2018 (2) TMI 915 - AT - Central Excise

CENVAT credit - Education cess and Higher education cess paid on CVD - Held that - the credit availed on education cess and secondary, higher education cess on the CVD portion is eligible - demand raised on this count cannot sustain and requires to be set aside, which we hereby do. CENVAT credit - Education cess and Higher education cess paid on CVD for third time - Held that - the issue has been discussed in the case of Polypack Industries Vs. CCE 2013 (8) TMI 956 - CESTAT BANGALORE , where it was held that If the 3rd education cess is considered as a levy on total excise duty, the obvious conclusion would be that the credit also admissible - the credit availed on the education cess paid for the third time by the appellants on the CVD portion is eligible. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility to avail credit on education cess and secondary and higher education cess when inputs are supplied by a 100% EOU under a specific notification.
2. Eligibility of credit on education cess paid for the third time on the CVD portion.

Issue 1:
The case involved the question of whether an appellant engaged in manufacturing non-woven fabrics could avail credit on education cess and higher education cess when inputs were supplied by a 100% EOU under Notification No. 23/2003-CE. The appellant's eligibility was challenged by the department, leading to SCNs proposing disallowance of credit, recovery with interest, and penalties. The Tribunal analyzed previous decisions like Emcure Pharmaceuticals Ltd. and Jumbo Bags Ltd., concluding that credit on the CVD portion was indeed available. The Tribunal explained the relevant provisions under Rule 3(7) and the proviso to Section 3(1) of the Central Excise Act, emphasizing that the Additional Duty of Customs (CVD) includes education cess and SHE cess. It was clarified that when goods are moved from EOU to DTA under the mentioned notification, credit on the CVD component, inclusive of excise duty and cess, was permissible. Relying on established case law, the Tribunal held that the appellant was entitled to credit on the education cess and higher education cess on the CVD portion, setting aside the demand raised by the department.

Issue 2:
The second issue addressed in the judgment pertained to the education cess paid for the third time on the CVD portion. Citing the case of Polypack Industries, the Tribunal determined that the credit availed on the education cess paid for the third time by the appellant was eligible. The Tribunal further noted the appellant's acknowledgment of excess credit on the CVD portion, which had been reversed before utilization. Referring to the precedent set by the High Court of Madras in a related case, the Tribunal concluded that since the excess credit had been rectified, no interest or penalty was payable. Consequently, the Tribunal set aside the demand related to the excess credit availed by the appellant. The impugned order was partially overturned, allowing the appeal with consequential reliefs.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT CHENNAI highlights the key issues, legal interpretations, and conclusions reached by the Tribunal regarding the eligibility of Cenvat credit on education cess and higher education cess in the specified circumstances.