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2015 (9) TMI 1380 - AT - Central ExciseDenial of CENVAT Credit - Whether the respondents are entitled to Cenvat credit of Education cess and Secondary & Higher Education cess when inputs are supplied by 100% EOU paying duty under Sr. No. 2 Notification No. 23/2003-CE dated 31.3.2003 - Held that - When goods have been removed from EOU to DTA availing the exemption under Sr. No. 2 of Notification No. 23/2003 (ibid) there is a restriction carved out by the formula provided in the proviso to Rule 3(7)(a). This restriction is to prohibit taking credit on the BCD component. But credit is available on the Additional Customs duty (CVD) component. As already stated Additional Customs duty includes excise duty as well as cess on this excise duty. Therefore the respondents are entitled to take credit of an amount equivalent to the Additional Customs Duty inclusive of excise duty and cess thereon. Though the decision in Emcure Pharmaceuticals Ltd case 2008 (1) TMI 147 - CESTAT MUMBAI which has been followed in the later judgement noted above was rendered prior to the amendment inserting the second proviso to Rule 3(7) (a) the principle enunciated therein alongwith the other judgments are correctly applicable to the present case. The legislature in its wisdom has brought forth the amendment of adding the second proviso to Rule 3(7)(a) w.e.f. 7.09.2009 to suppress the mischief clear the confusion and resolve the same. Therefore I do not find any reason not to allow the Cenvat credit on the Education Cess and SHE Cess Component Forming Part of CVD. In view of the above discussions the appeal filed by the Revenue is dismissed - Decided against Revenue.
Issues:
1. Entitlement to Cenvat credit of Education cess and Secondary & Higher Education cess when inputs are supplied by 100% EOU under Notification No. 23/2003-CE dated 31.3.2003. Analysis: Issue 1: Entitlement to Cenvat Credit The appeal and cross objections were disposed together, focusing on whether the respondents could avail Cenvat credit of Education cess and Secondary & Higher Education cess when purchasing inputs from a 100% EOU under Notification No. 23/2003-CE. The Respondents, engaged in paper manufacturing, were directed to deposit excess Cenvat credit availed, leading to a dispute. The Revenue alleged an excess Cenvat credit of Rs. 37,45,509 was availed due to miscalculation, contending that Education Cess and SHE Cess paid as part of Additional Customs duty were not admissible for Cenvat credit. The period in dispute was before the insertion of the second proviso to Rule 3(7)(a). The Revenue challenged the Commissioner (Appeals) order favoring the Respondents. Issue 2: Interpretation of Rule 3(7)(a) The Rule restricts Cenvat credit based on the formula provided, allowing credit on Additional Customs duty (CVD) component, which includes excise duty and cess. The Additional duty of customs includes Education Cess and SHE Cess. The judgment referenced relevant provisions and clarified that the Respondents, under Notification No. 23/2003, were entitled to credit on the Additional Customs Duty, inclusive of excise duty and cess. Precedents like Emcure Pharmaceuticals Ltd. case supported this interpretation, emphasizing the legislative intent behind the amendment. Issue 3: Application of Precedents The judgment cited various cases supporting the allowance of Cenvat credit on Education Cess and SHE Cess components forming part of CVD. The Commissioner (Appeals) applied the ratio from previous cases in favor of the assessee. The judgment highlighted the consistency in decisions favoring the assessee's position, even post the amendment inserting the second proviso to Rule 3(7)(a). The amendment aimed to clarify confusion and suppress mischief, supporting the allowance of Cenvat credit on Education Cess and SHE Cess components. Conclusion The appeal by the Revenue was dismissed, upholding the Commissioner (Appeals) decision in favor of the Respondents. The judgment also dismissed the Cross Objection filed by the Respondents seeking a refund, as no merit was found in their contention regarding the period in question. The impugned order was sustained, and both the Revenue's appeal and the Respondents' cross objection were dismissed.
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