thereunder, including those relating to refunds and exemptions from duties and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Education Cess on excisable goods as they apply in relation to the levy and collection of the duties of excise on such goods under the Central Excise Act, 1944 or the rules, as the case may be." 5.2.1 The provision of Section 136 and 138 of the Finance Act, 2007 regarding levy of S & H an identical to Section 91 and 93 of the Finance Act, 2004 regarding levy of education cess except that the rate of cess is 1% of the aggregate of duties of excise. 5.3 The relevant portion of Rule 3(4) and 3(7)(b) of the Cenvat Credit Rules, 2004 are as under :- 3(4) The CENVAT credit may be utilized for payment of- (a) any duty of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....23 of 2004), or the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007) or the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003), or the education cess on taxable services leviable under section 91 read with section 95 of the said Finance (No. 2) Act, 2004 (23 of 2004), or the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007), or the additional duty of excise leviable under section 85 of the Finance Act, 2005 (18 of 2005) respectively, on any final products manufactured by the manufacturer or for payment of such duty on inputs themselves, if such inputs are removed as such or after being partially processed or on any output service : [Provided that the credit of the education cess on excisable goods and the education cess on taxable services can be utilized, either for payment of the education cess on excisable goods or for tne payment of the education cess on taxable services : Provided further that the credit of the Secondary and Higher Education Cess on exc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Central Excise Act, 1944, AED (GSI) Act, 1957 and AED (T & TA) Act, 1978 to the extent the same have been paid through PLA when the liability for excise duty and/or AED has been discharged in the manner prescribed in para 1A of the notification. 6.1 In our view, the expression - "first utilize the whole of Cenvat credit available on the last day of the month for the payment of duty on goods cleared during the month" in para 1A of the notification, implies that for availing this exemption, a manufacturer must first discharge the duty liability on the goods cleared by utilizing during the Cenvat credit available at the end of the month to the extent possible and the word, "duty' means only the duties exempted under this notification and not the duties which are not covered under this notification for exemption. The Cenvat credit available at the end of month cannot be utilized for payment of duty which is not covered for exemption under this notification, as doing so would distort the quantum of duty payable through PLA. If a particular duty not covered by this exemption is also paid through Cenvat credit before utilizing the Cenvat credit to the extent possible for payment of dutie....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Same view has been taken by Hon'ble Gauhati High Court in case of CCE, Shillong v. Dharampal Satyapal Ltd. reported in 2012 (275) E.L.T. 71 (Gau.) wherein with regard to Notification No. 32/99-C.E., a notification similar to Notification No. 56/2002-C.E., it was held that the notification does not exempt education cess. Therefore, education cess leviable under Section 91 read with Section 93 of the Finance Act, 2004 and S & H cess leviable under Section 136 read with Section 138 of the Finance Act, 2007 is not covered by exemption Notification No. 56/2002-C.E. 6.3 Since these two education cess are not covered by Notification No. 56/2002-C.E., the same cannot be paid by the respondent in the manner they seek to pay the same i.e. by utilizing BED credit before utilizing the BED credit to the extent possible for payment of BED as doing so would result in refund of education cess also. 6.4 Normally the BED payable is more than the BED credit available at the end of the month and after utilizing the BED credit to the extent possible for payment of BED leviable, no BED credit would be left. But if due to some reason, after payment of duty on the goods cleared during the month by util....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ter of these appeals. 7.1 A perusal of Rule 3(4) and Rule 3(7)(b) of the Cenvat Credit Rules, 2004, would show that while AED (T & TA) credit, NCCD credit, credit of education cess leviable under Section 91 read with Section 93 of Finance Act, 2004, credit of S & H cess leviable under Section 136 read with Section 138 of the Finance Act, 2007, and credit of AED leviable under Section 85 of the Finance Act, 2005 can be used only for payment of AED (T & TA), NCCD, education cess, S & H cess and AED leviable under Section 85 of Finance Act, 2005 respectively, the Cenvat credit from other sources i.e. BED credit, AED (GSI) credit etc. can be used for payment of any duty of excise including education cess and S & H cess. Thus, while the Cenvat credit of the various duties/taxes mentioned in Rule 3(7)(b) can be used only for payment of the respective duties/taxes, there is no such restriction for utilization of credit of other duties i.e. BED credit, AED (GSI) credit, etc. In our view, in case of a manufacturer availing of exemption under Notification No. 56/2002-C.E., while the restriction on utilisation of Cenvat credit of duties/taxes as mentioned in Rule 3(7)(b) would be applicable,....