Education Cess / Secondary & Higher Education Cess, Central Excise

[Ashok Tank]

As per budgetary changes Education Cess and Secondary Higher Education Cess are exempt vide Noti. No. 14/2015 and 15/2015 w.e.f. 01/03/2015. However, there is no clarification with regards to balance of Education Cess and Secondary Higher Education Cess lying in Cenvat Account as on 28/02/2015. Please clarify whether balance of Education Cess and Secondary Higher Education Cess lying in Cenvat Account as on 28/02/2015 stand laps or to be carried forward and merged with balance of Basic Excise Duty and utilize the same for normal payment of duty?

Posts / Replies

[Rajagopalan Ranganathan]

Sir,

The clarification requested by you can be given by Government of India/CBEC. Therefore take up the matter directly with Govt. Of India/CBEC.

[GOKARNESAN.S SUBRAMANIAN]

Mr. Ashok Tank

The Government has not amended the Cenvat Credit Rules to utilize the Education Cess / SHE Cess closing balance available as on 28.2.2015. However, amendment has been made to allow the utilization of the Cess credits on input and input services received on or after 1.3.2015. Hence, legally it is not permissible to utilize the closing balance credit against Basic Cenvat duty liability.

You may keep the same in the closing balance without utilization with a hope that the Government / CBEC would come with amendment / clarification in as much as the said credit was earned during the period when the credit is eligibile. However, you may utilize the said credit against payment of any Education Cess / SHE Cess for past liability on account of price increase or demand payable due to litigation for the past period.

Alternatively, you can voluntarily litigate the issue on the following grounds by utilizing the credit against basic duty with an intimation to the Department to get proper legal relief from the Appellate Courts.

a) During the Budget Speech, Hon'ble Finance Minister has stated in Parliament that "​Education Cess and SHE Cess has been subsumed with Basic Rate of duty and as such, propose to levy 12.5% basic cenvat rate".

​b) The above clearly shows the intention of the Government to merge both Cesses with Basic cenvat rate.

​c) As such, when there is no payment of education cesses after 1.3.2015, the closing balance of amount lying under Education cess and SHE Cess also automatically subsumed with Basic duty closing balance.

​d) That is why, the Government has not come out any specific amendment in Cenvat Credit Rules for the closing balance of such cessess as on 28.2.2015 and further amendment is made only for the fresh credit on receipts after 1.3.2015 to allow such credit for utilization against basic duty.

​e) As per rule 6 of Cenvat Credit Rules, no cenvat credit is available on input and input services used, when the final product is exempted from payment of duty. In the present case, the excisable goods are exempted from Education cess / SHE cess and hence, as per Rule 6 of CC Rules, credit is not eligible for such cesses after 1.3.2015. In order to overcome the above situation and to give relief from Rule 6, the Government has come out with an amendment in cenvat credit rules to enable the assesses to take credit of such cess and utilize the same after 1.3.2015.

f) Hence, for the above reason, the same principle is applicable to closing balance of cessess already earned as on 28.2.2015.

In view of the above, you may write a letter to Department in the above lines and after getting an acknowledgement from the department, you may utilize the credit. However, the Department may issue a show cause notice to deny such availment and you have no other option except to litigate the issue.

Only on litigation, the Higher Appellate Courts will give you relief.

If you do not want to go for litigation, you may write a letter to Ministry of Finance / CBEC asking for clarification in this matter .

I also request all the viewers of Taxmanagementindia.com to express their views.

S. Gokarnesan

Advocate, Chennai

98400 87349

mail: s.gokarnesan@gmail.com

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[vijay kumar]

In terms of amended Rule 3(7) of Cenvat Credit Rules, 2004 read with Notification No. 12/2015-CE (NT), dated 30.04.2015, only the amounts towards Education Cess & Secondary Higher Education Cess received after 01.03.2015 can be utilized for payment of excise duty. Prior to this date, such credit was not allowed to be utilized for payment of BED since the unamended Rule 3(7) permitted utilization of cess for relevant cess only and not for BED or any other duty. Accordingly, it is felt that the credit of these cesses as on 01.03.2015 would lapse.

[GOKARNESAN.S SUBRAMANIAN]

Mr. Vinay Kumar

If you carefully read my reply to this query, you would understand that I have also expressed my views that the it is difficult to utilize the closing balance credit in the absence of amendment in Cenvat Credit Rules. However, I have also given a solution to litigate the issue and then to get a decision from the higher appellate court. As Advocate and Tax Consultant, we have to advise not only the correct legal position to clients but also give solutions to overcome the situation. Hope you would appreciate the solution given by me and I expect your views on this.

regards

S. Gokarnesan

Advocate

[bhart b sharma]

it lapses

[Ashok Tank]

Dear Mr. S. Gokarnesan / Mr. Vijay Kumar

Ref : Issue ID: 109089 Title: - Education Cess / Secondary & Higher Education Cess

I highly appreciate and sincerely thank you for clarifying legal position and providing solution to overcome the issue.

