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TMI Blog2018 (2) TMI 1264X X X X Extracts X X X X X X X X Extracts X X X X ..... ectively. Manufacturers and output service providers were entitled to take benefit of EC and SHE credit on the EC and SHE payable on manufactured goods and output services on or before the cut off date, i.e., 1st March, 2015 in case of manufactured goods and 1st June, 2015 in case of taxable services. They have not been allowed to take credit after the said two dates for the simple reason that EC and SHE ceased to be applicable and were no longer payable after the said dates. The provisos added to Rule 3, sub-rule (7) in clause (b) are really in the nature of concessions confined to a limited and narrow set of cases and are not of general application. Noticeably, they expand the scope and give benefit of utilization of accumulated EC and SHE against payment of excise duty and service tax, which was not the position prior to 1st March, 2015 and 1st June, 2015, respectively. It is also easily apparent as to why the said benefit or concession was granted. These cases certainly fall in a distinct and separate class. The said classification would not fall foul of vice of discrimination. Article 14 is not offended. In fact the petitioners do not challenge and question the provisos, albei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SHE on inputs, capital goods and input services could be utilised and availed of for payment of EC and SHE on manufactured goods and output services. Input EC and SHE credit had the effect of preventing cascading effect on EC and SHE payable down the line. It is an accepted and admitted case that benefit of EC and SHE on inputs, etc. could not have been utilised for payment of excise duty service tax on the output, i.e., manufactured goods or taxable services. Thus, cross utilisation of EC and SHE towards excise duty or service tax was impermissible and not permitted. 4. EC and SHE were abolished and were not payable on excisable goods with effect from 1st March, 2015 vide Notification Nos. 14/2015-CE and 15/2015-CE both dated 1st March, 2015. EC and SHE were also abolished and ceased to be payable on taxable services when Section 95 of Finance Act (No. 2) 2004 and Section 140 of Finance Act, 2007 were omitted by Finance Act, 2015. The omission was to take effect from 1st June, 2015 vide Notification No.14/2015-ST dated 19th May, 2015. As a result, levy of EC and SHE on excisable goods was withdrawn with effect from 1st March, 2015 and in respect of taxable services with effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax is being increased from 12% plus Education Cesses to 14%. The Education Cess and Secondary and Higher Education Cess shall be subsumed in the revised rate of Service Tax. Thus, the effective increase in Service Tax rate will be from the existing increase in Service Tax rate will be from the existing rate of 12.36% (inclusive of cesses) to 14%, subsuming the cesses The contention is that EC and SHE, which were earlier imposed and then withdrawn from 1st March, 2015 and 1st June 2015 for excisable goods and taxable services respectively, had been subsumed and included in the excise duty and service tax, and therefore, the amount lying in the credit towards EC and SHE should be available for availing CENVAT credit. This was not a case of abolition of EC and SHE, but the cesses were added and became part of the excise duty or service tax. Reliance is placed on the dictionary definition of the term subsumed , which means to include, absorb in something else or incorporated into something larger or more general. Therefore under law, unutilised EC and SHE should be allowed to be utilised for payment of basic excise duty in excisable goods and service tax on taxable service, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and secondary and higher education cess after these Cesses have been phased out. As these Cesses have been phased out and no new liability to pay such Cess arises, no vested right can be said to exist in relation to the accumulated credit of the past. The rule and notifications as they exist need to be followed and do not need any amendment. It is submitted that the aforesaid reasoning is fallacious and contrary to law in view of the admission that EC and SHE were subsumed in the increased or higher excise duty and service tax rates applicable, which coincide with the withdrawal of EC and SHE. 7. In support of the said contention, reference was made by the petitioners to the amended CC Rules, i.e., CENVAT Credit Rules, 2004, which partially permit utilization of EC and SHE by adding six provisos in Rule 3, sub-rule (7) in clause (b), which reads as under:- Cenvat Credit Rules, 2004-Second Amendment of 2015 In exercise of the powers conferred by Section 37 of the Central Excise Act, 1944 (1 of 1944) and Section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the CENVAT Credit Rules, 2004, namely:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess and Secondary and Higher Education Cess paid on capital goods received in the premises of the provider of output service in the financial year 2014-15 can be utilized for payment of service tax on any output service: Provided also that the credit of Education Cess and Secondary and Higher Education Cess paid on input service in respect of which the invoice, challan or Service Tax Certificate for Transportation of Goods by Rail (referred to in rule 9), as the case may be, is received by the provider of output service on or after the 1st day of June, 2015 can be utilized for payment of service tax on any output service. It is accordingly submitted that the respondents themselves in some cases have permitted credit of EC and SHE and utilization of accumulated credit for payment of excise duty and service tax. 8. The respondents have contested the petition on several grounds and, inter alia, asserted that credit of EC and SHE towards payment of excise duty or service tax is not a vested right. The effect of the legislation withdrawing EC and SHE was to abolish the cess, though while presenting the Bill, etc. and giving reasons for increase in the excise duty and service t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of SHE leviable under Section 138 of the Finance Act, 2007. In respect of taxable services, the Finance Act, 2015 had omitted Section 95 of the Finance (No. 2) Act, 2004, which imposed EC on taxable services, vide Section 153 and Section 140 of Finance Act, 2007 and SHE on taxable services vide Section 159, with effect from the date as notified by the Central Government in the Official Gazette. These exemptions and omissions were given effect from 1st March, 2015 for excisable goods and 1st June, 2015 for taxable services, as mentioned earlier. 