Utilisation of credit of Education and SHE Cess paid on inputs or capital goods

Finance Act, 2015 has abolished Education Cess and Secondary and Higher Education Cess (collectively referred as ‘cess’); in case of Excise Duty w.e.f. 1st March, 2015 and in case of Service Tax w.e.f. a date to be notified after the enactment of the Act. This amendment had raised questions regarding fate of cess, majorly, in following cases:

• Closing balance of cess as on 28th February, 2015;
• Cess in respect of inputs and capital goods received in factory in F.Y. 2014-15 but CENVAT Credit is omitted to be availed;
• Cess in respect of input services received in F.Y. 2014-15 but CENVAT Credit is omitted to be availed;
• Deferred cess of Capital Goods received in factory in F.Y. 2014-15;
• Cess in respect of Capital Goods received in factory prior to F.Y. 2014-15;
• Cess in respect of inputs and capital goods received on or after 1stMarch, 2015; and
• Cess in respect of input services availed on or after 1st March, 2015.

To remove difficulties CBEC vide Notification No.12/2015-Central Excise (N.T.), dated 30.04.2015 has amended Rule 3(7)(b) of the CENVAT Credit Rules, 2004 so as to allow utilisation of credit of Education Cess and Secondary & Higher Education Cess for payment of basic excise duty in the following situations:

a) Education Cess and Secondary & Higher Education Cess on inputs or capital goods received in the factory of manufacture of final product on or after the 1st March, 2015;

b) Balance 50% Education Cess and Secondary & Higher Education Cess on capital goods received in the factory of manufacture of final product in the financial year 2014-15; and

c) Education Cess and Secondary & Higher Education Cess on input services received by the manufacturer of final product on or after the 1st March, 2015.

Therefore, though Central Government has allowed utilising CENVAT Credit of cess in three cases mentioned in para supra; fate of cess in respect of other points is still full of doubts.

GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(DEPARTMENT OF REVENUE)
CENTRAL BOARD OF EXCISE & CUSTOMS
NEW DELHI

NOTIFICATION NO. 12/2015-Central Excise (N.T.),

Dated: April 30, 2015

In exercise of the powers conferred by section 37 of the Central Excise Act,  1944  (1  of  1944)  and  section  94  of  the  Finance  Act,  1994  (32  of  1994),  the  Central Government hereby makes the following rules further to amend the CENVAT Credit Rules, 2004, namely:–

1. (1) These rules may be called the CENVAT Credit (Second Amendment) Rules, 2015.

(2) They shall come into force from the date of their publication in the Official Gazette.

2. In the CENVAT Credit Rules, 2004 (hereinafter referred to as the said rules), in rule 3, in sub-rule (7), in clause (b), after the second proviso, the following shall be substituted, namely:-

“Provided also that the credit of Education Cess and Secondary and Higher Education Cess paid on inputs or capital goods received in the factory of manufacture of final product on or after the 1st day of March, 2015 can be utilized for payment of the duty of excise leviable under the First Schedule to the Excise Tariff Act:

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:

Provided also that the credit of Education Cess and Secondary and Higher Education Cess paid on input services received by the manufacturer of final product on or after the 1st day of March, 2015 can be utilized for payment of the duty of excise specified in the First Schedule to the Excise Tariff Act.”.

[F. No. 334/5/2015-TRU]

(Akshay Joshi)
Under Secretary to the Government of India

Note: The  principal  rules  were  published  in  the  Gazette  of  India,  Extraordinary,  Part II, Section 3, Sub-section (i), vide notification No. 23/2004-Central Excise (N.T.) dated the 10th September, 2004 vide number  G.S.R.  600(E)  dated  the  10th September,  2004  and  last amended vide notification No.6/2015-Central Excise (N.T.) dated 1st March, 2015 published  in  the  Gazette  of  India,  Extraordinary,  Part  II,  Section  3,  Sub-section  (i),  by number G.S.R. 151(E), dated the 1st March, 2015.