Excise Duty Under Sugar Cess Act Can Be Claimed As CENVAT Credit: Calcutta High Court

The Bench consists of Chief Justice T.S. Sivagnanam and Justice Chaitali Chatterjee (Das) was addressing the issue of whether payment of duty under Sugar Cess Act, 1982 can be claimed as Cenvat Credit when the Cenvat Credit Rules does not provide payment of cess under the Sugar Cess Act, 1982 as not being eligible under Rule 3 of the said Rules.

In this case, the adjudicating authority disallowed CENVAT credit taken by the assessee on payment of duty under Sugar Cess Act, 1982 and ordered for recovery from the assessee under Rule 14(1)(i) of the CENVAT Credit Rules, 2004, read with Section 11A of the Central Excise Act, 1944.

Being Aggrieved, the assessee had filed an appeal challenging the Order passed by the Commissioner, CGST & Central Excise, Kolkata South Commissionerate which was allowed.

The revenue has filed an appeal challenging the order passed by the Customs Excise and Service Tax Appellate Tribunal, Kolkata Eastern Zonal Bench (Tribunal) before the High Court.

The revenue submitted that the cess levied under the Cess Act, 1982 and collected under the Act does not partake the character of a duty of excise. It is in the nature of a fee for rendering specific service as contemplated under the Sugar Development Fund Act, 1982 and therefore the assessee is not entitled to the benefit of CENVAT credit.

The assessee submitted that the cess levied and collected under the Act is nothing but a duty of excise on sugar produced by the assessee. The levy of such cess is in addition to the duty of excise leviable on sugar under the Central Excise Act or any other law for the time being in force.

The assessee further contended that sub-section 4 of section 3 of the Act incorporates the provisions of the Central Excise Act and Rules made thereunder in relation to the levy and collection of the duty of excise on sugar in the Act. Therefore, by virtue of Section 2A of the Central Excise Act, 1944, the cess paid under the Act which is in the nature of a duty of excise shall be construed to include Central Value Added tax, that is, CENVAT and therefore the assessee is entitled to the benefit of CENVAT Credit.

The bench looked into the case of Belgaum vs. Shree Renuka Sugars Ltd., [2014 (302) ELT 33(Kar.)] where it was stated that Section 3 of the Act provides for levy and collection as a cess for the purpose of Sugar Development Fund Act, 1982, a duty of excise on all sugar produced by any sugar factory in India and, therefore, the cess leviable and collected is at the stage of production of sugar in the sugar factory. Because it is a tax on production, it is described as a duty of excise.

The bench agreed with the Tribunal that payment of duty under Sugar Cess Act, 1982 can be claimed as Cenvat Credit.

In view of the above, the bench dismissed the appeal filed by the revenue.

Case Title: Commissioner of CGST & Central Excise, Kolkata South, GST Bhawan v. M/s Diamond Beverages Pvt. Ltd.

Case Number: CEXA/9/2020

Counsel for Appellant/ Assessee: Bhaskar Prasad Banerjee and Abhradip Maity

Counsel for Respondent/ Department: Ankit Kanodia, Megha Agarwal and Piyush Khaitan

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