2019 (4) TMI 930 - AT - Central Excise

CENVAT Credit - sugar cess paid on imported sugar - whether the assessee is entitled to CENVAT credit on sugar cess as the same is not one of the duties allowed for CENVAT credit under Rule 3(1) of the CENVAT Credit Rules, 2004? - Held that - As per Rule 3 of CCR, 2004, CENVAT credit is not permissible on everything which has been paid but only such duties as are specified in it. Every Cess is levied under some specific Act and since there is no separate mechanism for collection etc., of such cesses, cess is deemed to be a duty of excise under Central Excise Act and correspondingly all provisions of the Central Excise Act will apply - A plain reading of Rule 3 would show that all cesses have not been made eligible for CENVAT credit but only duties of excise or additional duties of excise or education cess etc., have been made eligible for CENVAT credit. Sugar cess is clearly not covered in Rule 3 of CCR, 2004. The Hon ble High Court of Karnataka in COMMISSIONER OF CENTRAL EXCISE VERSUS M/S SHREE RENUKA SUGARS LTD 2014 (1) TMI 1469 - KARNATAKA HIGH COURT has allowed CENVAT credit on sugar cess which leaves me with no option but to follow this judgment while most respectfully disagreeing with it. The appellant is entitled to CENVAT credit on the sugar cess paid on the imported sugar - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Claim of CENVAT credit on sugar cess under Rule 3(1) of CENVAT Credit Rules, 2004.

Analysis:
The appellant, a manufacturer of aerated soft drinks, imported sugar and paid customs duty, including sugar cess. The question was whether the appellant could claim CENVAT credit on sugar cess under Rule 3(1) of CCR, 2004. The High Courts of Gujarat and Karnataka had conflicting views on the nature of sugar cess, with Gujarat holding it cannot be equated with Central Excise duty and Karnataka considering it as an excise duty. The Supreme Court dismissed the Revenue's appeal, leaving the question unresolved. The appellant relied on the Karnataka High Court's judgment in a similar case and argued for CENVAT credit on sugar cess.

The Rule 3 of CCR, 2004 lists specific duties eligible for CENVAT credit, including excise duties, education cess, and additional duties under various Acts. However, sugar cess is not explicitly included in the rule. The Tribunal noted that while all cesses are deemed excise duties under the Central Excise Act, Rule 3 limits CENVAT credit to specified duties. Despite the absence of sugar cess in Rule 3, the Tribunal followed the Karnataka High Court's decision, allowing CENVAT credit on sugar cess based on the binding precedent. The Tribunal disagreed with the Gujarat High Court's view on equating cess with excise duty and held in favor of granting CENVAT credit on sugar cess paid on imported sugar.

In conclusion, the Tribunal allowed the appeal, setting aside the impugned order and granting the appellant the right to avail CENVAT credit on sugar cess paid on imported sugar, following the precedent set by the Karnataka High Court's judgment.

(Order pronounced in open court on 12.04.2019)