The Jharkhand High Court has ruled in favor of the Revenue in a case involving the demand for Clean Energy Cess on coal production and held that the obligation to pay cess arises at production, with payment scheduled upon coal removal, as per Cess Rules and Rule does not stipulate that the Cess is to be paid at the rate current at the time of removal.
Brief Facts:
The petitioner is a subsidiary of Coal India Limited and a Category-I Mini Ratna Company since 2007, had challenged the order passed by respondent where the respondent had confirmed the demand of Clean Energy Cess amounting to Rs. 470,83,42,400/- under Section 11 (A) of the Central Excise Act, 1944, read with Rule 6(5) of the Clean Environment Cess Rules, 2010, along with interest under Section 11AA/11AB of the Central Excise Act, 1944, and penalty under Section 11AC of the Central Excise Act, 1944.
Contentions of the Petitioner:
The petitioner's learned counsel stated that, with the implementation of GST, the collection of clean energy cess has been replaced by the GST Compensation Cess under the Goods & Services (Compensation to States) Act, 2017. Accordingly, the petitioner has undisputedly paid the GST Compensation Cess on all clearances made post 01.07.2017.
Contentions of the Respondent:
The learned counsel for the respondent submitted that as per Section 83, the levy of duty is on the production of Coal. Rules 4 & Rule 6 of Cess Rules states the method that the Cess is payable by 5th of the second month. The Rule does not stipulate that the Cess is to be paid at the rate current at the time of removal. Therefore, respondent has the right to impose and collect Clean Energy Cess on the coal sitting in store as on 30.06.2017.
He also stated that Section 6 of the General Clauses Act would safeguard the Cess Rules as Regulation include Rules, inasmuch as, levy is already generated by section 83(3) of finance act, 2010 on production of coal before 01-07-2017.
In addition, he contended that Section 18(2) of the Taxation Laws (Amendment) Act, 2017 will avoid the obligations previously acquired, accrued or incurred. Therefore, the Cess will be due on coal generated before 01.07.2017. Since the abolition of Clean Energy Cess (Chapter VII of Finance Act, 2010) was effective from 01-07-2017, any obligation of CEC accumulated on the production of Coal as on 30-06-2017 was due in terms of the saving provision indicated above.
Observations of the Court:
The High Court's division bench addressed three key issues in this case:
(i) Whether the Revenue could levy Cess under Clean Energy Cess’2010, repealed by GST Compensation Cess under the Goods & Services (Compensation to States) Act, 2017?
(ii) If Cess was valid, could the Revenue use the first proviso to section 11A(1)/section 11A(4) based on suppression, fraud, etc.?
(iii) If liable for Cess, was the Assessee also liable for interest and penalty?
Regarding the first issue, the Court emphasized that the obligation to pay cess arises at production, with payment scheduled upon coal removal, as per Cess Rules. The Court, citing Section 83(3) of the Finance Act, 2010, ruled in favour of Revenue Department, stating the taxable event was production, and only payment was deferred.
On the second issue, the Court considered the use of the first proviso to section 11A(1)/section 11A(4) and noted the delay in the show cause notice issuance. The Court, viewing it as an interpretational issue, ruled against penalty under Section 11AC, given the Assessee's bona fide belief.
Consequently, the Court decided in favour of the Assessee on Issue no. (ii) and Issue No.(iii) (part), stating no penalty under Section 11AC could be levied, but the Assessee was liable for Cess for the normal period with interest.
The decision of the Court:
The Hon’ble Court partially allowed the writ petition. Considering the aforementioned discussion and legal precedents, the adjudication order was nullified, and the case was sent back to the adjudicating authority, namely the Principal Commissioner, Goods & Services Tax-CX, Ranchi (respondent no. 3). The directive is to reevaluate the clean environment cess amount, affirming the demand within the regular time limit.
Case Title: Central Coalfields Limited vs. The Union of India
Coram: Hon’ble Mr. Justice Rongon Mukhopadhyay, Hon’ble Mr Deepak Roshan
Case No.: Writ Petition No. 160 of 2021
Advocate for the Applicant: Mr. Laxmi Kumaran, A.K Das, Shilpi Shalni
Advocate for the Respondent: Mr. Anil Kumar, Mr. Ashish Kumar Shekhar
Read Judgment @LatestLaws.com
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