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TMI Blog2013 (9) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara 2A, for the purpose of this notification, duty paid, by utilization of the amount credited in the account current, shall be taken as payment of duty by the way other than utilization of Cenvat credit under the Cenvat Credit Rules, 2004. 1.3 Clause 1A of the exemption notification reads as under :- In cases where all the goods produced by a manufacturer are eligible for exemption under this notification, the exemption contained in this notification shall be available subject to the condition that, the manufacturer first utilizes whole of the Cenvat credit available to him on the last day of the month under consideration for payment of duty on goods cleared during such month and pays only the balance amount in cash. 1.4 It is the duty paid in cash, after exhausting the entire Cenvat credit for payment of duty, which is refunded by the jurisdictional Assistant/Deputy Commissioner or at the option of the assessee can be taken as self credit in PLA (account current) which can be utilized for payment of duty through PLA next month. Paras 2 and 2A of the Notification prescribe the procedure to be followed for obtaining refund of duty paid through PLA or taking its self credit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cenvat credit of various duties is specified in Rule 3(7)(b) according to which the credit of AED (GSI), AED (T TA), NCCD, education cess and S H cess be utilized only for payment of AED (GSI), AED (T TA), NCCD, education cess and S H cess respectively, and there is no restriction on utilizing BED credit for payment of education cess or S H cess. 1.9 Against the above orders of CCE (Appeals), these appeals have been filed by the Revenue. In respect of appeal Nos. E/358/2009, E/793 to 801, 1931, 782 to 787, 790 to 792, 1472 to 1476, 1477 to 1479, 1484 to 1487, 1921, 1924, 1925, 1928 to 1930, 1482 to 1483, 788 to 789, 353 to 355, 1922 to 1923, 1927, 349 to 352, 356 to 357, 773/2009 , stay applications have also been filed. 2. Heard both the sides. 3. Shri S.R. Meena, the learned Senior Departmental Representative assailed the impugned orders by reiterating the grounds of appeal in the Revenue s appeals and pleaded that - (a) In terms of para (1A) of the notification, a manufacturer availing of this exemption, has to first utilize the whole of the cenvat credit available at the end of the month for payment of duty on clearances made during the month and only the bala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgments of the Tribunal in the cases of Bharat Box Factory Ltd. v. CCE, Jammu reported in 2007 (214) E.L.T. 534 (Tri.-Del.) and Cyrus Surfactant Pvt. Ltd. reported in 2007 (215) E.L.T. 55 (Tri.-Del.); that when the education cess is a duty exempted under Notification No. 56/2002-C.E., and neither in Rule 3(4) nor in Rule 3(7)(b) of Cenvat Credit Rules, 2004 there is any restriction on the utilization of basic excise duty credit for payment of education cess, and S H cess, these cesses payable by the Respondents could be paid through BED credit also, not necessarily through the education cess credit and S H cess credit respectively; that Hon ble Gauhati High Court in case of CCE, Dibrugarh v. M/s. Prog Bosami Synthetics Ltd. in its judgment dated 29-6-2011 has held that while NCCD is not exempt under Notification No. 32/99-C.E. (a notification similar to Notification No. 56/2002-C.E.), a manufacturer availing of Notification No. 32/99-C.E. can pay NCCD through credit of basic excise duty; that Tribunal in case of CCE, Ludhiana v. Malwa Industries Ltd. reported in 2004 (171) E.L.T. 67 (Tri.-Del) has held that BED or SED credit could be utilized for payment of AED (GSI); that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Centre or Export Promotion Industrial Park; or Industrial Estate or Industrial Area or Commercial Estate or Scheme Area. - In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and sub-section (3) of section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than goods specified in Annexure I appended hereto, and cleared from a unit located in the Industrial Growth Centre, Industrial Infrastructure Development Centre or Export Promotion Industrial Park; or Industrial Estate or Industrial Area or Commercial Estate or Scheme Area as the case may be, leviable thereon under any of the said Acts as is equivalent to the amount of duty paid by the manufacturer of goods, other than the amount of duty paid by utilization of CENVAT c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained in terms of Part V of the Excise Manual of Supplementary Instruction issued by the Central Board of Excise and Customs. Such amount credited in the account current may be utilised by the manufacturer for payment of duty, in the manner specified under rule 8 of the Central Excise Rules, 2002, in subsequent months, and such payment should be deemed to be payment in cash; Provided that where the exemption contained in this notification is not applicable to some of the goods produced by a manufacturer, the amount of such credit shall not exceed the amount of duty paid less the amount of the CENVAT Credit availed of, in respect of the duty paid on the inputs used in or in relation to the manufacture of goods cleared under this notification. xxx xxx xxx xxx xxx Explanation. - For the purposes of this notification, duty paid, by utilisation of the amount credited in the account current, shall be taken as payment of duty by way other than utilisation of CENVAT credit under the CENVAT Credit Rules, 2002. . 