2012 (7) TMI 902 - HC - Central Excise

Utilisation of CENVAT credit - Whether the assessee is entitled to utilize CENVAT credit of Basic Excise Duty for payment of education Cess?

Summary

Issues:
Whether CENVAT credit of Basic Excise Duty can be utilized for payment of education Cess.

Analysis:
The appeal was filed by the revenue under Section 35G of the Central Excise Act, 1944, questioning the utilization of CENVAT credit of Basic Excise Duty for education Cess payment. The issue was whether the assessee could use this credit for such payment. The appellants referred to a previous judgment where a similar question was addressed. The Court observed that Rule 3(7) limits the utilization of CENVAT credit for specific duties, but it does not restrict the use of credit from other sources for payment of a particular duty. The Court concluded that the Commissioner was mistaken in disallowing the utilization of CENVAT credit of Basic Excise Duty for NCC duty.

In the present case, the assessee used CENVAT Credit of Basic Excise duty for education Cess payment, which was objected to by the department. The Adjudicating authority held that such credit could not be used for education Cess payment and deducted the amount from the refund owed to the assessee. However, the revision petition under Section 35EE of the Act favored the assessee's action, stating that utilizing CENVAT Credit for education Cess payment on exempted final products was correct as education cess is also a duty of excise. The Tribunal upheld this view, emphasizing that there was no prohibition on using CENVAT Credit of Basic Excise Duty for education Cess payment.

The Tribunal's decision aligned with the Court's previous judgment, which allowed the utilization of CENVAT credit from various sources for payment of specific duties. Consequently, the Court dismissed the appeal, affirming the Tribunal's decision that there was no legal impediment to using CENVAT Credit of Basic Excise Duty for education Cess payment.