Customs, Excise and Service Tax Appellate Tribunal

Sindia Steels Ltd. Vs. CCGST, Nashik

MANU/CM/0028/2019

23.01.2019

Excise

Mere taking of cenvat credit in book of account would not entail interest and penalty unless same is drawn from account of the government by way of refund or utilisation against duty dues

Appellant manufactures bright bar of stainless steel, and mild steel and mild steel wire. It has registered under the Central Excise Act. It availed cenvat credit on inputs for such manufacturing. During investigation made in January 2013, after intelligence gathered by the excise department, Appellant was informed that as per provision of Rule 3(1) of Cenvat Credit Rules 2004 credit on Education Cess & Secondary and Higher Secondary Education Cess were not admissible and the Appellant should reverse the same. Appellant did the reversal promptly and debited cenvat credit account but it was put to show-cause for such availment of allegedly inadmissible credit.

The matter was adjudicated upon that resulted in the confirmation of demand under Rule 14 of the Cenvat Credit Rules along with applicable interest at the appropriate rate and penalty of equivalent amount as well as penalty on the Director of the Appellant by the adjudicating authority. Appellant preferred appeal against such finding of the adjudicating authority that was dismissed in respect of Appellant company but allowed in respect of the Director absolving the penalty imposed on him. The present appeal is preferred by the Appellant challenging part rejection of its appeal in respect of duty demand interest and penalty on the appellant company.

Customs duty, as per customs tariff act were paid by the Appellant in accordance to Section 3 of Central Excise Act, 1994 as input material were brought by the Appellant from 100% EOU to its manufacturing unit located in India and Education Cess & Secondary and Higher Secondary Education Cess were duly paid by it.

Education Cess & Secondary and Higher Secondary Education Cess paid against additional duty leviable under Section 3 of Customs Tariff Act, 1975 are covered under cenvat credit permitted to be taken under Rule 3(1) of Cenvat Credit Rules 2004. Further, in respect of additional duty leviable under sub-section (5) of Section 3 of the Customs Tariff Act, nothing has been mentioned in Rule 3(1) of Cenvat Credit Rules 2004 that Education Cess & Secondary and Higher Secondary Education Cess paid on those duty is also included for availment of credits by the manufacturer.

According to Section 126 and 129 of the Finance Act, it is clear that Secondary and Higher Secondary Education Cess levied under Section 126 is not to be levied on the additional duty referred in sub-section (5) of Section 3 of the Customs Tariff Act. Therefore, the sample copy of invoice, which is imprinted on the show-cause notice, though reveals payment of additional duty of excise under sub-Rule (5) of Rule 3 was paid by the Appellant under erroneous interpretation of law and the same though taken as a credit should have been refunded back again under proper application. Only education cess paid under sub-section (5) is outside the purview of Cenvat Credit Rules and Secondary & Higher Education cess and of attached to additional duty referred in sub-section (5) of Section 3 of the Customs Tariff Act.

Mere taking of cenvat credit in the book of account would not entail interest and penalty unless the same is drawn from the account of the government by way of refund or utilisation against duty dues. Moreover having regard to the fact that even the intelligence wing officials of the Excise department, who conducted investigation are unaware that, higher education cess is not to be attached to sub-rule (5) of Rule 3 of Customs Tariff Rules, and issued show-cause to the Appellant, the same itself is sufficient indication that even experts in the field of taxation also misinterpreted the provisions due to inadequate understanding. The case of the Appellant can be considered as a bonafide dispute of legal interpretation of the provision as it has reflected the credit in its cenvat credit account without utilisation that would never justify invocation of extended period. The appeal is allowed and the order passed by the Commissioner of Central Excise is set aside.

Tags : Duty demand Interest Penalty

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