The CESTAT authorizes the reimbursement of the unused Cenvat credit of the education tax for the payment of the tax on outings

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The Delhi Bench of the Customs, Excise and Service Tax Appeals Tribunal (CESTAT) allowed the refund of the unused cenvat credit of the education tax and the secondary and higher education tax for the payment of the downstream tax.

The bench of Anil Choudhary (judicial member) relied on the Tribunal’s order in Bharat Heavy Electricals Ltd. Vs. Commissioner, CGST and detained, assessee is entitled to reimbursement of unused assignment under applicable law, remaining in credit as of 06/30/2017.

The appellant/appraisee 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/Appraise was entitled to use Cess for Education and Cess for Secondary and Higher Education (SHEC) credit for payment of Cess for In-Service Education or for taxable services under the provisions of the Cenvat Credit Rules, Rule 3(7)(b). Similarly, the Cess credit for secondary and higher education could be used to pay a similar excise duty on outbound service tax.

As of 01.03.2015, under the Finance Bill/Bill 2015, Cess EC & SHE levies have been exempted on goods.

The appellant argued that he filed his ER-I return for the month of February on 03.11.2015 and showed the unused portion of the Education Cess/S. Cessation of higher education at Rs.3,27,325/-. The appellant continued to carry over said balance and subsequently used it for the payment of excise duties in the month of December 2016.

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

The objection was raised for other matters, but no objection was raised for the misuse of the disposal amount in December 2016. The audit objections were recorded as satisfied at the “monthly meeting of the committee” held on January 17, 2017. There was another audit of the appellant by Revenue, which took place in the months of June and July 2018, and in this audit, Revenue pointed out that the appellant had used wrongly cenvat credit of education tax and SHE tax, which was not available to them under the amended provisions of the Cenvat credit rules, read with notice.

The appellant challenged the show cause notice on the basis of invoking the extension of the limitation period. However, the contracting authority upheld the claim with interest and an equal amount of penalty under Article 11 AC read with Rule 15 of the Cenvat Credit Rule (CCR, 2004). A penalty of Rs. 5,000 was also imposed under CCR Rule 15A.

The Appellant argued that there was no bad faith on the Appellant’s part and that the show cause notice was wrong for invoking the extension of the limitation period.

The CESTAT, while allowing the appeal, said that if the appellant is required to deposit the amount of Rs. 3,27,325 in cash, he will be entitled to a refund of the fee previously paid through the use of credit EC & SHEC. Thus, the situation is completely revenue-neutral.

Business 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 the Appellant: Lawyer Rajesh Gupta

Counsel for the Respondent: Authorized Representative Divey Sethi

Click here to read Order

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Elaine R. Knight