2019 (5) TMI 1091 - AT - Central Excise

Utilization of cenvat credit of education cess and secondary and higher education cess paid for payment of basic excise duty - the cesses were abolished prior to the date when the utilization took place - Rule 3(7)(b) of Cenvat Credit Rules 2004 - HELD THAT - The cenvat credit in question was credit of education cess and secondary and higher education cess lying in balance with the appellant on 01.03.2015. Prior to this date this could be utilised only for payment of education cess and secondary and higher education cess. The appellant could not use this credit for this purpose as these cesses were abolished. Notification No. 12/2015 amended Cenvat Credit Rules 2004 by inserting three provisos to Rule 3(7)(b) enabling utilisation of credit of education cess and secondary and higher education cess in respect of inputs received after 01.03.2015 for payment of basic excise duty. However, the balance lying in credit was not covered by this notification also. Any provisions of fiscal laws or criminal laws should be read as such with no scope for intendment regardless of the consequences - A plain reading of the Cenvat Credit Rules as they existed during the relevant period did not allow the appellant to utilise credit of educational cess and secondary and higher education cess lying in balance for payment of basic excise duty. The utilization of the credit is not correct in law - appeal dismissed - decided against appellant.

Summary

Issues:
1. Interpretation of Rule 3(7)(b) of the Cenvat Credit Rules, 2004 regarding the utilization of education cess and secondary and higher education cess credit.
2. Applicability of Notification No. 12/2015-CE dated 30.04.2015 and its impact on the utilization of cenvat credit.
3. Whether the appellant can utilize the cenvat credit of education cess and secondary and higher education cess lying in balance for payment of basic excise duty.

Analysis:

Issue 1: Interpretation of Rule 3(7)(b) of the Cenvat Credit Rules, 2004
The appellant argued that after the abolition of education cess and secondary and higher education cess, they utilized the credit for payment of basic excise duty, which was objected to by the department. The lower authority ordered recovery of the amount with interest and imposed a penalty under Rule 15(1) read with Section 11AC of the Central Excise Act, 1944. The Tribunal noted that the Rule mandated the credit to be utilized only for specific cesses, and the appellant's actions were in violation of this rule. The Tribunal upheld the lower authority's decision, emphasizing that the Rule did not allow the appellant to use the credit for basic excise duty post-abolition.

Issue 2: Applicability of Notification No. 12/2015-CE dated 30.04.2015
The appellant argued that Notification No. 12/2015 amended the Cenvat Credit Rules, 2004, enabling the utilization of credit for basic excise duty on inputs received after 01.03.2015. However, the balance credit on 01.03.2015 was not covered by this notification. The Tribunal acknowledged the hardship faced by the appellant due to this rule position but emphasized that the plain reading of the rules did not permit the utilization of the balance credit for basic excise duty. The Tribunal rejected the argument that the case law of TAFE Ltd. applied to the appellant's case, as there was no allegation of the credit lapsing.

Issue 3: Utilization of cenvat credit of education cess and secondary and higher education cess
The Tribunal recognized the appellant's predicament of losing the credit balance that could not be utilized for basic excise duty post-abolition. However, the Tribunal held that fiscal laws should be interpreted strictly without room for intendment, as per the Constitutional Bench of the Supreme Court's judgment in Dilip Kumar's case. Therefore, despite acknowledging the hardship faced by the appellant, the Tribunal found no infirmity in the lower authority's decision and upheld the impugned order, rejecting the appeal.

In conclusion, the Tribunal upheld the decision of the lower authority, emphasizing the strict interpretation of the Cenvat Credit Rules and the lack of provision for utilizing the balance credit post-abolition. The appellant's arguments regarding Notification No. 12/2015 and the applicability of case law were deemed insufficient to overturn the decision.