Whether balance 50% credit on capital goods compulsory to be taken in April month of next financial year and cash refund of E.Cess & S & H E Cess is permissible u/s 11B ?

PJ/Case Law /2016-17/3437

Case:-SC JOHNSON PRODUCTS PVT. LTD. VersusCOMMISSIONER OF C. EX., GUWAHATI
Citation:-2017 (345) E.L.T. 152 (Tri. - Kolkata)
Brief facts:-This appeal has been filed by the appellant against OIA No. 38/GHY/CE(A)/GHY/2014, dated 21-2-2014 passed by Commissioner (Appeals), Guwahati as first appellate authority. Under this OIA dated 21-2-2014 first appellate authority has rejected the appeals filed by the appellant.
Appellant’s contention:-Sh. Shekhar Vyas (Advocate) appearing on behalf of the appellant argued that balance 50% Cenvat credit with respect to capital goods was taken on 7-5-2012, 17-5-2012, 18-5-2012 & 28-5-2012, when these capital goods were received in the previous financial year. That it is the case of the Revenue that the credit of balance 50% was available to the appellant in the month of April, 2012 and should have been taken in April only which is in violation of Clause 2B of Notification No. 32/99-C.E., dated 8-7-1999. Learned Advocate argued that credit has been correctly taken as per Rule 4(2)(b) of the Cenvat Credit Rules, 2004 which does not bind that 50% balance credit on capital goods to be taken in April of the next financial year. It was also his case that even if the credit was taken in April, 2013 then also they would have got more cash refund in the relevant months when credit was taken.That the entire exercise is revenue neutral.
On the issue of Rs. 4,08,985/- cash refund of Education Cess & S & H Education Cess learned Advocate argued that once Central Excise duty gets exempted when refund is granted then automatically Education Cesses also are not leviable and cash refund was required to be sanctioned.
Respondent’s contention:-Sh. S.S. Chattopadhyay Supdt. (AR) appearing on behalf of the Revenue argued that as per the provision of Clause 2B of Notification No. 32/99-C.E., dated 8-7-1999 credit on capital goods was available to the appellant in April, 2012 and was required to be taken in April, 2012 itself to arrive at the correct cash refund admissible. On the admissibility of cash refund of Education Cess (CE) and Secondary and Higher Education Cess (S & H EC) learned AR made the Bench to go through Para 14 of the OIA dated 21-2-2014 where this Bench has decided the same issue of Education Cesses against the assessees. He also relied upon the case law of VMI Industries v. CCE, Jammu [2014 (300) E.L.T. 286 (Tri.-Del.)] where on the same issue of education cesses, after a difference of opinion, was decided in favour of the Revenue. It was also the case of the learned AR that two appeals were required to be filed by appellant against OIA dated 21-2-2014 as two orders-in-original were involved in these proceedings.
Reasoning of judgment:-Heard both sides and perused the case records. So for as preliminary objection of the learned AR, regarding filing of two appeals is concerned, it is observed that Comm. (Appeals) has given only one Order No. 38/GHY/CE(A)/ GHY/2014 to OIA dated 21-2-2014 when two OIA orders-in-originals number were required to be given when two order-in-originals were being decided. However, as the issues relating in both the orders-in-original is the same it will be only a technical formality to file a supplementary appeal. Therefore, appeal is taken up for disposal on merits.
So for as the issue of cash refund of EC & S & H EC is concerned Comm. (Appeals) in Para 14 of OIA dated 21-2-2014 has relied upon the case laws of this Bench where the same issue has been decided in favour of the Revenue. In the case of VMI Industries v. CCE, Jammu (supra) the same issue with

respect to area based exemption Notification No. 56/2002-C.E., dated 14-11-2002 has been decided by CESTAT, Delhi by majority in a difference of opinion situation. In view of the above settled position OIA dated 21-2-2014, rejecting the appeal of the appellant regarding cash refund of EC & S & H EC, is upheld and appeal of the appellant to that extent is rejected.
Regarding taking of balance 50% Cenvat credit on the capital goods in April, 2012 it is observed that Rule 4(2)(b) of Cenvat Credit Rules, 2004 (CCR) does not mandate appellant to take credit compulsorily in the month of April of the next financial year. It is observed that even if credit was taken is the month of April, 2012 then also appellant would be entitled to higher refunds during the months when such credit, was taken. The whole exercise is revenue neutral. Department was also aware of the fact that appellant took 50% balance Cenvat credit on capital goods during previous financial year and should have guided the appellant to take the remaining 50% Cenvat credit on capital goods in April of next financial year to avoid confusion. As the entire exercise is revenue neutral appeal of the appellant to that extent is allowed by setting aside recovery made by the adjudicating authority on this account. Appeal filed by the appellant is allowed only to the extent indicated in Para 4.2 above with consequential relief, if any.
Decision:-Appeal partly allowed.
Comment:-The gist of the case is that there being no such provision under Rule 4(2)(b) of Cenvat Credit Rules, 2004 mandating to take balance credit compulsorily in the April month of next financial year and also whole exercise is Revenue neutral, therefore denial of credit on this ground is not justifiedin accordance with Rules 3 and 4 of Cenvat Credit Rules, 2004. Therefore cenvat credit taken in the month of may is allowed to appellant. Hence on this first issue appeal is allowed. But as far as concern with second issue the refund of Education Cess and Secondary Higher Education Cess is not available to appellant as it relies upon the judgement of concerned Comm. (Appeals) in Para 14 of OIA dated 21-2-2014 of some case law. So appeal on this issue is not granted to assessee.
Prepared by:-Praniti Lalwani

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PJ/Case Law /2016-17/3437

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