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2014 (6) TMI 304 - AT - Central ExciseArea based exemption - Cash refund scheme - payment of education cess and S & H cess using BED Credit - Whether a manufacturer availing of exemption under Notification No. 56/2002 - CE - Held that:- manufacturer availing of notification 56/02-CE cannot utilize BED credit for payment of education cess and S & H cess as, it will amount to the indirect refund of education cess and S & H cess, which is not permissible. The payment of education cess and S&H cess through BED credit is in conflict with the scheme of this exemption which does not exempt the education cess and S&H cess and which is available only in respect of the duties mentioned in it subject to following of condition of para 1A of the notification. Thus, while the Cenvat credit of the various duties/taxes mentioned in Rule 3(7) (b) can be used only for payment of the respective duties/taxes, there is no such restriction for utilization of credit of other duties i.e. BED credit, AED (GSI) credit, etc. In our view, in case of a manufacturer availing of exemption under Notification No.56/02-CE, while the restriction on utilization of Cenvat credit of duties/taxes as mentioned in Rule 3(7) (b) would be applicable, there would be one more additional restriction on utilization of credit of duties/taxes other than those mentioned in Rule 3(7) (b), i.e. credit of BED, AED (GSI) etc. and this restriction is that this credit cannot be used for payment of duties not exempted under this notification, as, as discussed above, if this is permitted, this would result in refund of duties like education cess, S & H cess, NCCD etc. which is not permitted under this notification, while it is well settled law that what is not permissible directly cannot be allowed indirectly. Therefore, in order to ensure that an assessee availing of exemption under this notification does not end up availing this exemption in respect of education cess and S & H cess also, he cannot be allowed to use BED credit for payment of education cess and S & H cess, though this may be permitted under the provision of Rule 3(4) of the Cenvat Credit Rules, 2004. The provision of Rule 3(4) of the Cenvat Credit Rules are after all a facility and the extent to which the same are in conflict with the condition of Notification No.56/2002-CE, the same would not be applicable, as it is the condition of notification which would prevail. It is pertinent to note that education cess and S & H cess have been levied vide Section 91 of Finance Act, and 136 of Finance Act, 2007 respectively and the object behind this levy is to generate funds to finance and provide infrastructure for promoting education in the country. If the argument of the respondents is accepted, then by adopting the practice of paying education cess and S & H cess from the Cenvat credit (BED) the assessee would indirectly get the refund of aforesaid cess which is not permissible under law as held by the Guwahati High Court in the matter of Dharampal & Satyapal (2011 (8) TMI 99 - GAUHATI HIGH COURT). - A unit availing of exemption under Notification No.56/2002 –CE cannot utilize BED credit for payment of education cess and S & H cess which are not exempted under this notification - Extra BED paid through PLA on account of diversion of BED credit for payment of education cess and S & H cess would not be refundable under Notification No. 56/2002 - CE - Decided in favour of Revenue.
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