While hearing the case between Cellular Operators Association of India vs Union of India, the Delhi High Court rejected the claim to allow credit of the unutilized education and higher education cess.
Assessee in the instant case is a society registered under the Societies Registration Act has filed a writ petition before the Court for quashing notification issued in the year 2015 as violating Articles 14, 19(1)(g), 265 and 300A of the Constitution of India and claimed to allow credit accumulated on account of Education Cess (EC) and Secondary Higher Education (SHE) cess for payment of service tax leviable and payable on telecommunication services.
On the other hand the respondent argued that CENVAT credit on Education Cess (EC) and Secondary Higher Education Cess (SHE) on inputs, capital goods, and input services could be utilized and availed of for payment of EC and SHE on manufactured goods and output services and further submitted that it is an accepted fact that benefit of EC and SHE on inputs, etc. could not have been utilized for payment of excise duty service tax on the output of manufactured goods or taxable services.
In response, the Assessee contended that benefit of the unutilized amount of EC or SHE credit, which was available and had not been set off for payment of tax on excisable goods and taxable services respectively. Further submitted that EC and SHE were subsumed in the Central Excise Duty, and the rate was increased from 12% to 12.5%, and service tax, which was increased from 12.36% to 14%. The Assessee also submitted a copy of the budget speech of the finance minister the memorandum explaining provisions of Finance Bill, 2015 for the support of its arguments.
After analyzing the above narrated facts and circumstances, the division bench comprising of Justice Sanjiv Khanna and Justice Chander Shekhar observed that “Manufacturers and output service providers were entitled to take benefit of EC and SHE credit on the EC and SHE payable on manufactured goods and output services and the same cannot be utilized for payment of excise duty or service tax. The Assessee considered the budget speech and finance bill in a wrong meaning for supporting its argument”.
While dismissing the Writ Petition, the Court also observed that “credit of EC and SHE could be only allowed against EC and SHE and could not be cross-utilized against the excise duty or service tax”.