3. The exemption contained in this notification shall apply only to the following kind of units namely :- xxx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcept that the rate of cess is 1% of the aggregate of duties of excise. 5.3 The relevant portion of Rule 3(4) and 3(7)(b) of the Cenvat Credit Rules, 2004 are as under :- 3(4) The CENVAT credit may be utilized for payment of - (a) any duty of excise on any final product; or (b) an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed; or (c) an amount equal to the CENVAT credit taken on capital goods if such capital goods are removed as such; or (d) an amount under sub-rule (2) of rule 16 of Central Excise Rules, 2002; or (e) service tax on any output service : Provided that while paying duty of excise or service tax, as the case may be, the CENVAT credit shall be utilized only to the extent such credit is available on the last day of the month or quarter, as the case may be, for payment of duty or tax relating to that month or the quarter, as the case may be : xxx xxxx xxxxx xxxxx xxxx xxx Rule 3(7)(b). - CENVAT credit in respect of - (i) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of the education cess on excisable goods and the education cess on taxable services can be utilized, either for payment of the education cess on excisable goods or for the payment of the education cess on taxable services : Provided further that the credit of the Secondary and Higher Education Cess on excisable goods and the Secondary and Higher Education Cess on taxable services can be utilized, either for payment of the Secondary and Higher Education Cess on excisable goods or for the payment of the Secondary and Higher Education Cess on taxable services.] Explanation. - For the removal of doubts, it is hereby declared that the credit of the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) paid on or after the 1st day of April, 2000, may be utilised towards payment of duty of excise leviable under the First Schedule or the Second Schedule to the Excise Tariff Act. 6. From a plain reading of the Notification No. 56/2002-C.E., it will be seen that - (1) this notification has been issued under Section 5A of Central Excise Act, 1944 read with Section 3(3) of AED (GSI) Act, 1957 and Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilized for payment of duty which is not covered for exemption under this notification, as doing so would distort the quantum of duty payable through PLA. If a particular duty not covered by this exemption is also paid through cenvat credit before utilizing the cenvat credit to the extent possible for payment of duties covered by this exemption, the payment through PLA of the duties covered by this exemption notification would increase to the extent the duty not covered by this exemption had been paid through cenvat credit and will result in refund of the duty not covered by this exemption, which is not permissible. To illustrate, if all the goods manufactured by a manufacturer availing of Notification No. 56/2002-C.E. attract BED; education cess and S H cess, and while cenvat credit of BED available at the end of a month is C and his BED liability for the goods cleared during the month is B (more than C ) and he after fully utilizing the cenvat credit to the extent possible, pays the balance amount of duty (B - C) through PLA, the quantum of refund available to him would be B - C. But if before fully utilizing the cenvat credit (BED credit) for payment of BED, he utilizes cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also. 6.4 Normally the BED payable is more than the BED credit available at the end of the month and after utilizing the BED credit to the extent possible for payment of BED leviable, no BED credit would be left. But if due to some reason after payment of duty on the goods cleared during the month by utilizing the BED credit to the extent possible, some credit is left, can the leftover BED credit be used for payment of education cess and S H cess? Our answer to this would be in the negative, as unutilized BED credit of a particular month would be available next month for payment of BED and if this credit is utilized/diverted for payment of education cess and S H cess, the payment of BED through PLA and, hence, the quantum of refund during next month will get distorted i.e. will increase to that extent. 6.5 Therefore, in our view, a manufacturer availing of Notification No. 56/2002-C.E. cannot utilize BED credit for payment of education cess and S H cess and as demonstrated above, it will amount to the indirect refund of education cess and S H cess, which is not permissible. The payment of education cess and S H cess through BED credit is in conflict with the scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restriction for utilization of credit of other duties i.e. BED credit, AED (GSI) credit, etc. In our view, in case of 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 is that this credit cannot be used for payment of duties not exempted under this notification, as discussed above, if this is permitted, this would result in refund of duties like education cess, S H cess, NCCD etc. which is not permitted under this notification, while it is well settled law that what is 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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