Case Law Details
In re Kansai Nerolac Paints Limited (GST AAR Maharashtra)
Whether accumulated credit by way of Krishi Kalyan Cess (KKC) as appeared in the Service tax return of Input Service Distributor (ISD) ON June 30, 2017 which is carried forward in the electronic credit ledger maintained by the company under CGST Act 2017, will be considered as admissible input tax-credit?
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING,MAHARASHTRA
Also Read AAAR Ruling- KKC not eligible for Input Tax Credit under GST- AAAR, Maharashtra
The issue put before us is whether accumulated credit by way of Krishi Kalyan Cess (KKC) as appeared in the Service tax return of Input Service Distributor (ISD) on June 30, 2017 which is carried forward in the electronic credit ledger maintained by the company under CGST Act 2017, will be considered as admissible input tax-credit. Krishi Kalyan Cess was brought into implementation by Chapter VI of the Finance Act, 2016.
The GST Act does not have a definition of the words “CENVAT credit”. The words have also not been defined under the Excise and Service Tax laws. However, we find CENVAT credit Rules, 2004 wherein the word “credit” is said to mean “CENVAT credit” as can be seen thus
Rule 3. Cenvat Credit
(1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of –
(i) the duty of excise specified in the First Schedule to the Excise Tariff Act. leviable under the Excise Act:
(ii) the duty of excise specified in the Second Schedule to the Excise Tariff Act, leviable under the Excise Act:
(iii) the additional duty of excise leviable under section 3 of the Additional Duties olExeise (Textile and Textile Articles) Act, 1978 40 of 1978);
(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 ( 58 of 1957);
(v) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001):
(vi) the Education Cess on excisable goods leviable under section 91 read with section 93 of the Finance (No.2) Act, 2004 (23 of 2004);
(via) the Secondary and higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007):
(vii) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i). (ii). (iii), (iv). (v) (vi) and (via):
(viia)the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act.
Provided that a provider of taxable service shall not he eligible to take credit of such additional duty;
(viii) the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003);
(ix) the service tax leviable under section 66 of the Finance Act:
(x) the Education Cess on taxable services leviable under section 91 read with section 95 of the Finance (No.2) Act, 2004 (23 of 2004); and
(xa) the Secondary and I Iigher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007); and
(xi) the additional duty of excise leviable under section 85 of Finance Act. 2005 (18 of 2005 )
The enumerated list of items in respect of which CENVAT credit is available makes no reference to the KKC. By the Notification No. 28/2016 – Central Excise (N.T.), the 26th May, 2016, the Central Government made the following rules, which came into force on 1st of June, 2016, ,to amend the CENVAT Credit Rules, 2004. In rule 3, as reproduced above, after sub-rule (1), the following sub-rule was inserted :-
“(1a) A provider of output service shall be allowed to take CENVAT credit of the Krishi Kalyan Cess on taxable services leviable under section 161 of the Finance Act, 2016 (28 of 2016);”;
Thus, CENVAT credit was available in respect of KKC. However, we need to see the following amendments, too, as were brought by the aforesaid Notification No. 28/2016 – Central Excise (N.T.), the 26th May, 2016 ‑
i. in sub-rule (4), after the ninth proviso, the following proviso was inserted –
“Provided also that the Cenvat credit of any duty specified in sub-rule (1) shall not he utilised for payment of Krishi Kalyan Cess leviable under section 161 of the Finance Act, 2016 (28 of 2016);’
ii. in sub-rule (7), after clause (c), the following clause was inserted –
“(d) Cenvat credit in respect of Krishi Kalyan Cass on taxable services leviable under section 161 of the Finance Act, 2016 (28 of 2016) shall be utilised only towards payment of Krishi Kalyan Cess on taxable services leviable under section 161 of the Finance Act, 2016 (28 of 2016)”;
It can be seen that by express provision, it was made clear that KKC would be utilised towards payment of KKC only. Further, it was expressly provided that the list of items in respect of which CENVAT credit is available, as enumerated above, would not be utilized for payment of KKC. Thus, there was a clear demarcation of the credit in respect of KKC. Under GST, there is no levy of KKC. Now, we know that tax and duty and cess are distinct levies. In Cellular Operators Association of India vs. Union of India [Writ Petition (Civil) No. 7837/2016 dt.15.02.2018], the Hon. Delhi High Court was dealing with taxguru.in the Petition for direction that the ‘t accumulated on account of Education Cess (EC, for short) and Secondary and Higher Education Cess (SHE, for short) should be allowed to be utilised for payment of service tax leviable and payable on telecommunication services.
