Case Law Details
Education Cess was being levied on Central Excise and Service Tax from 10.09.2014. Education Cess paid on the purchase was available as a credit against payment of education cess on payment on the output removal. The credit of cess was not able to use for the payment of duty. Later when the rate of excise duty was increased from 12% to 12.5%, cess was rescinded. Thereby the accumulated credit was not able to be used. Similar was in case of Krishi Kalyan Cess credit in case of service tax. Now whether this accumulated credit of cess can be carried forward into the GST under the transition provision is the issue, there was contradicting views on this some in favor and some against. Few of them have carried forward the credit, however recently, there were news articles published in the newspapers that companies carried forwarded the credit of KKC may face fine/penalties citing that the recent judgment of Hon’ble Delhi High Court in case of Cellular Operators Association of India and Others Vs UOI and Others 2018-TIOL-310-HC-DEL-ST. In this background, an attempt has been made in this article to explain the Delhi High Court decision and its implication on the KKC/EC carried forwarded into GST.
Background of the Case:
Under the CENVAT Credit Rules, 2004 (CCR, for short), CENVAT credit of EC and SHE Cess can be availed and utilized for payment of EC and SHE Cess on manufactured goods or output services while the cross utilization of EC and SHE towards payment of Excise Duty or Service Tax was not permitted. However, EC and SHE cess were exempted (on excisable goods w.e..f 01.03.2015 and taxable services w.e.f. 01.06.2015). The credit of EC/SHEC on inputs received after 1.3.2015 but charged with EC/SHEC is allowed to utilize for payment of Excise duty/service tax (similarly for the input services received after 01.06.2015). However, the unanswered question remains what to do with the unutilized credit of EC/SHEC lying as on 01.03.2015/01.06.2015 whether it lapses or can be sought as a refund or used for the payment of tax/duty?
A writ petition has been filed inter alia seeking direction that the credit accumulated as on 01st June 2015 on account of EC and SHEC should be allowed to be utilized for payment of service tax.
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Author Bio
I feel that assessees do not have a chance to utilize EC/SHEC/KKC lying unutilized in their PLA/CENVAT account as on 30.06.17. Also there are many other assessees who did not reflect these figures lying unutilized in their PLA/CENVAT in ER-1/ST-3 returns.
However, there is no denying the fact that these cesses were valid levies during a certain point of time.The assessees had to deposit hard cash in PLA in the account head of Cess/SHE Cess first and then to utilize a part or full of it to discharge their Excise duty/ Service Tax liability. Similarly, credit earned through legal purchase can be utilized through CENVAT route, So as it stands, the assessees have unutilized Cess/SHE Cess/KKC in their PLA and/or Cenvat account. As the Central Excise duty and Service Tax got subsumed into GST, and there is no scope to utilize these amounts in GST regime, only logical conclusion remanins is to sanction refund of these amounts by the department.
Like to see other opinions too on is score.
Many assessees are demanding refund of EC/ SHEC /KKC lying unutilized in their PLA/ CENVAT account prior to introduction of GST. Is it justified /grantable?
Please offer your valuable opinion on this score.