Utilization of CESS against payment of excise duty: Whether industry has been fooled?
In a significant move towards Goods & Service Tax (GST), the Central Government had issued
Notification No. 14/2015-CE and 15/2015-CE dated 01-03-2015 (as part of the Union Budget –
2015 Notifications) whereby it exempted all goods falling under First Schedule of the Central
Excise Tariff Act, 1985 (CETA) from the levy of Education Cess and Secondary and Higher
Education Cess (SHE Cess) (collectively referred as CESS) respectively with immediate effect.
The underlying objective of the exemption notification was indicated by the Hon’ble Finance
Minister Shri Arun Jaitley during his Budget Speech in the Lok Sabha on 28-02-2015 as quoted
“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%.”
The immediate, shocking but may be unintended fall out of the above notification was that the
balance of cenvat credit lying in Ed. Cess and SHE Cess as on 28-02-2015 became un-utilizable
and deadstock for all the manufacturers!! This is due to the restriction contained in Rule 3(7)(b)
of the Cenvat Credit Rules, 2004 (hereinafter referred as CCR) which provide that cenvat
credit availed on Ed. Cess/SHE Cess can be utilized only towards payment of Ed. Cess/SHE Cess
respectively.
The issue was raised by various members
In a significant move towards Goods & Service Tax (GST), the Central Government had issued
Notification No. 14/2015-CE and 15/2015-CE dated 01-03-2015 (as part of the Union Budget –
2015 Notifications) whereby it exempted all goods falling under First Schedule of the Central
Excise Tariff Act, 1985 (CETA) from the levy of Education Cess and Secondary and Higher
Education Cess (SHE Cess) (collectively referred as CESS) respectively with immediate effect.
The underlying objective of the exemption notification was indicated by the Hon’ble Finance
Minister Shri Arun Jaitley during his Budget Speech in the Lok Sabha on 28-02-2015 as quoted
“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%.”
The immediate, shocking but may be unintended fall out of the above notification was that the
balance of cenvat credit lying in Ed. Cess and SHE Cess as on 28-02-2015 became un-utilizable
and deadstock for all the manufacturers!! This is due to the restriction contained in Rule 3(7)(b)
of the Cenvat Credit Rules, 2004 (hereinafter referred as CCR) which provide that cenvat
credit availed on Ed. Cess/SHE Cess can be utilized only towards payment of Ed. Cess/SHE Cess
respectively.
The issue was raised by various members