Cenvat Credit Can Be Availed On Sugar Cess Paid On Imported Raw Sugar: CESTAT

S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) were addressing the issue of whether the assessee is entitled to avail the CENVAT credit of the sugar cess paid on imported raw sugar or not.

In this case, the assessee/appellant is engaged in manufacturing of sugar. In year 2010, the assessee imported raw sugar and paid the sugar cess. The sugar cess was paid and collected as duty of excise under Section 3(1) of the Sugar Cess Act, 1982.

Vide Notification No. S.O.102(E) dated 07.01.2009 and vide Circular No. 883/3/2009-CX dated 26.02.2009, though the sugar cess was exempted, but the assessee, not being aware of the same, paid the sugar cess after reprocessing the imported raw sugar and selling it to buyers.

Further, the assessee availed the credit of sugar cess paid on the imported raw sugar under bona fide belief that such credit was admissible to them.

The department entertained the view that the assessee is not entitled to avail the credit of the sugar cess paid by them on the imported raw sugar as the sugar cess is not a duty of excise.

On these allegations, a show cause notice was issued to the assessee alleging that neither under the Sugar Cess Act, 1982 nor under the Cenvat Credit Rules, an assessee can avail credit of the sugar cess paid by them.

The Adjudicating Authority denied the CENVAT credit to the assessee and confirmed the demands, interest and penalties as proposed in the show cause notice.

The assessee submitted that the assessee has paid the sugar cess on imported raw sugar under the Sugar Cess Act, 1982 where it is specifically mentioned that it is a duty of excise and all the provisions of Excise Act will be applicable to sugar cess.

The Tribunal referred to the case of Commissioner of C.Ex., Belgaum vs. Shree Renuka Sugars Ltd. [2014 (302) ELT 33 (Kar.)] where it was stated that “levy and collection of cess under the Central Excise Act, 1944 is treated as levy and collection of duty of excise on sugar and not a fee; sugar cess is a duty of excise; the assessee is entitled to the CENVAT credit; manufacturer or producer of final products is eligible to CENVAT credit of the additional duty (CVD) leviable under Section 3 of the Customs Tariff Act, 1975 equivalent to the duty of excise.”

The bench after referring to the above case opined that the impugned order is not sustainable in law.

In view of the above, the Tribunal allowed the appeal.

Case Title: M/s A B Sugar Ltd. v. Commissioner of Central Excise and Service Tax, Ludhiana

Case Number: Excise Appeal No. 2696 of 2012

Counsel for Appellant/ Assessee: Yug Singhal and Shivansh Dhiman

Counsel for Respondent/ Department: Aneesh Dewan

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