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2019 (2) TMI 380 - AT - Central ExciseCENVAT Credit - Education Cess & Secondary and Higher Secondary Education Cess - purchase of inputs for manufacture from 100% EOU for manufacturing - Extended period of limitation - Held that - There is no doubt that Education Cess & Secondary and Higher Secondary Education Cess paid against additional duty leviable under section 3 of Customs Tariff Act are covered under cenvat credit permitted to be taken under Rule 3(1) of Cenvat Credit Rules 2004. Further, in respect of additional duty leviable under sub-section (5) of Section 3 of the Customs Tariff Act, nothing has been mentioned in Rule 3(1) of Cenvat Credit Rules 2004 that Education Cess & Secondary and Higher Secondary Education Cess paid on those duty is also included for availment of credits by the manufacturer. Thus, only education cess paid under sub-section (5) is outside the purview of Cenvat Credit Rules and Secondary & Higher Education cess and are not attached to additional duty referred in sub-section (5) of Section 3 of the Customs Tariff Act. Extended period of limitation - Held that - The case of the appellant can be considered as a bonafide dispute of legal interpretation of the provision inasmuch as it has reflected the credit in its cenvat credit account without utilisation that would never justify invocation of extended period. Appeal allowed - decided in favor of appellant.
Issues:
Availment of cenvat credit on Education Cess & Secondary and Higher Secondary Education Cess against purchase of inputs for manufacture from 100% EOU. Detailed Analysis: Issue 1: Availment of Cenvat Credit The appellant, engaged in manufacturing stainless steel and mild steel products, availed cenvat credit on inputs for manufacturing. Upon investigation in January 2013, it was discovered that credit on Education Cess & Secondary and Higher Secondary Education Cess was inadmissible. The appellant promptly reversed the credit but was still subjected to duty demand, interest, and penalty by the adjudicating authority. The appellant challenged the decision, arguing that the credit was reversed before utilization and citing judicial precedents to support the contention that mere availment of credit does not warrant interest or penalty. Issue 2: Legal Interpretation of Cenvat Credit Rules The appellant contended that the availment of cenvat credit on Education Cess & Secondary and Higher Secondary Education Cess was a bonafide dispute of legal interpretation. The appellant highlighted Rule 3(1) of the Cenvat Credit Rules 2004, emphasizing that duties against which cenvat credit is permissible also include Education Cess & Secondary and Higher Secondary Education Cess paid against additional duty leviable under the Customs Tariff Act. The appellant argued that the education cess paid under sub-section (5) of Section 3 of the Customs Tariff Act was erroneously interpreted as not eligible for cenvat credit, leading to the reversal of credit. Issue 3: Applicability of Interest and Penalty The appellant relied on the distinction between the mere taking of credit and its utilization, as established in the J.K. Tyres case. It was argued that interest and penalty should not be imposed unless the credit is utilized or refunded. The appellant also highlighted the lack of clarity even among excise department officials regarding the attachment of higher education cess to the Customs Tariff Act provisions, indicating a genuine legal interpretation dispute. The Tribunal, after considering the arguments and relevant provisions, set aside the order passed by the Commissioner of Central Excise & GST, thereby allowing the appeal. In conclusion, the Tribunal's decision favored the appellant, emphasizing the bonafide nature of the dispute regarding the availment of cenvat credit on Education Cess & Secondary and Higher Secondary Education Cess. The judgment underscored the importance of legal interpretation and the distinction between credit availment and utilization, ultimately leading to the setting aside of the duty demand, interest, and penalty imposed on the appellant.
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