2018 (5) TMI 1403 - AT - Central Excise

Refund claim - rejection on the ground that the assessee has availed Cenvat credit of basic excise duty for payment of Education Cess and Higher Education Cess - Whether the Respondent can utilise basic excise duty for payment of education cess/higher education cess or not? - Held that - The issue of payment of education cess/higher education cess through basic excise duty has been decided in the case of Hon ble High Court of Gauhati in the case of Union of India Vs. Kamakhya Cosmetics & Pharmaceutical Pvt. Ltd. 2012 (7) TMI 902 - GAUHATI HIGH COURT wherein the Hon ble High Court has held that basic excise duty can be utilised for payment of education cess/ higher education cess - decided in favor of respondent. Whether the Respondent is entitled to claim refund of Education Cess/Higher Education Cess paid in cash in terms of N/N. 56/2002-CE dated 14.11.2002 or not? - Held that - issue of refund of education cess/higher education cess has been dealt by the Hon ble Apex Court in the case of SRD Nutrients Pvt. Ltd. vs. CCE Guwahati 2017 (11) TMI 655 - SUPREME COURT OF INDIA wherein the Hon ble Apex Court held that the Education Cess/higher education cess arises on account of payment of duty therefore the refund claim is admissible of education cess/ higher education cess in terms of Notification No. 56/2002-CE dated 14.11.2002 - decided in favor of respondent. Whether the interest for the intervening period can be demanded/adjusted or recovered from the Respondent without issuance of the SCN? - Held that - the issue is of short payment of duty on the premises that as the goods had been cleared to their sister unit and they are required to pay duty as per CAS- 4 whatever the duty could have been paid by the Respondent is entitled to refund of the same - it is a revenue neutral situation therefore on that account also payment is of interest is not required to be adjusted by the authorities below - decided in favor of respondent. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Whether the Respondent can utilize basic excise duty for payment of education cess/higher education cess.
2. Whether the Respondent is entitled to claim refund of Education Cess/Higher Education Cess paid in cash.
3. Whether the interest for the intervening period can be demanded/adjusted or recovered from the Respondent without issuance of the show cause notice.

Issue No. I:
The Tribunal referred to a previous case from the High Court of Gauhati, where it was held that basic excise duty can be used for paying education cess/higher education cess. Consequently, the Tribunal ruled in favor of the Respondent on this issue.

Issue No. II:
Citing a case from the Apex Court, the Tribunal determined that Education Cess/higher education cess is refundable as it arises from duty payment. Therefore, the Respondent was found entitled to claim a refund of Education Cess/Higher Education Cess paid in cash, in line with Notification No. 56/2002-CE dated 14.11.2002.

Issue No. III:
The Tribunal emphasized the necessity of issuing a show cause notice for the recovery or adjustment of interest. Referring to a previous case involving Punjab National Bank, it was established that interest cannot be recovered from the Respondent without the issuance of a show cause notice. Additionally, considering the duty payment situation between the Respondent and their sister unit as revenue neutral, the Tribunal concluded that no interest adjustment was warranted. Therefore, the Tribunal ruled in favor of the Respondent on this issue as well.

In conclusion, as all issues were resolved in favor of the Respondent, the Tribunal found no merit in the appeal filed by the Revenue and subsequently dismissed the appeal.