2026-VIL-1233-CESTAT-KOL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Cross-utilization of Education Cess and SHE Cess Credit against Excise Duty - The appellant transferred accumulated Education Cess and Secondary and Higher Education Cess credit from its Cenvat Account towards payment of Excise Duty in May 2015, after the cesses were withdrawn and subsumed into Excise Duty and Service Tax effective from March 1, 2015 for excisable goods and June 1, 2015 for taxable services - Department raised a demand for Excise Duty contending that there was no provision to transfer the accumulated EC and SHE cess to the Cenvat account and utilize the same towards payment of Excise Duty - Whether accumulated Education Cess and SHE Cess credit under the Cenvat Credit Rules 2004 can be transferred to the Cenvat account and utilized towards payment of Excise Duty after these cesses were withdrawn and incorporated into the Excise Duty and Service Tax - HELD - The Delhi High Court in Cellular Operators Association of India held that under the Cenvat Credit Rules 2004, credit of EC and SHE was admissible and could be utilized only for payment of EC and SHE respectively, and that cross-utilization of EC and SHE towards excise duty or Service Tax was impermissible. Even though the cesses were withdrawn and subsumed into Excise Duty and Service Tax, this did not change the statutory restriction on cross-utilization - The confirmed demand is upheld. However, since the appellant was carrying much more balance than the amount in question when it utilized the ED and SHE cess, no interest was required to be paid on the confirmed demand. The issue as to whether ED and SHE cess could be transferred to the Cenvat account and utilized therefrom was being actively litigated and had reached the High Court and Larger Bench level at the time of the appellant's action. Hence, no penalty is called for under such circumstances where the question was subject to judicial determination. The penalty imposed is set aside – The appeal is partly allowed
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