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2018 (11) TMI 492 - AT - Central ExciseCENVAT credit - education cess paid on inputs - the appellant had stopped availing CENVAT credit on inputs after insertion of Explanation III in rule 6(3) of CENVAT Credit Rules, 2004 - demand of interest - Held that - Reliance placed in the case of MAHINDRA & MAHINDRA LTD. VERSUS COMMISSIONER OF C. EX., MUMBAI 2007 (2) TMI 24 - CESTAT, MUMBAI , to hold that the appellant is ineligible to avail CENVAT credit - To consider the cess discharged by the appellant under another law to which CENVAT Credit Rules, 2004 does not apply, or coverage therein by self-inflicted burden of duty, despite escapement under law, would be a construction that negates the entire scheme of CENVAT credit. Accordingly, the erasure of CENVAT credit in the impugned order cannot be faulted - liability of interest upheld. Penalty u/r 25 and rule 26 of CENVAT Credit Rules, 2004 - Held that - It is not controverted that the credit so availed has been utilised for any purpose. Moreover, it was only with the insertion of Explanation III in rule 6(3) of CENVAT Credit Rules, 2004 that the ineligibility became unambiguously clear - penalty not warranted. Appeal allowed in part.
Issues:
- Availment of CENVAT credit on education cess paid on inputs procured in 2005-06 and 2006-07 - Claim of appellant regarding manufacturing of exempt goods - Interpretation of 'duty of excise' and 'Cenvat' in relation to availment of CENVAT credit - Liability to penalty under rule 25 and rule 26 of CENVAT Credit Rules, 2004 Analysis: 1. The dispute revolves around the availment of CENVAT credit by M/s Mahindra & Mahindra Ltd on education cess paid on inputs procured in 2005-06 and 2006-07. The Commissioner of Central Excise, Mumbai-V confirmed the demand of the CENVAT credit availed, interest thereon, and imposed a penalty under rule 15 of CENVAT Credit Rules, 2004. The appellant claimed they are not manufacturers of exempt goods due to discharging automobile cess and education cess. However, the adjudicating authority held their claim as not maintainable since the appellant stopped availing CENVAT credit after a specific rule was inserted in 2005. 2. The appellant's counsel admitted that the goods manufactured by the appellant are not liable to basic excise duty or any additional duty. The counsel relied on the provisions of The Industries (Development and Regulation) Act, 1951 and a decision of the Hon'ble High Court of Karnataka to argue that there should be no distinction between the phrases 'duty of excise' and 'duties of excise' when construed harmoniously with the statutory provision, excluding them from coverage as manufacturers of exempted goods. 3. The Authorized Representative highlighted the appellant's admission of ineligibility for CENVAT credit from a specific date due to a rule change. He argued that the assumption of liability for education cess by the appellant, even though not legally required, does not entitle them to avail CENVAT credit. The appellant's attempt to challenge a previous Tribunal decision was not entirely convincing, as the Tribunal's finding regarding the interpretation of 'duty of excise' in CENVAT Credit Rules, 2004 remains valid until overturned by a superior court. 4. The Tribunal, considering the previous decision and the nature of the issue, held that the appellant is ineligible to avail CENVAT credit. The Tribunal emphasized that allowing the appellant to claim credit for a cess not covered by CENVAT Credit Rules would undermine the scheme of CENVAT credit. The Tribunal upheld the erasure of CENVAT credit in the impugned order, with interest liability applicable as per law. 5. Regarding the liability to penalty under rule 25 and rule 26 of CENVAT Credit Rules, 2004, the Tribunal found that the appellant had not utilized the credit for any purpose and the ineligibility became clear only after a specific rule change. Considering the existence of various interpretations of 'duty' and 'duties,' the Tribunal concluded that the imposition of penalty was not warranted. Therefore, the penalty was set aside, and the impugned order was sustained with this modification.
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