The Hon. Court dismissed the Writ Petition. In the present case, KKC is to be utilized for payment of KKC only. Therefore, KKC cannot be treated as excise duty or service tax. in view thereof, the CENVAT credit as referred to in sub-section (1) of section 140 would not include the credit in respect of KKC. We can also see the position in respect of the Swachh Bharat Cess (SBC) which was brought in force by Chapter VI (Section 119) of the Finance Act 2015. The Frequently Asked Questions (FAQ) issued by the Central Board of Excise and Customs (CBEC) in regard to SBC explained the new levy thus –
Q. 1 What is Swachh Bharat Cess (SBC)?
Ans. It is a Cess which shall be levied and taxguru.in collected in accordance with the provisions of Chapter VI of the Finance Act, 2015,called Swachh Bharat Cess, as service tax on all the taxable services at the rate of 0.5% of the value of taxable service.
Q.14 Whether Cenvat credit of the SBC is available?
Ans. SBC is not integrated in the Cenral Credit Chain. Therefore, credit of SBC cannot be availed. Further, SBC cannot be paid by utilizing credit of any other duty or tax.
Chapters of the Finance Act by which SBC and KKC were brought into effect could be had a look at
| CHAPTER VI SWACHH BHARAT CESS
Section 119 of the Finance Act, 2015 read as under:- (1) This Chapter shall come into force on such date as the Central Government) by notification in the Official Gazette, appoint. (2) There shall be levied and collected in accordance with the provisions of this Chapter, a cess to be called the Swachh Bharat Cess, as service tax on all or any of the taxable servicesat the rate of two per cent. on the value of such services for the purposes of financing and promoting Swachh Bharat initiatives or for any other purpose relating thereto. (3) The Swachh Bharat Cess leviable under sub-section (2) shall be in addition to any cess or service tax leviable on such taxable services under Chapter V of the Finance Act, 1994, or under any other law for the time being in force. (5) The proceeds of the Swachh Bharat Cess levied under sub-section (2) shall first be credited to the Consolidated Fund of India and the Central Government may, after due appropriation made by Parliament by law in this behalf, utilise such sums of money of the Swachh Bharat Cess for such purposes specified in sub-section (2), as it may consider necessary. (5) The provisions of Chapter V of the Finance Act, 1994 and the rules made there under, including those relating to refunds and exemptions from tax, interest and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Swachh Bharat Cess on taxable services, as they apply in relation to the levy and collection of tax on such taxable services under Chapter V of the Finance Act, 1994 or the rules made there under, as the case may be. |
CHAPTER VI
Krishi Kalyan Cess 161. (1) This Chapter shall come into force on the 1st day of June, 2016. (2) There shall be levied and collected in accordance with the provisions of this Chapter, a cess to be called the Krishi Kalyan Cess, as service tax on all or any of the taxable services at the rate of 0.5 per cent. on the value of such services for the purposes of financing and promoting initiatives to improve agriculture or for any other purpose relating thereto. (3) The Krishi Kalyan Cess leviable under sub-section (2) shall be in addition to any cess or service tax leviable on such taxable services under Chapter V of the Finance Act, 1994 (32 of 1994), or under any other law for the time being in force. (4) The proceeds of the Krishi Kalyan Cess levied under sub-section (2) shall first be credited to the Consolidated Fund of India and the Central Government may, after due appropriation made by Parliament by law in this behalf, utilise such sums of money of the Krishi Kalyan Cess for such purposes specified in sub-section (2), as it may consider necessary. (5) The provisions of Chapter V of the Finance Act, 1994 (32 of 1994) and the rules made thereunder, including those relating to refunds and exemptions from tax, interest and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Krishi Kalyan Cess on taxable services, as they apply in relation to the levy and collection of tax on such taxable services under the said Chapter or the rules made thereunder, as the case may be. |
As can he seen, both SBC and KKC are on the same lines. Therefore, the FAQs explaining SBC apply with equal force to KKC. Under the GST Act too, the FAQs issued by CBEC clarify thus –
| 112. | Can ITC of Swach Bharat Cess or Krishi Kalyan Cess can be carried forward under GST | No. |
Thus, it can he seen that the non-availability of carry forward of credit with respect to KKC has been clarified to the Trade. In view thereof, we are convinced that accumulated credit by way of Krishi Kalyan Cess (KKC) as appeared in the Service tax return of Input Service Distributor (ISD) on June 30, 2017 which is carried forward in the electronic credit ledger maintained by the company under CGST Act 2017, will not be considered as admissible input tax-credit.