Regards,

Ashok Tank

[KASTURI SETHI]

It is a matter of time factor. Ultimately, the balance of unutilized credit of Ed. Cesses would not lapse. Nobody can stop this. It is basic right of the assessee. He should approach the jurisdictional AC/DC and sought for permission to utilize the balance in other Central Excise duties. We should not forget that Cess is also a kind of duty. Representations to the department would expedite the clarification from the Board.

[Ganeshan Kalyani]

Sir, I would request experts to share updated views on the subject. Thanks

[KASTURI SETHI]

Sir,

Notification No.22/15-CE (NT) dated 29.10.15 allows the utilisation of credit of Education Cess and Higher Education towards any taxable output service provided that inputs, capital goods, services are received in the premises on or before 1.6.15.

Regarding remaining reply, I absolutely agree with the reply dated 3.9.15 of Sh.Vijay Kumar, an expert.

 

[Ganeshan Kalyani]

Sir, in addition to the above change, i am eager to know any further progress on the subject. So far there is no notification from Government to clarify whether the un-utilized credit of both Education Cess lying balance as on 01.03.2015 can be availed or not.

In this situation i am eager to know how the industries are reacting on this change. There are so many assessees whose closing balance as on 01.03.2015 of 2% Education Cess and 1% S.H.Education Cess are considerable high amount. I am eager to know what steps would they taken or what strategy they are going to take. This may or may not fare to intend to know about other company stategy but as a layman my intention is correct I believe.

Sir, if all the assesses are waiting under one roof for the instruction to come from the department on the subject then in my view the waiting period may stretch for long time. All assesses have to raise their concern and represent to the Govt and request humbly to issue a notification allowing the credit to utilize.

Sir, further in an article an expert has opined that there is a clause in GST which states that the closing balance of the Cenvat credit shown in the last return under present tax regime would be allowed to carry forward in GST as opening balance. Hence an assurance is there, that even if no notification is received from Govt, even if no representation is made before Govt, even if no credit is taken suo-motto, even if no credit is taken with due intimation to Department, even if no permission is sought before taking credit, even if no action is taken by both assesses and Govt then also there is a hope that the balance of credit of 2%Education Cess Cross and 1% S.H.Education Cess would be allowed to carry forward is GST. But whether credit would be allowed.

Hoping GST to come atleast for the above reason. Thanks.

[Ganeshan Kalyani]

Sir, Sri Kasturi Sir, thanks for reply. Thanks.

[Ganeshan Kalyani]

https://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=6586&kw=accumulated-education-cess-balance-hopes-vain

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Pl. go through Point No.B.21 of CBEC's Instruction Circular No.96/85/2015-CX.1 dated 7.12.15 which is appended below:

[Ganeshan Kalyani]

Sir, I have gone through the same. Thanks for sharing the information.

Sir, so many assessees would be carrying balance of Cess as on 01.03.2015 in their books. Will it be fare for them to forgo those credits citing the reference of the circluar reproduced in your view.

Sir the provision states that if tax is paid then the credit should not be denied. Then how it will be fare to say in day that the credit is not eligible.

Sir, whether assesses should claim those credit or refund can be sought. Please share your views. Thanks.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

I fully agree with you that it is gross injustice with the assessee. Cess is also a kind of duty and credit should be allowed to be used towards BED. Govt. should not be allowed to be enriched at the cost of assessee. I am confident that if all the assessees fight a legal battle for their right, they would get the benefit. After all, laws are framed for the welfare of public.

It is pertinent to inform you that I have searched two judgements of Hon'ble Supreme Court on this very issue pertaining to past period when credit was lapsed. These are in favour of assessee and reflect your emotions. These are appended below:

1. 2003 (155) ELT.14(SC) =  2003 (3) TMI 121 - SUPREME COURT OF INDIA in the case of SAMTEL Industries Ltd. Vs. CCE, Jaipur

2. 1999 (106)ELT.3 (SC) =  1999 (1) TMI 34 - SUPREME COURT OF INDIA in the case of Eicher Motors Ltd. Vs. UOI.

Pl. read between the lines.

[Ganeshan Kalyani]

Thanks a ton for your valuable time invested in searching the case law. Thanks.

[Rizwan Ullah]

Cess & H. Cess amount received as cenvat credit can be merged with BED and is eligible for payment of monthly Excise Duty ..

Refer Notification No.22/2015-Central Excise (N.T.) dated 29-10-2015 .

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[Ganeshan Kalyani]

Sir, In my view it cannot be done so. Thanks.