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2013 (9) TMI 345 - AT - Central ExciseArea Bases Exemption under Notification No.56/2002 - Whether an assessee availing of exemption under Notification No. 56/2002-C.E. can pay education cess and S & H Cess through BED Credit - Held that - A unit availing of exemption under Notification No. 56/2002-C.E. cannot utilize BED credit for payment of education cess and S & H cess which were not exempted under the notification - Extra BED paid through PLA on account of diversion of BED credit for payment of education cess and S & H cess would not be refundable under Notification No. 56/2002-C.E. A manufacturer availing of Notification No. 56/2002-C.E. cannot utilize BED credit for payment of education cess and S & H cess - it will amount to the indirect refund of education cess and S & H cess, which was not permissible - The payment of education cess and S & H cess through BED credit was in conflict with the scheme of this exemption which does not exempt the education cess and S & H cess and which was available only in respect of the duties mentioned in it subject to following of condition of the notification - CCE, Shillong v. Dharampal Satyapal Ltd. 2011 (8) TMI 99 - GAUHATI HIGH COURT - the notification does not exempt education cess. These two education cess were not covered by Notification No. 56/2002-C.E. the same cannot be paid by the respondent in the manner they seek to pay the same i.e. by utilizing BED credit before utilizing the BED credit to the extent possible for payment of BED as doing so would result in refund of education cess also. A manufacturer availing of exemption under Notification No. 56/2002-C.E., while the restriction on utilisation of Cenvat credit of duties/taxes as mentioned in Rule 3(7)(b) would be applicable, there would be one more additional restriction on utilization of credit of duties/taxes other than those mentioned in Rule 3(7)(b), i.e. credit of BED, AED (GSI) etc. and this restriction was that this credit cannot be used for payment of duties not exempted under this notification if this was permitted, this would result in refund of duties like education cess, S & H cess, NCCD etc. which was not permitted under this notification, while it is well settled law that what was not permissible directly cannot be allowed indirectly. Therefore, in order to ensure that an assessee availing of exemption under this notification does not end up availing this exemption in respect of education cess and S & H cess also, he cannot be allowed to use BED credit for payment of education cess and S & H cess, though this may be permitted under the provision of Rule 3(4) of the Cenvat Credit Rules, 2004 - The orders were set aside Decided in favour of Revenue.
Issues Involved:
1. Whether an assessee availing exemption under Notification No. 56/2002-C.E. can pay education cess and Secondary and Higher Education Cess (S & H Cess) through Basic Excise Duty Credit (BED Credit). Issue-wise Detailed Analysis: 1. Utilization of BED Credit for Payment of Education Cess and S & H Cess: The primary issue in these appeals is whether the respondents, who are availing exemption under Notification No. 56/2002-C.E., can pay education cess and S & H Cess by utilizing the BED Credit. The respondents had paid these cesses using BED Credit, resulting in a higher amount of basic excise duty being paid through PLA and subsequently claimed higher refunds. 2. Jurisdictional Assistant Commissioner's Orders: The Jurisdictional Assistant Commissioner disallowed the refund of excess Basic Excise Duty paid through PLA, holding that the utilization of BED Credit for payment of education cess and S & H Cess was not permissible under Notification No. 56/2002-C.E. This notification does not exempt these cesses, and using BED Credit for their payment would indirectly refund these cesses, which is not allowed. 3. Commissioner (Appeals) Orders: The Commissioner (Appeals) set aside the Assistant Commissioner's orders, holding that under the Cenvat Credit Rules, 2004, there is no restriction on utilizing BED Credit for payment of education cess and S & H Cess. The Revenue appealed against this decision. 4. Tribunal's Initial Judgment and Rectification of Mistake: Initially, the Tribunal disposed of these appeals by following its judgment in CCE, Jammu v. Jindal Drugs Ltd., which dealt with a different issue. The respondents filed applications for rectification of mistake, arguing that their case was wrongly decided along with others. The Tribunal allowed the rectification applications and restored the appeals to their original numbers. 5. Arguments by Revenue: The Revenue argued that: - As per para (1A) of Notification No. 56/2002-C.E., the term "duty" refers only to duties exempted under this notification. - Education cess and S & H Cess are not covered by this notification. - BED Credit cannot be used for payment of education cess and S & H Cess, as these are not duties of excise under Section 3(1) of the Central Excise Act, 1944. - The issue has been decided in favor of the Department by the Tribunal in CCE, J&K v. Bharat Box Factory Ltd. 6. Arguments by Respondents: The respondents argued that: - Notification No. 56/2002-C.E. exempts education cess and S & H Cess. - There is no restriction in the Cenvat Credit Rules, 2004, on utilizing BED Credit for payment of these cesses. - Various judgments support the view that BED Credit can be used for payment of education cess and S & H Cess. 7. Tribunal's Analysis: The Tribunal examined the relevant provisions of Notification No. 56/2002-C.E., the Finance Acts, and the Cenvat Credit Rules, 2004. It concluded that: - The notification exempts only specific duties and not education cess and S & H Cess. - Utilizing BED Credit for payment of these cesses would distort the quantum of duty payable through PLA and result in an indirect refund of these cesses, which is not permissible. - The provisions of the Cenvat Credit Rules, 2004, are a facility, and to the extent they conflict with the conditions of Notification No. 56/2002-C.E., the notification's conditions prevail. 8. Tribunal's Conclusion: The Tribunal held that: - A unit availing of exemption under Notification No. 56/2002-C.E. cannot utilize BED Credit for payment of education cess and S & H Cess. - Extra BED paid through PLA due to diversion of BED Credit for these cesses would not be refundable under the notification. Final Judgment: The Tribunal set aside the impugned orders of the Commissioner (Appeals) and restored the orders passed by the original adjudicating authority, thus allowing the Revenue's appeals. The judgment was pronounced in open court on 19-9-2012.
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