The Board's Bombshell - Balance of Credit of Education Cess will LAPSE!!!!
DDT knew this.
01 06 2015 mentioned: Unfortunately, there is a school of thought in the Department, which believes that this credit will lapse. Before such dangerous thoughts spread and the litigation system is further clogged with unwanted notices and appeals, CBEC/TRU should wake up to the reality and urgently issue the clarifications/amendments.
They woke up and gave the clarification - sure and wrong!
As we all know, consequent to the increase in excise duty to 12.5% from 12% with effect from 1.3.2015, the Government by Notification Nos. 14/2015-CE and 15/2015-CE dated 1.3.2015 exempted ‘education cess' and ‘Secondary and Higher Education Cess' on all excisable goods. So, from 1.3.2015, no education cess was payable on excise duty. Similar is the case of education cess on Service Tax from 1.6.2015.
CBEC has allowed the CENVAT credit on inputs and input services on goods or services received after 1.3.2015/1.6.2015, but CBEC refuses to understand that almost all the assessees must have had credit balance of education cess paid on inputs or input services as on 1.3.2015/1.6.2015. How can this credit be used? DDT extensively covered this issue on several days. (Please see DDT 2589 01 05 2015 ; 06 05 2015: ; 01 06 2015 : ; 08 06 2015 ; 10 06 2015 ; 22 06 2015 : ; 01 07 2015: ; 20 07 2015 : ; 23 07 2015 : ; 29 10 2015.
This issue was raised in the Tariff Conference held recently in Chandigarh by the Hyderabad, Coimbatore, Vadodara, Vishakhapatnam and Delhi Zones:
THE ISSUE: Exemption from levy of Education Cess and Secondary & Higher Education Cess has been provided w.e.f. 01.03.2015 vide notification no. 14/2015-CE & 15/2015-CE both dated 01.03.2015. Sub-rule 7(b) of Rule 3 of CENVAT Credit Rules, 2004, specifies that CENVAT credit of specified duties shall be utilized for payment of those specified duties only. CENVAT Credit of Education Cess and Secondary & Higher Education Cess can be utilized only for payment of Education Cess and Secondary & Higher Education Cess, respectively. Consequent upon grant of exemption there is issue of utilization of the accumulated credit of the past. It is suggested that an amendment to sub-rule 7(b) of Rule 3 of CENVAT Credit Rules, 2004 may be made to allow the utilization of balance CENVAT Credit of Education Cess and Secondary & Higher Education Cess towards payment of either duty of excise or Service Tax.
The Commissioners, principal and chief included made a fair, just and legal suggestion.
But DDT knew, TRU was against this and when the mighty TRU decides, poor Commissioners have to simply follow.
So this is what the Board says,
1. It was Government's conscious policy decision to withdraw the Education Cess and Secondary & Higher Education Cess.
2. It is a policy decision to not allow utilization of accumulated credit of education cess and secondary and higher education cess after these Cesses have been phased out.
3. As these Cesses have been phased out and no new liability to pay such Cess arises, no vested right can be said to exist in relation to the accumulated credit of the past.
4. The rule and notifications as they exist need to be followed and do not need any amendment.
Does the Board remember that they have allowed the credit arising after abolition of Education Cess that is from 1.3.2015 and 1.6.2015, but the credit balance would not be allowed? Is this Law or logic or sheer arrogance?
This is going to be a twenty year lega-cy. The lawyers and consultants should be extremely grateful to the CBEC for this kind gesture.
But is this how we are going to bring in GST? Maybe you will need at least a thousand more courts to deal with litigation that our babus can create in the enlarged environment of GST. I am happy that GST is a mirage - far from reality. How much money is the Government going to get by illegally denying CENVAT Credit earned by its assessees?
In the Budget speech, the Finance Minister said, "In effect, the general rate of Central Excise Duty of 12.36% including the cesses is being rounded off to 12.5% .". So it is not as if the cess is withdrawn, it is included in the excise duty with a small bonus to the Government. When the Cess I have to pay is merged with the excise duty, why can't the credit of cess I got be merged with the credit of excise duty I have?
Unjust, unfair, illogical and illegal dear Board, you just make business impossible, forget ease of doing business. Unfortunately, these things happen under the leadership of very earnest people like the present CBEC Chairman, Revenue Secretary and Finance Minister.
The Law is not what the Parliament makes, Law is not what the Supreme Court interprets, Law is what the Under-secretary in the Board understands or misunderstands!