2011 (4) TMI 834 - AT - Central Excise

Cenvat credit - procuring inputs from 100% EOU - disallowance of credit availed on Educational Cess and S & H. E. Cess - Held that - Referring to Shreya Pets Pvt. Ltd. Vs. CCE Hyderabad reported (2008 (9) TMI 351 - CESTAT BANGLORE) the impugned order restricting credit was set aside - It is clear that availment of credit of Education Cess over goods supplied to them by 100% EOU is correct. Accordingly the order of the Commissioner (Appeals) is upheld and the appeal filed by the Revenue is rejected.

Summary

Issues:
- Whether Education Cess and S & H.E. Cess paid by 100% EOU can be fully credited by the recipient manufacturing unit or must be limited as per Rule 3(7)(a) of Cenvat Credit Rules, 2004.

Analysis:

1. The case involved M/s. Cello Plastotech availing cenvat credit of duty paid on inputs procured from 100% EOU, including Educational Cess and S & H.E. Cess. The original adjudicating authority disallowed the credit, but the Commissioner (Appeals) allowed it, leading to the Revenue filing an appeal.

2. The main issue was whether the credit of Education Cess and S & H.E. Cess paid by 100% EOU should be limited by the formula in Rule 3(7)(a) of Cenvat Credit Rules, 2004. The department argued the formula applied to both types of Education Cess, while the appellants contended it only applied to basic customs duty and CVD components.

3. The assessee argued that Rule 3(7)(a) restricts credit to duties paid by 100% EOU towards basic customs duty and CVD only. The Tribunal referred to the case of Emcure Pharmaceuticals Ltd. Vs. CCE Pune, which clarified that Education Cess credit over goods supplied by 100% EOU was permissible, not barred by Rule 3(7)(a).

4. The Tribunal emphasized that Rule 3(7)(a) applies only to basic customs duty and CVD, not Education Cess. It cited the case of Shreya Pets Pvt. Ltd. Vs. CCE Hyderabad, where an order restricting credit was set aside, supporting the allowance of Education Cess credit.

5. The Tribunal rejected the Revenue's appeal, upholding the Commissioner (Appeals)'s decision that the availment of Education Cess credit over goods supplied by 100% EOU was correct. The judgments and orders cited supported this conclusion, leading to the rejection of the Revenue's appeal.