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2018 (7) TMI 325 - AT - Central ExciseCENVAT credit - denial of credit on the ground that Sugar Cess is a duty of excise - Rule 3 of the Cenvat Credit Rules, 2004 - Held that - It is settled that Sugar Cess is a tax and not a fee and the ld. Commissioner (Appeals) has erred in holding that sugar cess is not a tax. Credit cannot be denied - Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether 'Sugar Cess' is a duty of excise or a fee. 2. Whether the appellant is entitled to Cenvat Credit under Rule 3 of the Cenvat Credit Rules, 2004 for the 'Sugar Cess' paid. Issue-wise Detailed Analysis: 1. Whether 'Sugar Cess' is a duty of excise or a fee: The primary issue revolves around the classification of 'Sugar Cess' as either a duty of excise or a fee. The Commissioner (Appeals) rejected the appellant's contention that 'Sugar Cess' is a duty of excise, thereby denying the entitlement to Cenvat Credit under Rule 3 of the Cenvat Credit Rules, 2004. The appellant argued that 'Sugar Cess' should be treated as a duty of excise based on the precedent set by the Karnataka High Court in the case of CCE vs. Shree Renuka Sugar Ltd., which held that 'Sugar Cess' is indeed a duty of excise and not a fee. The department, however, contended that 'Sugar Cess' does not partake the character of a duty of excise but is in the nature of a fee for rendering specific services as per the Sugar Development Fund Act, 1982. The department relied on the Gujarat High Court's decision in Commissioner vs. Sahakari Khand Udyog Mandi Ltd., which stated that 'Sugar Cess' cannot assume the characteristic of central excise duty. 2. Whether the appellant is entitled to Cenvat Credit under Rule 3 of the Cenvat Credit Rules, 2004 for the 'Sugar Cess' paid: The appellant argued that their case is covered by the Karnataka High Court's decision in Shree Renuka Sugar Ltd., which allows for the Cenvat Credit of 'Sugar Cess' as it is considered a duty of excise. The appellant highlighted that the charging section of the Sugar Cess Act, 1982, explicitly states that the cess is a duty of excise on all sugar produced by any sugar factory in India. Furthermore, Section 2A of the Central Excise Act includes references to 'Central Value Added Tax (CENVAT)' under the term 'duty of excise,' thereby supporting the appellant's claim for Cenvat Credit on 'Sugar Cess.' The appellant also cited multiple tribunal decisions supporting their claim for Cenvat Credit on similar grounds. Legal Provisions and Analysis: The judgment delved into various legal provisions, including Section 3 of the Sugar Cess Act, 1982, Sections 3 and 4 of the Central Excise Act, 1944, and Rule 3(1) of the Cenvat Credit Rules, 2004. Section 3 of the Sugar Cess Act clearly indicates that the cess is a duty of excise levied on all sugar produced by any sugar factory in India. This duty is in addition to the duty of excise levied under the Central Excise Act or any other law in force. The provisions of the Central Excise Act apply to the levy and collection of this duty, further reinforcing its characterization as a duty of excise. The tribunal also referred to the Supreme Court's decision in Barnagore Jute Factory Co. vs. Inspector of Central Excise, which dealt with the nature of a cess levied under the Jute Manufacturers Cess Act, 1983, and concluded that such cess is in the nature of a duty of excise. Conclusion: The tribunal concluded that the appellant is entitled to Cenvat Credit of 'Sugar Cess' as it is a duty of excise. The decision of the Karnataka High Court in Shree Renuka Sugar Ltd. was deemed more appropriate and applicable to the present case compared to the Gujarat High Court's decision in Sahakari Khand Udyog Mandli Ltd. The appeal filed by the appellant was allowed, and the impugned order was set aside. The tribunal's decision was pronounced in open court on 5.7.2018.
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