2008 (1) TMI 147 - AT - Central Excise

Credit of education cess denied on the ground that as per Rule 3(7)(a) of CCR an assessee receiving goods from EOU can avail credit of BED only revenue contend since Rule 3(7)(a) begins with a non-obstante clause it overrides the provisions contained in sub-rule (1) and (4) of Rule 3 held that a non-obstante clause is used where contrary provisions exist not on all the provision contained Rule 3(7)(b) & 3(1) are applicable to all so credit of education cess is admissible

Summary

Issues:
Disallowance of credit of education cess availed by manufacturers from a 100% EOU.

Analysis:
1. Rule 3(1) of the Cenvat Credit Rules, 2004 allows manufacturers to take credit of specified duties paid on inputs or capital goods. An exception is carved out for inputs supplied by a 100% EOU, where credit is restricted to the formula under Rule 3(7)(a) only for basic excise duty. However, Rule 3(7)(a) does not cover all duties paid by EOU, focusing only on basic excise duty, not Education Cess or other duties under the Finance Act, 1944.

2. The Revenue argued that Rule 3(7)(a) overrides other provisions, limiting credit to the specified formula. However, this argument is not tenable as a non-obstante clause is used to give overriding effect to specific provisions, not all contained therein. Citing legal precedents, it is established that a non-obstante clause applies where contrary provisions exist, supporting the admissibility of education cess credit under Rule 3(1) and 3(7)(b).

3. Rule 3(7)(b) allows utilization of Cenvat credit by all manufacturers, including 100% EOU, for specific duties like education cess. As Rule 3(7)(b) also begins with a non-obstante clause, barring education cess credit under Rule 3(7)(a) would render Rule 3(7)(b) redundant. Therefore, the interpretation that restricts education cess credit is not in line with the legislative intent.

4. Considering the above, the judgment concludes that credit of education cess is admissible to the appellants, overturning the disallowance by the authorities. The judgment emphasizes the legislative framework and the purpose of Cenvat Credit Rules, ensuring manufacturers can avail credits as intended under the law.

This detailed analysis highlights the interpretation of rules, the application of legal precedents, and the legislative intent behind Cenvat Credit Rules, leading to the decision in favor of allowing the credit of education cess to the manufacturers.