2017 (2) TMI 196 - AT - Central Excise

CENVAT credit - Rule 3(5) of CCR, 2004 - removal of base oil - Held that - it is clear that it was required to pay duty on the removal of input as such equivalent to the Cenvat credit availed by them therefore, when no education cess was paid on input at the time of procurement, no further education cess required to be paid at the time of removal of same input. Moreover, even in case of manufactured of goods, if the goods are manufactured prior to enactment of the imposition of education cess, on such manufactured goods, even if cleared after enactment, will not attract education cess. The input were manufactured prior to imposition of education cess in the Budget of 2004, for this reason also demand of education cess on removal of input as such is not correct - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Applicability of education cess on clearance of imported Base Oil under Cenvat Credit Rules, 2004.

Analysis:
The case involved a dispute regarding the imposition of education cess on the clearance of imported Base Oil by the appellant under the Cenvat Credit Rules, 2004. The appellant cleared the base oil after paying duty equivalent to the Cenvat credit availed, but the adjudicating authority demanded education cess, citing its imposition in the Finance Budget of 2004. The appellant contended that the removal of base oil constituted the removal of input as such under Rule 3(5) of the Cenvat Credit Rules, 2004, and therefore, education cess should not be applicable. The Commissioner(Appeals) rejected the appeal, leading the appellant to approach the tribunal for redressal.

The appellant's counsel argued that the removal of base oil constituted the removal of input as such under Rule 3(5) of the Cenvat Credit Rules, 2004, as evidenced by the details of the Bill of Entry for the imported base oil. The counsel also referenced Board Circular No. 345/2/2004-Tru(Pt.) dated 10-8-2004 to support their contention.

The Revenue, represented by the Assistant Commissioner, reiterated the findings of the impugned order, maintaining the demand for education cess on the clearance of base oil.

Upon careful consideration of the submissions from both sides, the tribunal analyzed Rule 3(4) of the Cenvat Credit Rules, 2004, which mandates the payment of duty on the removal of inputs as such equivalent to the Cenvat credit availed. The tribunal concluded that since no education cess was paid on the input at the time of procurement, no additional education cess was required at the time of its removal. Furthermore, the tribunal highlighted that even in the case of manufactured goods, if the goods were manufactured before the imposition of education cess, their clearance post-enactment would not attract education cess. Given that the base oil in question was manufactured before the imposition of education cess in the Budget of 2004, the demand for education cess on its removal as an input was deemed incorrect. Consequently, the tribunal set aside the impugned order, allowed the appeal, and directed for consequential relief, if any, in accordance with the law.