2011 (1) TMI 222 - AT - Central Excise

Classification - Cenvat credit - Refund - Notification No. 56/2002-C.E., dated 14-11-2002 -payment of E.Cess using Cenvat crdit of basis duty - Held that the provision of law either as it stood in the year 2005 or even today does not permit the payment of cess by utilising cenvat credit availed on payment of excise duty as the provision of law comprised under sub-rule 7(b) of Rule 3 specifically makes the provision regarding the utilisation of the cenvat credit. It specifically provides that the credit of the education cess on excisable goods and education cess on taxable services can be utilised, either for payment of the education cess on excisable goods or for payment of education cess on taxable services. - the modus operandi adopted by the respondents was not correct in relation to the utilisation of the cenvat credit while availing the benefit of Notification No. 56/2002, dated 14-11-2002. - Claim of refund rejected - decided in favour of revenue.

Summary

Issues:
Appeal against common order allowing refund claims based on utilization of Cenvat credit for education cess paid through PLA.

Analysis:
1. Background: The appeals arose from a common order by the Commissioner (Appeals) setting aside the orders passed by the adjudicating authority and allowing refund claims by the respondents.

2. Refund Claims: The respondents, engaged in manufacturing printed cartons, filed refund claims for central excise duty paid through PLA for specified months under Notification No. 56/2002-C.E., dated 14-11-2002. The adjudicating authority disallowed the claims, citing that Cenvat credit of basic excise duty cannot be used for education cess payment as per Rule 3 of Cenvat Credit Rules, 2004.

3. Appellate Decision: The Commissioner (Appeals) set aside the adjudicating authority's orders, following a Tribunal decision in Sun Pharmaceutical Industries case. The Tribunal held that the Cenvat credit could have been utilized for cess payment, contrary to the adjudicating authority's stance.

4. Legal Interpretation: The issue revolved around whether Cenvat credit could be used for cess payment under Notification No. 56/2002-C.E., dated 14-11-2002. The law, specifically Rule 3 sub-rule 7(b), prohibits such utilization for education cess. The Tribunal's reliance on Sun Pharmaceutical Industries case was deemed incorrect as it contradicted the law's provisions.

5. Inconsistencies: The Tribunal's decision in Sun Pharmaceutical Industries case was deemed in curiam as it conflicted with the legal provisions. The subsequent orders based on this case were considered incorrect. The judgment emphasized that the law does not permit using Cenvat credit for cess payment.

6. Final Decision: The impugned order was set aside, and the adjudicating authority's orders were restored. The appeals were allowed, and the refund claims were disallowed, emphasizing the correct interpretation of the law. The judgment was pronounced on 19-1-2011.