CESTAT Allows Refund Of Unutilised Cenvat credit of Education Cess For Payment Of Output Tax

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed the refund of unutilised cenvat credit of education cess and secondary and higher education cess for payment of output tax.

The bench of Anil Choudhary (Judicial Member) has relied on the order passed by the Tribunal in the case of Bharat Heavy Electricals Ltd. Vs. Commissioner, CGST and held an assessee is entitled to a refund of unutilized cess under the existing law, lying in credit as on 30/06/2017.

The appellant/assessee is a manufacturer of AC conductors, which are used in the transmission of electricity. As of 28.02.2015, the appellant had a credit balance in the Cenvat Register of Education Cess and Secondary & Higher Education Cess of Rs.3,27,325.

The appellant/assessee was entitled to use the credit for Education Cess and Secondary & Higher Education Cess (SHEC) for payment of Education Cess on duty or taxable services under the provisions of Cenvat Credit Rules, Rule 3(7)(b). Similarly, the Secondary and Higher Education Cess credit could be used to pay similar excise duty on output service tax.

With effect from 01.03.2015, under the Finance Bill/Act, 2015, levies on EC & SHE Cess were exempted on goods.

The appellant contended that they had filed their ER-I Return for the month of February on 11.03.2015, and they had shown the unutilized portion of the Education Cess/S. Higher Education Cess at Rs.3,27,325/-. The appellant kept carrying forward the said balance and, thereafter, utilised the same for the payment of excise duty in the month of December 2016.

The appellant has filed a return for the month of December on 05.01.2017. Subsequently, there was an audit of the appellant by the Department in the month of December 2017 for the period from April to June 2016.

The objection was raised for other matters, but no objection was raised for erroneous utilisation of the amount of cess in December 2016. The audit objections were recorded as satisfied in the "Monthly Committee Meeting" held on January 17, 2017. There was a subsequent audit of the appellant by Revenue, which was in the months of June and July 2018, and in this audit, Revenue pointed out that the appellant had wrongly utilised the cenvat credit of the education cess and SHE cess, which was not available to them under the amended provisions of the Cenvat Credit Rules, read with notification.

The appellant contested the show cause notice on the ground of invocation of the extended period of limitation. However, the Adjudicating Authority confirmed the demand along with interest and an equal amount of penalty under Section 11 AC read with Rule 15 of the Cenvat Credit Rule (CCR, 2004). A penalty of Rs. 5,000 was also imposed under Rule 15 A of the CCR.

The appellant urged that there was no malafide on the part of the appellant and that the show cause notice was bad for the invocation of the extended period of limitation.

The CESTAT, while allowing the appeal, stated that if the appellant is required to deposit the amount of Rs. 3,27,325 in cash, it will become entitled to a refund of the duty earlier paid by utilisation of credit from EC & SHEC. Thus, the situation is wholly revenue neutral.

Case Title: M/s Mahavir Transmission Ltd. Versus Commissioner of Central Goods And Service Tax, Dehradun

Citation: Excise Appeal No. 50289 of 2022 (SM)

Date: 19.10.2022

Counsel For Appellant: Advocate Rajesh Gupta

Counsel For Respondent: Authorised Representative Divey Sethi

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