2018 (7) TMI 258 - AT - Central Excise

Utilisation of CENVAT Credit - Appellant were availing credit of Education Cess and Secondary Higher Education Cess paid on the inputs and is utilising the same towards payment of Education Cess and Secondary Higher Education Cess payable on Tractor Cess on the Tractors - Rule 6(1) of the CENVAT Credit Rules, 2002 - Held that - Although tractors are exempted from duty but cess of Education on automobile are paid thereon. Though these cess are governed and collected under the procedure laid down in Central Excise law but they borrow their legislative authority under duty statue. Therefore, they are not included in whole duty of excise and charge of nil rate of duty as has been referred in Rule 2 (d) of Cenvat Credit Rules 2004 defining exempted goods. Therefore, it is clear that tractors is exempted goods and not dutiable. Since tractors are exempted goods therefore credit of inputs (Inputs used in the manufacture of final product) is not admissible in terms of Rule 6(1) of Cenvat Credit Rules 2002/2004 for the reason that the final product i.e. tractor are wholly exempted from payment of duties of excise. Quantification of demand for the period from September, 2006 to March, 2012 - appellant submitted that an amount of ₹ 9.20,492/- on Education Cess and Secondary Higher Education Cess was wrongly availed by the Appellant but the same was duly reversed in the month of September, 2008. But the department has not taken that into consideration - Held that - This issue require re-consideration and verification by the ld. Commissioner (Appeals) whether the Cenvat credit amount of ₹ 9.20,492/- which according to the Appellant they have already reversed, has been taken care of while raising the demand from the Appellant. Appeal allowed by way of remand.

Issues Involved:
1. Admissibility of Cenvat Credit on Education Cess and Secondary Higher Education Cess.
2. Invocation of the extended period of limitation.
3. Imposition of interest and penalty.
4. Correctness of the demand calculation.

Issue-wise Detailed Analysis:

1. Admissibility of Cenvat Credit on Education Cess and Secondary Higher Education Cess:

The Appellant, engaged in manufacturing tractors, was availing credit of Education Cess and Secondary Higher Education Cess paid on inputs and utilizing the same for payment of these cesses on tractors. The tractors were exempt from excise duty but not from the cesses. According to Rule 6(1) of the Cenvat Credit Rules, 2002, Cenvat credit is not admissible on inputs used in the manufacture of exempted goods. The Tribunal had previously ruled in the Appellant's own case (Mahindra & Mahindra Ltd. vs. CCE, Mumbai) that tractors, being exempt from basic excise duty, are considered exempted goods under Rule 2(d) of the Cenvat Credit Rules. Therefore, the Appellant was not entitled to utilize Cenvat Credit towards payment of Education Cess and Secondary Higher Education Cess.

2. Invocation of the Extended Period of Limitation:

The Appellant argued that the extended period of limitation was wrongly invoked since the demand for the period up to August 2010 was beyond the normal period of limitation. They contended that all facts were within the knowledge of the department, thus the extended period should not apply. However, the department maintained that the Appellant wilfully contravened the provisions by continuing to avail inadmissible credit despite the Tribunal's decision in 2007. The Appellant was repeatedly reminded to pay the cesses, but they failed to comply. Thus, the extended period of limitation was rightly invoked due to the Appellant's deliberate actions to evade payment.

3. Imposition of Interest and Penalty:

The department imposed interest under Section 11 AB of the Central Excise Act, 1944, and penalties under Rule 15(2) of the Cenvat Credit Rules, 2004, read with Section 11 AC of the Central Excise Act, 1944. The Appellant's conduct of availing and utilizing Cenvat credit despite the Tribunal's decision demonstrated wilful contravention of the provisions, justifying the imposition of penalties.

4. Correctness of the Demand Calculation:

The Appellant claimed that the demand included an amount of ?9,20,492/- which was already reversed in September 2008. They argued that this amount was wrongly included in the demand calculation. The Tribunal acknowledged this issue and remanded the matter to the Commissioner (Appeals) to verify whether the reversed credit amount was considered while raising the demand.

Conclusion:

The Tribunal upheld the impugned order but remanded the matter to the Commissioner (Appeals) for verifying the correctness of the demand calculation, specifically whether the reversed credit amount of ?9,20,492/- was accounted for. The Tribunal emphasized that the Appellant's actions justified the invocation of the extended period of limitation and the imposition of penalties.

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