2024 (9) TMI 1022 - AT - Central Excise

Utilization of CENVAT credit availed on inputs, capital goods and input services for paying Sugar Cess - period 2010-2011 - subrule (4) of Rule 3 of the CENVAT Credit Rules, 2004 - HELD THAT - Hon ble Karnataka High Court in appellant s own case COMMISSIONER OF CENTRAL EXCISE VERSUS M/S SHREE RENUKA SUGARS LTD 2014 (1) TMI 1469 - KARNATAKA HIGH COURT observed that Sugar Cess is nothing but a duty of excise and admissible to take credit under Rule 3 of the CCR, 2004. In the absence of any restriction of utilization under subrule (4) of Rule 3 of the CENVAT credit Rules, 2004 in discharging Sugar Cess, the utilization of accumulated credit in discharging liability of Sugar Cess cannot be denied. This Tribunal in DECCAN CEMENTS LTD, M/S BHARATHI CEMENT CORPORATION PVT LTD, M/S ZUARI CEMENT LTD, M/S PENNA CEMENT INDUSTRIES LTD UNIT IV, I, M/S RAIN CEMENTS LTD VERSUS COMMISSIONER OF CENTRAL TAX, RANGAREDDY, TIRUPATI GST, COMMISSIONER OF CUSTOMS, CENTRAL EXCISE SERVICE TAX, NELLORE, TIRUPATI 2019 (7) TMI 764 - CESTAT HYDERABAD , comparing Sugar Cess with Clean Energy Cess observed that Sugar Cess as held by the Hon ble Karnataka High Court to be duty of excise stands in a different footing from Clean Energy Cess. Hence, the said judgment is not applicable to the facts and circumstances of the present case. The impugned orders are not sustainable in law and accordingly, the same is set aside - appeal allowed.

Summary

Issues:
Whether CENVAT credit can be utilized for paying Sugar Cess.

Analysis:
The appeals were filed against orders demanding recovery of Sugar Cess paid using CENVAT credit. The appellant argued that various court decisions supported their position, including those by the High Court and Tribunal. They contended that Sugar Cess is a duty of excise and hence, CENVAT credit can be used for its payment. The Revenue argued that Sugar Cess is not a duty of excise under the Central Excise Act, 1944, and thus, CENVAT credit cannot be used. They also highlighted that the issue is pending before the Supreme Court for finality. Additionally, they pointed out decisions related to Clean Energy Cess where CENVAT credit was not allowed. The main issue was whether Sugar Cess payment can be made using CENVAT credit.

The Tribunal analyzed Rule 3(4) of the CENVAT Credit Rules, 2004, which allows CENVAT credit to be utilized for payment of excise duty on final products. The Karnataka High Court had previously held that Sugar Cess is a duty of excise and admissible for credit under Rule 3. Since there was no restriction in the rule against using credit for Sugar Cess, the Tribunal held that accumulated credit can be used for such payment. They also cited a previous order in favor of the appellant. The judgment concerning Clean Energy Cess was deemed irrelevant as it did not apply to Sugar Cess, which was considered a duty of excise.

Ultimately, the Tribunal found the impugned orders unsustainable in law and allowed the appeals, providing consequential relief as per the law. The decision was based on the interpretation of Rule 3(4) and the precedent set by the Karnataka High Court regarding Sugar Cess being treated as a duty of excise eligible for CENVAT credit.