TMI Blog2018 (9) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... d that such credit of SHEC could be utilized only for payment of SHEC on excisable goods or taxable services. Under both, the service tax laws and the central excise laws, SHEC was not supposed to be used for making duty/ tax payments. The express provisions have been made in the Cenvat Credit Rules from time to time that credit availed in respect of EC, SHEC and KKC can be used for making tax/duty payments only against ECT SHEC and KKC, respectively. The CCR has also expressly provided that items in respect of which CENVAT credit is available, would not be utilized for payment of EC SHEC and KKC. Thus, there was a clear demarcation of the credit in respect of EC, SHEC and KKC. Under GST, there is no levy of the three types of cesses - all the three types of cesses cannot be treated as excise duty or service tax. In view thereof, the CENVAT credit as referred to in subsection (1) of section 140 would not include the credit in respect of KKC. Therefore, the credit of taxes which are not covered in the definition of eligible duties in Section 140 cannot be availed. Ruling - The input tax credit against unutilised cenvat credit such as Education cess, Secondary & Higher secondar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed re-credit for ₹ 29,83,759/- and (for material subsequently in production) balance credit to be availed is ₹ 22,81,792/-. As on 30/06/2017 we have the total debit balance of ₹ 22,81,792/- In post GST there are no specific provisions available either in the GST Act/GST rules, for taking back such credit. Statement containing the applicant s interpretation of law in respect of the aforesaid questions- We refer to Sub-rule (5B) of Rule 3 of the CCR states that if the value of any: (i) input, or (ii) capital goods before being put to use, on which CENVAT credit is taken is written-off fully or partially or where any provision to write-off fully or partially (w.e.f. 1.3.2011) has been made in the books of account, then the manufacturer or service provider is required to pay an amount equivalent to the CENVAT credit taken in respect of said inputs or capital goods. However, if these are subsequently used in the manufacture of final products or the provision of taxable service, the manufacturer or output service provider can take credit of the amount paid earlier. Question on which advance ruling required-whether we are eligible to avail input tax credit ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to levy of tax on services by both the Centre and the States, it is proposed to increase the present rate of Service Tax plus education cesses from 12.36% ton consolidated rate of 14% .(para 121) Thus, it was generally expected by the trade and industry that as the Education Cesses have been subsumed as part of Excise Duty or Service Tax, the existing balance of the cesses would be allowed to be utilised for payment of Excise duty or Service Tax. However, no amendments were made to Rule 3(7)(b) of the Cenvat Credit Rules, 2004 to this effect. However Notification No.12/2015-CE(NT) amended second proviso to Rule 3(7)(b) for allowing utilisation of EC paid on inputs and capital goods received on or before 01.03.2015 by a manufacturer towards payment of excise duty Credit of balance fifty percent of EC on capital goods received by a manufacturer during the previous FY for payment of excise duty; Credit of EC paid on input services received by the manufacturer on or after 1.3.2015 for payment of excise duty. Similarly, Notification No.22/2015-CE(NT) dated 29.10.2015 inserted sixth proviso to Rule 3(7)(b) to permit utilised of EC paid on: inputs and capital goods recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit on Education Cess has been taken validly, and continues to be referred to as CENVAT credit, the taxpayer cannot be deprived of the credit and thereby increase the cost of procurement of the inputs/input services after a few years. The Hon. Supreme Court in the case of Collector of Central Excise, v. Dai Ichi Karkaria Ltd. [1999] (112) ELT 353 = 1999 (8) TMI 920 - SUPREME COURT OF INDIA had clearly laid down the above principle in the following words: 17. It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgement thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the Rules which provides for a reversal of the credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, of utilised, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cesses Higher secondary education cess were subsumed into the excise duty/Service Tax rate structure as has been announced by the Finance Minister to the Parliament as a move towards GST. Therefore, even the justification extended for introduction of Rule 57F(4A) is not present in this case, and the taxpayer cannot be required to write off the unutilised balance of credit on Education Cesses as a cost at this stage 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- WRITTEN SUBMISSION CMI FPE Limited-, 400 093 (here in referred to as the applicant ) has filed above detailed application under Section 97 of the Central Goods and Service Tax Act, 2017 read with Rule 97 of the Central Goods and Service Tax Act, 2017 read with Rule 104 (1) of the CGST Rules, 2017 seeking advance ruling on the issues detailed at column number 14 of the Application field, in form of questions framed as under 1-3 as in note sheet. 