2015 (3) TMI 995 - CGOVT - Central Excise

Denial of rebate claim - Education Cess and SHE Cess paid from the Cenvat Credit of Basic Central Excise duty is not permissible under proviso to Rule 3(7) of Cenvat Credit Rules, 2004 read with Rule 3(4) - Held that - as per Rule 3(4) of Cenvat Credit Rules, 2004, Cenvat credit may be utilized for payment of any duty of excise on any final product. As such Cenvat credit of BED paid on inputs can be utilized for payment of any duty of excise on any final product. Section 93(1) of Finance Act, 2004 and Section 138(1) of Finance Act, 2007 under which Education Cess and SHE Cess are leviable specifically refer to these cesses as duty of excise. The Rule 3(7)(b) of Cenvat Credit Rules, 2004 put restriction in regard to utilization of Cenvat credit availed in respect of Education Cess and SHE Cess paid on inputs. The provisions relating to utilization of basic excise duty credit contained in Rule 3(4) of said rules does not put any restriction on utilization of said credit for payment of Education Cess/SHE Cess leviable as per provisions of relevant Finance Acts. This point is further clarified in para 2.4.2 of Chapter 5 of C.B.E. & C. Excise Manual on Supplementary Instructions which clearly stipulate that there is no restriction on utilization of credit of duties other than the restriction as envisaged in Rule 3(7)(b) of Cenvat Credit Rules, 2004. Plain reading of statute as clarified and elaborated vide the C.B.E. & C. Manual and circulars are mandatorily binding on the departmental authorities. Thus in the event of there being no specific bar anywhere to the utilization of accumulated Cenvat credit of BED towards payment of Education Cess and SHE Cess, the objection and ground of revision application of the department are not legally sustainable. As such Commissioner (Appeals) has rightly hold that there is no restriction on utilization of Cenvat credit of BED for payment of Education Cess & SHE Cess. - No infirmity in impugned orders - Decided against Revenue.

Summary

Issues:
Rebate claim rejection due to utilization of Cenvat Credit for Education Cess and Secondary & Higher Education Cess.

Detailed Analysis:

Issue 1: Utilization of Cenvat Credit for Education Cess and SHE Cess
The case involved a rebate claim filed by a company for duty paid on exported goods. The adjudicating authority rejected part of the claim as the company had used Cenvat Credit of Basic Central Excise duty for payment of Education Cess and Secondary & Higher Education Cess. The department challenged this decision, arguing that Education Cess and SHE Cess are defined as Central Excise duty under relevant Finance Acts. However, the appellate authority contended that the Cenvat Credit Rules restrict the use of credits for specific duties only. The government analyzed the relevant provisions and held that there is no restriction on utilizing Basic Excise Duty credit for Education Cess and SHE Cess. Citing a High Court ruling, the government emphasized that credits from different sources can be used for such payments. Additionally, Supreme Court precedents highlighted the binding nature of C.B.E. & C. Manual and circulars on departmental authorities, supporting the decision that there was no legal impediment to using Basic Excise Duty credit for Education Cess and SHE Cess.

Conclusion:
The government upheld the appellate authority's decision, rejecting the revision application and affirming the legality of using Cenvat Credit of Basic Excise Duty for Education Cess and SHE Cess payments.