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2017 (2) TMI 716 - AT - Central ExciseArea based exemption - whether the appellant is liable to pay NCCD, Education Cess and Secondary Higher Education Cess inspite of the exemption N/N. 50/2003? - reliance placed in the case of CCE, Dibrugarh Vs. Prag Bosimi Synthetics Ltd. 2013 (11) TMI 487 - GAUHATI HIGH COURT - Held that - NCCD, Education Cess, Secondary Higher Education Cess which are levied under separate statutory enactments cannot be granted exemption under the notification. - appellant will not be entitled to exemption for the above three types of duties inspite of enjoying the benefit of exemption under Notification No. 50/2003. - Decided in favor of revenue. Utilization of accumulated cenvat credit to pay NCCD and Education cess - Held that - Once the final products manufactured are exempted goods, then there is a bar in availing cenvat credit on the inputs/ input services in terms of Rule 6 of the CCR, 2004. The appellant will not be entitled to avail the cenvat credit of duties paid on the inputs. Consequently, there is no question of set-off of such credits towards the liability for NCCD Education Cess and Secondary Higher Education Cess - appeal dismissed - decided against appellant.
Issues Involved:
1. Liability to pay National Calamity Contingent Duty (NCCD), Education Cess, and Secondary Higher Education Cess despite area-based exemption. 2. Utilization of accumulated Cenvat credit for payment of NCCD, Education Cess, and Secondary Higher Education Cess. Issue-wise Detailed Analysis: 1. Liability to Pay NCCD, Education Cess, and Secondary Higher Education Cess Despite Area-Based Exemption: The appellants were engaged in the manufacture of two-wheelers and availed area-based exemption under Notification No. 50/2003-CE dated 10.06.2003. The dispute arose regarding the demands for NCCD, Education Cess, and Secondary Higher Education Cess. The Revenue argued that the exemption notification only covered basic excise duty and additional duties of excise but did not extend to NCCD. The demands were raised under Section 11A, including interest and penalties. The appellants admitted that the issue of demanding NCCD, Education Cess, and Secondary Higher Education Cess was settled against them based on precedents, including Bajaj Auto Ltd. Vs. Union of India and CCE, Dibrugarh Vs. Prag Bosimi Synthetics Ltd. The CESTAT upheld the demands, referencing the Gauhati High Court's judgment, which clarified that NCCD, though a duty of excise, was not exempted under the relevant notification. The court stated, "NCC duty is nothing but a duty of excise," but it is not covered under the exemptions provided by Notification No. 50/2003. 2. Utilization of Accumulated Cenvat Credit for Payment of NCCD, Education Cess, and Secondary Higher Education Cess: The appellants contended that they should be allowed to utilize accumulated Cenvat credit for paying NCCD, Education Cess, and Secondary Higher Education Cess. They relied on the Gauhati High Court's decision in Prag Bosimi Synthetics, which allowed the utilization of Cenvat credit for such payments. The CESTAT examined Rule 3(4) and Rule 3(7) of the Cenvat Credit Rules, 2004, which permit the utilization of Cenvat credit for payment of any duty of excise on any final product. However, the court emphasized the second proviso to Rule 3(4), which restricts the utilization of Cenvat credit for exempted goods. The Revenue argued that the goods manufactured by the appellants were exempted under Notification No. 50/2003, and hence, Cenvat credit could not be utilized. The CESTAT agreed, noting that the mechanism of Notification No. 50/2003 differed from Notification No. 32/99-CE. The latter allowed for the refund of duties paid, whereas the former provided outright exemption, making the goods "exempted goods" under Section 2(d). The court concluded that since the final products were exempted, the appellants could not avail of Cenvat credit on inputs, and thus, there was no question of setting off such credits against the liability for NCCD, Education Cess, and Secondary Higher Education Cess. The CESTAT upheld the adjudicating authority's orders, stating, "the demand pertaining to the NCCD, Education Cess, Secondary Higher Education Cess is payable and same cannot be adjusted against the Cenvat credit as assessee has never paid any duty in any form." Conclusion: The CESTAT dismissed the appeals, affirming the liability to pay NCCD, Education Cess, and Secondary Higher Education Cess, and rejecting the utilization of accumulated Cenvat credit for these payments. The court sustained the orders passed by the adjudicating authority, finding no reason to interfere.
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