R.K Rengaraj, Advocate

Introduction:

The Hon’ble Finance Minister in the recent Union Budget 2015-16 announced in the floor of the Parliament that “As part of the movement towards GST, I propose to subsume the Education Cess and the Secondary and Higher Education Cess in Central Excise duty. In effect, the general rate of Central Excise Duty of 12.36% including the cesses is being rounded off to 12.5%”. So, this has come into effect from 01.03.2015 and there is no CESS for Excise Duty and the same is subsumed in the BED. However, the Budget notification and circular was silent about the unutilised balance of CESS and Higher Education CESS as on 28.02.2015 as to whether the CESS would be lapsed or can be adjusted in the major head of Basic Excise Duty. Now after two months, the Board has issued Notification No. 12/2015-Central Excise (N.T.) Dated- 30th April, 2015 about the utilisation of CESS which can be accessed at the following link :-

https://taxguru.in/excise-duty/utilisation-credit-education-cess-paid-inputs-capital-goods.html

The above notification allows the manufacturers to utilize the Cenvat credit on CESS towards payment of basic excise duty on certain situations. The amendment is 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 situations may arise like this.

  • When excisable materials are despatched during end of Feb 2015 from outside the State, the consignment would normally reach during first week of March 15, which would have been suffered ED, Cess, Hr Edu Cess at the supplier’s end.  But the receiving unit could not claim the cess portion as per the budget notification during March 15.  But this current notification 12/2015 allows such cess paid for discharging duty for BED.
  • Only for Excise duty, cess is withdrawn and subsumed in BED, but, for Service tax still cess is applicable.  Therefore the excise units can take cenvat credit on input services also as cross-sectoral adjustment is allowed, this notification would help the manufacturing units to take credit on cess on Service Tax and utilise for BED.
  • During 13-14, 50% cenvat credit for capital goods was availed by an excise Unit, and if the second 50% is not availed upto Feb 15 but taken credit in March 15, then CESS paid on such invoices can be now utilised for BED.

Therefore, this amendment is not applicable to inputs, capital goods and input services received in the factory of the manufacturer upto 28th February, 2015. In other words, even after the amendment of Rule 3(7) (b) of Cenvat Credit Rules, 2004 the excise Units cannot utilize the balance of CESS lying as on 28-02-2015 towards payment of excise duty,

Further, the manufacturers can utilise the CESS available as on 28.02.2015 in the following situations also, even before receiving this notification 12/2015:

  • “As such” removal of inputs upon payment of Cenvat credit availed on such inputs, during past periods, to the other units or return to the suppliers, as the case may be.
  • For payment of any arrears of CESS or for payment of CESS on service tax for the services provided.

Conclusion:

It is expected and hoped that the Department would further clarify about the fate of the CESS unutilised as on 28.02.2015 in the near future. In the author’s opinion, the Department has not taken care the real expectation of the trading community about the utilisation of the balance amount as the current notification says about only the CESS paid on inputs, capital goods and input services received in the factory on or after 01.03.2015.

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0 responses to “Adjustment of Central Excise Education CESS and Higher Education CESS as on 01.03.2015”

  1. Nikhil Bhugra says:

    is there any notification in which we can Adjust cenvat in Edu Cess & Higher Edu Cess in Basic Duty except notf 12/2015.

  2. Pultrron Composites says:

    Dear Sir,

    I stil confused about utilizaition of E.D. & S.H.E.D. credit balances as on 28/02/15.Whether it is to be utilized for payment of basic duty and under which notification. Please clarify.

    Thanks & Regards,
    A A Pawar

  3. K.L.SETHI says:

    Un-utilised credit of Ed. Cesses as on 28.2.15 cannot be lapsed. It is substantive right of assessee to utilize the same for payment of Basic Excise duty. Cess is also kind of duty. Hence it can be utilized for any type of duty. It is a matter of time factor. When law is silent either benefit should go to assessee or Board should issue clarification. Assessee should not be punished without fault.

  4. Susant Mukherjee says:

    We have found sum service provider import service mansion the Ed.Cess and H.E.Cess in their bill as on june-2015, can we take the same and add with basic
    duty also utilized the same?

  5. Satheesh Kumar M says:

    Sir

    Your explanations are fine and I got some clarity. But as per the budget speech, the E.CESS and SH.CESS was ‘subsumed’ into BED and the rate of duty increased from 12.36% (incl CESS) to 12.5%

    It shows that the E.CESS & SHE.CESS levied upto 28.02.2015 is included in the revised 12.5% Duty.

    The Notification 12/2015 clarifies for the materials received after 01.03.2015 only for our easy understanding.

    In such situation, I assume that the E.CESS & SHE CESS accrued as of 28.02.2015 can be utilized for paying ED, as it was subsumed into BED w.e.f 01.03.2015.

    In other words, in our RG23A, RG23C registers, we have to subsume E.CESS & SHE.CESS closing balances as of 28.02.2015 and consolidate them into BED.

    Please clarify whether my view is correct

    Thanks

    Satheesh Kumar M

  6. PRAKASH says:

    Sir,

    Kindly clarify,

    suppose in the FY 12-13, i utilized 50% CENVAT on CG, but not availed the balance 50% in 13-14. can i avail the balance in the year 15-16 for CESS for payment BED?

    Thank you in advance

  7. SHAILESH PANCHAL says:

    Which Site Notification of adjustment of ED & SHED Duty.

  8. D S Prasad says:

    Dear Sir,

    Thank you for your clarification and I agree with your conclusion regarding both the Cesses credit unutilised and available up to 28.02.2015 must be clarified by GOI.

    D S Prasad

  9. Rengaraj says:

    In this article i have mentioned in the third example that “During 13-14, 50% cenvat credit for capital goods was availed by an excise Unit, and if the second 50% is not availed upto Feb 15 but taken credit in March 15, then CESS paid on such invoices can be now utilised for BED.”

    But the Department says that the credit is available only for the capital goods received in the factory in the financial year 2014-15, which please note and avail the benefit accordingly. The relevant portion of the notification is extracted below.

    “Provided also that the credit of balance fifty per cent. Education Cess and Secondary and Higher Education Cess paid on capital goods received in the factory of manufacture of final product in the financial year 2014-15 can be utilized for payment of the duty of excise specified in the First Schedule to the Excise Tariff Act.”

    rengaraj r.k

  10. Varadharajan AV says:

    Dear Sir,

    Thank you for lucid explanation.

    I fail to understand why government does not allow using the closing balance of cess as on 28th feb 2015, towards BED payable later.

    Hope GOI comes with clarification soon.

    Kind Regards,
    Vardharajan.

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