Admissibility of 100% credit on supply from 100% EOU

PJ/Case Laws/2010-11/1038

Case: Shreya Pets Pvt Ltd v/s Commissioner of Cus & C. Ex, Hyderabad-IV

Citation: 2009 (240) ELT 408 (Tri-Bang)

Issue:- Whether 100% credit is available on the goods supplied from 100% EOU?

Brief Facts:- Appellant-assessee procured inputs from a 100% EOU unit. The issue arose regarding the quantum of education cess available as cenvat credit to the appellant. The Lower Authorities held that appellants would be entitled to credit as per Rule 3(7)(a) of Cenvat Credit Rules, 2004 on the goods cleared by the 100% EOU. Hence, appellant filed an appeal before the Tribunal.

Appellant’s Contentions:- It was submitted that the issue was no longer res integra and the Mumbai Bench in Emcure Pharmaceuticals Ltd. v. CCE, Pune [2008 (225) E.L.T. 513 (Tri-Mumbai)] has held that assessee is eligible to take credit of Education Cess over the goods supplied to them by 100% EOU in terms of Rule 3(7)(a) and the provisions of Rule 3(7)(b) of the Cenvat Credit Rules. It was submitted that the learned Vice-President has followed the Larger Bench judgment rendered in the case of Das and Co. v. Collector [2000 (121) E.L.T. 275 (Tribunal-LB)] and also Apex Court judgment rendered in the case of Jindal Poly Films Ltd. v. Commissioner [2006 (198) E.L.T. 3 (S.C.)].

It was submitted that they are eligible to avail the Cenvat credit in respect of Education Cess

Reasoning of Judgment:- The Tribunal considered the decision in Emcure Pharmaceuticals Ltd. v. CCE, Pune wherein it was held that the non-obstante clause is a legislative device which is usually employed to give overriding effect to certain provisions over some contrary provisions that may be found in the same enactment or some other enactment, and not all provisions contained therein. In this case reliance was placed on Apex Court judgment in UOI v. G.M. Kokil [(1984) Supp SCC 196] wherein it was held that it is well-known that a non obstante clause is a legislative device which is usually employed to give overriding effect to certain provisions over some contrary provisions that may be found either in the same enactment or some other enactment, that is to say, to avoid the operation and effect of all contrary provisions. It was noted that this decision was also followed in Das & Co. v. CCE [2000 (121) E.L.T. 275] holding that a non obstante clause is used where contrary provisions exist.

Similar view was expressed by the Apex Court in the case of Jindal Poly Films Ltd. v. CCE [2006 (198) E.L.T. 3 (S.C.)] in the context of the Modvat Rules.

Thus, it was held by the Mumbai Bench that Rule 3(1) is applicable to all manufacturers or producers of final products or providers of taxable services including 100% EOU. Rule 3(7)(b) allows utilisation of Cenvat credit by all categories of manufacturers or producers of final products or providers of taxable services, including 100% EOU, in respect of AED for payment of AED, NCCD for payment of NCCD, education cess for payment of education cess, etc. Rule 3(7)(b) also opens with the non obstante clause. Therefore, if the interpretation canvassed by the Revenue is accepted as correct, there would have been no question of utilisation of education cess for payment of education cess if the taking of the credit itself, according to the Revenue, is barred by Rule 3(7)(a), and the provisions of Rule 3(7)(b) would, therefore, be rendered redundant.

Accordingly, the Mumbai Bench had held that credit of education cess is admissible to the assessee therein.

The Tribunal held that the Mumbai Bench has given a clear cut finding that appellants are entitled to avail 100% credit of Education Cess on the goods supplied to them by a 100% EOU in terms of the above findings. Impugned orders of Lower Authorities set aside.

Decision:- Appeal allowed with consequential relief.

Comments:- This is very important decision as the credit of education cess and SHE cess is still disallowed to the manufacturer on the invoices of 100% EOU by the department. Though it is clearly held that the credit is admissible but the department is not agreeing to the same.

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PJ/Case Laws/2010-11/1038

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