The Kolkata bench of the CESTAT has held that the cenvat credit is allowable on the amount of sugar cess paid.
The Appellant is engaged in the manufacture and clearance of Aerated water and Fruit-based drinks classifiable under Chapter- 22 of the Central Excise Tariff Act, 1985 on payment of applicable excise duty. The Appellant operates under the Cenvat Credit Scheme and Sugar is one of the principal ingredients in the manufacture of their dutiable final product. The appellant claimed credit in respect of the sugar cess paid and the request got rejected on the ground that Sugar Cess is not expressly stipulated as a levy on which credit can be taken under Rule 3 of the Cenvat Credit Rules, 2004.
Before the Tribunal, the department relied on the judgment of the Apex Court in the case of Unicorn Industries v. UOI, which has held in cases of refund/exemption of excise duty for the units located in the northeast region, the same does not apply to education cess as the notification governing the exemption does not specifically exempts the same.
The Tribunal bench comprising Shri P. K.Choudhary, Member(Judicial) And Shri P.V.Subba Rao, Member(Technical) observed that the Karnataka High Court after taking into consideration the provisions of Section 3(4) of the Sugar Cess Act, which incorporates by reference the provision of the Central Excise Act and the Rules framed thereunder as also the effect of the legislation by reference as explained by the Hon’ble Supreme Court in Bamagore Jute Factory Co. Vs. Inspector of Central Excise answered the substantial question of law in favour of the assessee and against the Revenue.
“On the other hand, the decisions relied upon by the learned Authorized Representative for the Resepondent/Revenue are dealing with the issue of eligibility of exemption of education cess when the excise duty levy is exempted which is totally a different subject matter in our view,” the bench said.
Allowing the refund, the bench added that “We find from the case records that the First Appellate Authority has rejected the part claim of Cenvat credit on the ground that a demand for recovery of such amount for the period August 2014 to June 2015 is pending adjudication by the learned Commissioner. We find that the issue in the said demand notice also relates to eligibility of Cenvat credit on sugar cess and when the same has already been decided in favour of the Appellant assessee, then the earlier demand notices become infructuous and cannot be sustained in the eyes of law. Further for the same period on the same issue, two demand notices cannot be sustained and hence we are of the view that the order of the learned First Appellate Authority needs to be modified to the above extent.”
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