E.Cess can be utilized for payment of E.Cess relating to Output Service only – FAQ answer becoming pet audit objection
A Netizen brought to our notice that a manufacturer who also is registered as a service provider is being told to pay Education Cess when it relates to excisable goods by cash only & is not allowed to utilize the Cenvatted quantum.
He says that the Audit group is pointing a finger to the following Q&A from the booklet brought out by the CBEC & DGST in December 2007 –
“11.2 . What are the duties/taxes that can be availed as credit?
Duties paid on the inputs, capital goods and the Service Tax paid on the ‘input' services can be taken as credit. Education Cess paid on the Excise duty and Service Tax can also be taken as credit. However, the credit of Education Cess availed can be utilized only for payment of Education Cess relating to output service. The interest and penalty amounts cannot be taken as credit.”
We tried to pacify the Netizen by drawing his attention to the provisos appearing under Rule 3(7 )( b) of the Cenvat Credit Rules, 2004 & saying that this is not true but he is not satisfied & wants the Board to clarify.