10. Omission of a provision signifies deletion of that provision and is normally not treated as different from repeal. The repeal/omission in the present case was not made retrospectively, but applied prospectively. Manufacturers and output service providers were entitled to take benefit of EC and SHE credit on the EC and SHE payable on manufactured goods and output services on or before the cut off date, i.e., 1st March, 2015 in case of manufactured goods and 1st June, 2015 in case of taxable services. They have not been allowed to take credit after the said two dates for the simple reason that EC and SHE ceased to be applicable and wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te applicable to excise duty and service tax. Noticeably, the service tax rate had gone up by 2%, from 12% to 14%, with the intent to increase it further in view of implementation of the General Goods and Services Tax in future. In the case of excise duty, the increase was only marginal, from 12% to 12.50%. Pertinently, no statement or assertion was made that the benefit of unutilized EC and SHE credit would be given against excise duty and service tax. The use of the words subsumed with reference to the two cesses could well indicate that there would not be an increased tax burden being put on the payers or the consumers, as EC and SHE were being withdrawn. Noticeably, the two cesses and the excise duty and the service tax were always treated as different and separate and cross-utilization was never permitted. 12. It is no doubt true that the two cesses, in the present case, were in the nature of taxes and not fee, but it would be incorrect and improper to treat the two cesses as excise duty or service tax. They were specific cesses for the objective and purpose specified. A Constitution Bench of five Judges in Hingir-Rampur Coal Company Limited and Others versus State of Ori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be founded - nor can the levy of the cess be said to have been dispensed with - by virtue of the alleged decision referred to in the Finance Minister's speech or on account of the letter dated August 11, 1986. The Finance Minister's speech is not law. The Parliament may or may not accept his proposal. Indeed, in this case, it did not accept the said proposal immediately but only a year later. It is only from the date of the repeal that the said levy becomes inoperative. We did not go as far in the present case for the explanation and reasons elucidated and given in paragraph 11 above. Use of the word subsumed in the context of the present case does not help and assist the petitioners in the manner asserted. No promise and statement that cross utilization of EC and SHE would be permitted was made. The petitioners seek an addition and expansion to what was stated and intended. 14. In Shashikant Laxman Kale and Another versus Union of India and Another, (1990) 4 SCC 366, constitutional validity of clause (10-C) of Section 10 of the Income Tax Act was challenged, as benefit under the said Section was not available to employees of private sector on voluntary retiremen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill, are not endorsed by Parliament and cannot be amended by Parliament. They are intended to be neutral in political tone; they aim to explain the effect of the text and not to justify it. The text of an Act does not have to be ambiguous before a court may be permitted to take into account explanatory notes in order to understand the contextual scene in which the Act is set: see the National Asylum Support Service case, para 5. In so far as this material casts light on the objective setting or contextual scene of the statute, and the mischief to which it is aimed, it is always an admissible aid to construction. Lord Steyn, however, ended his exposition of the value of explanatory notes as an aid to construction by saying [2002] 1 WLR 2956 , para 6: What is impermissible is to treat the wishes and desires of the Government about the scope of the statutory language as reflecting the will of Parliament. The aims of the Government in respect of the meaning of clauses as revealed in explanatory notes cannot be attributed to Parliament. The object is to see what is the intention expressed by the words enacted. 16. The decision in the case of Eicher Motors Limited and Another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed provision, could not be made applicable to goods which had already come into existence and under which the assessee had claimed credit facility. As noticed above, in the present case, credit of EC and SHE could be only allowed against EC and SHE and could not be cross- utilized against the excise duty or service tax. In fact, what the petitioners seek is an amendment of the scheme to allow them to take cross utilization of the unutilized EC and SHE upon the two cesses being withdrawn against excise duty and service tax, though this was not the position even earlier. Both EC and SHE were withdrawn and abolished. They ceased to be payable. In these circumstances, it is not possible to accept the contention that a vested right or claim existed and legal issue is covered against the respondents by the decision in Eicher Motors Limited and Another (supra) and Samtel India Limited (supra). The said decisions are distinguishable and inapplicable. 17. The decision in Eicher Motors Limited and Another (supra) was distinguished in the case of Osram Surya (P) Ltd. Versus Commissioner of Central Excise, Indore, 2002 (142) ELT 5 (SC), wherein proviso to Rule 57 introducing six months time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with regard to the judgment of this Court in CCE v. Dai Ichi Karkaria Ltd.(1999) 7 SCC 448 8. It is vehemently argued on behalf of the appellants that in effect by introduction of this Rule, a manufacturer in whose account certain credit existed, would be denied of the right to take such credit consequently, as in the case of Eicher (1999) 2 SCC 361 a manufacturer's vested right is taken away, therefore, the Rule in question should be interpreted in such a manner that it did not apply to cases where the credit in question had accrued prior to the date of introduction of this proviso. In our opinion, this argument is not available to the appellants because none has questioned the legality or the validity of the Rule in question, therefore, any argument which in effect questions the validity of the Rule, cannot be permitted to be raised. The argument of the appellants that there was no time whatsoever given to some of the manufacturers to avail the credit after the introduction of the Rule also is based on arbitrariness of the Rule, and the same also will have to be rejected on the ground that there is no challenge to the validity of the Rule. 9. Without such a challenge, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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