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2021 (6) TMI 746 - AT - Central Excise100% EOU - Maintainability of appeal - non-compliance of the manadatory predeposit under Section 35F of the Finance Act, 1994 - HELD THAT - The dismissal of the appeal for non-compliance of mandatory predeposit under Section 35F of the Finance Act, 1994 is not sustainable in law in the present case because the appellant has already paid the entire duty by debiting the cenvat credit account and also paid the interest in cash. Further the Commissioner(Appeals) after hearing the matter on merits should not have dismissed the appeal for non-compliance of Section 35F. Once the credit of education cess and secondary education cess is specifically disallowed to be carried forward as transitional credit, they remain and retain their character as education cess and secondary education cess as cenvat credit as per Rule 3 of CCR, 2004. Since there is no finding on the merit by the learned Commissioner(Appeals), it will not be appropriate to decide the appeal on merits. The dismissal of the appeal for non-compliance of mandatory predeposit is not justified in law when the appellant has already paid the entire duty by debiting the cenvat credit account. The matter remanded back to the learned Commissioner(Appeals) for disposal of the appeal on merits after considering the various provisions contained in Section 140 of CGST Act, 2017 and the Circular dt.02.01.2019 issued by CBIC and after following the principles of natural justice - appeal allowed by way of remand.
Issues:
Non-compliance of mandatory predeposit under Section 35F of the Finance Act, 1994; Incorrect payment of excise duty by the appellant; Disallowance of education cess and secondary education cess as transitional credit under CGST Act, 2017. Analysis: The appeal was against the order dismissing the appellant's appeal due to non-compliance with predeposit under Section 35F of the Finance Act, 1994. The appellant, a 100% EOU engaged in manufacturing and exports, was found to have short-paid Central Excise duty on DTA clearances. The duty should have included customs education cess and customs secondary higher education cess as per Central Excise Act, 1944. The appellant debited the amount in their input tax ledger but failed to reflect it in the electronic ledger or statutory returns. A show-cause notice was issued, and the demand was confirmed by the adjudicating authority. The Commissioner(Appeals) dismissed the appeal without considering the merits due to non-compliance with predeposit. The appellant argued that the entire duty was paid by debiting their cenvat credit account, which was not considered in the impugned order. The counsel contended that education cess and secondary education cess cannot be carried forward as transitional credit under CGST Act, 2017, as clarified by CBIC Circular. The appellant relied on Section 140 of CGST Act, 2017 and CCR, 2004, stating that the credit of cesses remains as cenvat credit and can be used for payment. The appellant also highlighted Section 174 of CGST Act, 2017, saving the action of taking credit and utilization under CCR, 2004. The Tribunal found the dismissal of the appeal for non-compliance with predeposit unjustified as the duty was paid by debiting the cenvat credit account. It was noted that education cess and secondary education cess cannot be carried forward as eligible duty of cenvat credit. The authorities failed to consider Section 140 of CGST Act, 2017 and the CBIC Circular. The matter was remanded back to the Commissioner(Appeals) for a decision on merits, considering the relevant provisions and principles of natural justice. The appeal was allowed by way of remand for further proceedings.
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