Tuesday, 23 January 2018

HC : Disallows Excise Duty credit utilisation towards NCCD & Education Cess to exempted manufacturer

HC disallows utilization of basic excise duty credit towards payment of NCCD and Education Cesses to motor cycle manufacturer (assessee) availing area based exemption under Notification No. 50/2003-CE; Rejects assessee’s plea that since final product is not exempt from NCCD and other Cesses, this would necessarily render provision of Rule 6 of CENVAT Credit Rules, 2004 (CCR) inapplicable; Observes, while it can be said that basic excise duty paid would be available for payment of NCCD and Cesses as they fall under category of “any duties of excise” imposed on the final product (excluding period subsequent to 2016 amendment in 5th proviso to Rule 3(4) whereby credit utilization has been restricted to NCCD alone), Rule 6 is intended to cover cases where the main duty i.e. basic excise duty is exempt; States that in present case, substantial duty invariably would be basic excise duty whereas NCCD and other Cesses are essentially surcharges calculated as percentage thereof; Elucidates, “…the intention was that when the final product is exempted from the payment of the substantial part of the aggregate of the levies in a case where apart from the excise duty, there are surcharges, as NCCD and cesses in this case, then when the assessee opts for the benefit of the exemption from the duty under Section 3, then it would not also, at the same time, claim further benefit by way of CENVAT credit…”; As regards imposition of 100% penalty u/s 11AC, HC upholds Revenue contention that mere deposit of duties, either before or after issuance of notice, would not absolve assessee from liability to pay penalty, be it under protest or otherwise, where assessee is otherwise found liable; Rejects assessee’s reliance on host of judicial precedents to plead that there was no mala fide intention and that matter involved legal interpretation, but accepts that it was of bona fide view that CENVAT credit utilization of basic excise duty paid on inputs was permissible against NCCD and Education Cesses; Finds no scope of any interpretation for including NCCD or Cesses under the expression “duty of excise” while noting that assessee’s ER-1 Returns also revealed its awareness about leviability of all duties of excise including NCCD and Cesses; Consequently, relying on SC ruling in Dharmendra Textile Processors, HC holds that “penalty is mandatory and there is no discretion to the authorities on quantum of such penalty”  : Uttarakhand HC

No comments:

CBDT issues second round of frequently asked questions in relation to Direct Tax Vivad Se Vishwas Scheme, 2024

  This Tax Alert summarizes Circular No. 19/2024 dated 16 December 2024 (VSV 2- December Circular) issued by the Central Board of Direct Tax...