Notification 12/2015-CE(NT) - some unanswered questions
MAY 05, 2015
By S B Parikh
IT is mentioned at Para 118 of the Budget Speech that the intention behind increase in the rate of central excise duty from 12.36% to 12.50% was to subsume EC and SHEC in central excise duty. The Finance Minister further mentioned that, in effect, the general rate of central excise duty of 12.36% including the cesses was being rounded off to 12.5%. Thus although technically EC and SHEC leviable on excisable goods have been exempted w.e.f. 1.3.2015, effectively these two Cesses have been subsumed in the increased rate of central excise duty from the said date.
In the ensuing paragraphs, we discuss the impact of the latest notification 12/2015-CE(NT) dated 30.04.2015 and the surprises it throws up. DDT 2589 too has also delved on the issue.
Prior to 30th April 2015, Cenvat credit of Education Cess and S&HE Cess was utilizable for the purpose of payment of the respective Cesses only as per Rule 3(7)(b) of the Cenvat Credit Rules, 2004. Vide Notification No. 12/2015-CE(NT) dated 30.4.2015, the said rule has been amended to allow utilization of credit of EC and SHEC for payment of basic excise duty, only in the following three situations:
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Utilisation allowed in respect of
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Author's comments
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Inputs and capital goods received in factory of manufacturer of final product on or after 1st March, 2015
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If inputs or capital goods were sent directly to job worker prior to 1st March 2015, but received in the factory of manufacturer of final product after that date, whether credit is utilizable for payment of basic excise duty?
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Balance fifty per cent. EC and SHEC paid on capital goods received in factory of manufacturer in 2014-15.
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If the manufacturer has not taken 50% credit in 2014-15 for the capital goods received in that year, there will be no "balance fifty per cent." as perceived in the proviso; but 100% credit can be taken in 2015-16. However, he can utilize only 50% for payment of basic excise duty.
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Input services received by manufacturer on or after 1st March 2015.
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Difficulties will arise in case of continuous supply of service. Whether the Point of Taxation Rules, 2011, will be applicable for this purpose?
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The logic behind this amendment appears to be that prior to 1st March 2015, manufacturers were in a position to utilize Cenvat credit of EC and SHEC; and if they have not utilized it, they should not have been allowed to utilize it thereafter!
Due to the above amendment, manufacturers who have received inputs and input services prior to 1st March, 2015 will be at disadvantage as compared to the manufacturers who have received identical inputs and input services on or after 1st March, 2015, even though the duty paid nature, intended use and rates of duty on inputs & final product are same in both situations. For newly set up plant and machinery, there will be no scope of utilization of Cenvat credit of EC and SHEC taken on capital goods, until commercial production and clearance starts. In such situations, the accrued benefit of Cenvat credit should not be withheld. Discrimination created by Notification No. 12/2015-CE (NT) based on the date or year of receipt will certainly create litigations.
When a manufacturer had received inputs, capital goods or input services prior to 1st March, 2015, on which EC and SHEC have been paid and he clears his final product on or after 1st March, 2015, on payment of central excise duty at higher rate subsumed of Cesses, logically there should be no reason to withhold utilization of Cenvat credit of EC and SHEC for payment of central excise duty.
For service providers, similar situation will arise in near future when the rate of service tax will be increased from 12.36% to 14% subsumed of Cesses.
Interestingly, there is no amendment to the effect that credit of EC and SHEC lying in balance with manufacturers as on 1st March 2015 will lapse.
So, this gives the manufacturer a glimmer of hope that in the near future such balance of EC and SHEC would also be allowed to be utilized for payment of central excise duty.
(The views expressed are strictly personal)
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