1. The admissibility of input tax Credit pertaining to chapter V of the CGST Act, 2017 from Section 16 to 21 is a different subject matter than the Transitional Provisions under chapter XX Section 139 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sh. S Ramaiya, Asstt. Chief Manager appeared and made an oral request as well as written submission stating that their Consultant is not available and therefore an adjournment be granted in the matter. Jurisdictional Officer Sh. Anil Kumar, Superintendent, Division - X, Range-I, Mumbai East appeared and made written submission. The preliminary cum final hearing was held on 04.04.2018 Mr. Manish Parekh, Consultant along with Sh. S Ramaiya, Asstt. Chief Manager and Mr. Ajay Shah, General Manager appeared and made written submissions. They requested that today s hearing be treated as final hearing and issue be decided on the basis of their written submissions. Jurisdictional Officer Sh. Anil Kumar, Superintendent, Division -X, Range-I, Mumbai East appeared and stated they have already made written submissions stating that application may not be admitted. On going through the submissions and application of applicant and of the jurisdictional Officer application is admitted and would be decided on merits. Further in respect of their first question in their application, they stated that as it is not covered under transitional provisions of GST as available, they withdraw the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amendment was made applicable only to CESS paid on inputs, capital goods and input services received in the factory of the manufacturer on or after 01-03-2015. The Budget provisions in 2015 made no express provision as regards to the lapse of balance of credit available with the manufacturers or the provision of its utilisation in future or its refund. Similarly, Secondary and Higher Education Cess (SHEC) was levied by the Finance Act, 2007 and the CCR vide Rule 3(1) notified that the manufacturer or provider of taxable (output) service shall be allowed to take credit of SHEC. The CCR also mandated that such credit of SHEC could be utilized only for payment of SHEC on excisable goods or taxable services. Under both, the service tax laws and the central excise laws, SHEC was not supposed to be used for making duty/ tax payments. Levy of SHEC was also abolished by the Finance Act, 2015. Notification No. 12/ 2015-CE(NT) mentioned above was applicable to SHEC also the case of a manufacturer. In this case also Budget provisions in 2015 made no express provision as regards to the lapse of balance of credit available With the manufacturers or the provision Of its utilisation in future ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . From the submissions made by the applicant it is seen that in addition to the EC and SHEC their query is also whether they are eligible to avail ITC against unutilized cenvat credit of Krishi Kalyan Cess (KKC) lying in their books of accounts. This authority has answered this question in the negative in the Advance Ruling order passed in the case of M/s. Kansai Nerolac Paints Limited (KNPL). In the case of KNPL, the query was similar i.e. whether accumulated credit by way of KKC would be considered as ITC under GST laws. The reasons on the basis of which the said ruling has been passed would also be applicable to the subject matter at hand. We find that express provisions have been made in the Cenvat Credit Rules from time to time that credit availed in respect of EC, SHEC and KKC can be used for making tax/duty payments only against ECT SHEC and KKC, respectively. The CCR has also expressly provided that items in respect of which CENVAT credit is available, would not be utilized for payment of EC SHEC and KKC. Thus, there was a clear demarcation of the credit in respect of EC, SHEC and KKC. Under GST, there is no levy of the three types of cesses mentioned above. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary and Higher Education Cess are not mentioned there. Therefore these will not be carried forward as credit of these cesses is not allowed under GST. Letter D.O.F. No. 267/8/2018-CX.8 Dated: 14 th March, 2018 issued by the Board with respect to the issue of Transitional Credit, under GUIDANCE NOTE ON CGST TRANSITIONAL CREDIT, para 4.2: Check 2: Credit of taxes not covered in the definition of eligible duties in section 140 cannot be availed. Example: Krishi Kalyan Cess, Education Cess, etc. Instances have also come to notice where credit of VAT and PLA balance has been availed as transitional credit. This is not allowed in law . Further in an FAQ issued by the government on the said issue, in response to the question: Whether closing balance of education cess and secondary higher education cess prior to 1 st Mar 2015 can be carried forward in GST? has been answered as follows:- No it will not be carried forward in GST as it is not covered by definition of eligible duties and taxes under Section 140 of the CGST Act 06. In view of the deliberations as held hereinabove, we pass the order as under: ORDER (under section 98 of the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X
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