Exemption from Ed Cess and SHE cess on clean energy cess under Notifications No 28/2010 CE and No.29/2010 CE cannot be made applicable to excise duty imposed on coal - Demand of Ed Cess and SHE Cess upheld: CESTAT
By TIOL News Service
HYDERABAD, NOV 03, 2016: THE appellant is engaged in the mining and sale of coal. The Appellant has obtained Registration under the Clean Energy Cess Rules, 2010 with effect from July 01, 2010 and has been discharging Clean Energy Cess at the rate of Rs. 50/- per metric ton on the removal of Coal from their mine.
The Central Government issued Notification No. 28/2010-CE dated June 22, 2010 and Notification No. 29/2010-CE dated June 22, 2010 granting exemption from payment of Education Cess and Secondary and Higher Education Cess (hereinafter referred to S.H.E Cess) respectively to goods on which Clean Energy Cess is leviable - as specified in the Tenth Schedule of the Finance Act, 2010, which, inter alia includes Coal.
Coal was attracting Nil rate of duty upto Feb, 2011 in the First Schedule to CETA, 1985 with effect from March 01, 2011 the Finance Act, 2011 introduced Excise Duty on Coal, where under the manufacturer was granted an option of discharging Excise Duty either at the rate of 1% provided CENVAT credit of inputs, input services and capital goods used for production of coal is not availed or5% with the facility of CENVAT credit. The Appellant opted to remove Coal on payment of 5% Excise Duty.
On introduction of Excise Duty, the Appellant was advised that Education Cess and Secondary and Higher Education Cess is not payable on removal of Coal in view of the exemption granted under Notification No. 28/2010-CE dated June 22, 2010 and Notification No. 29/2010-CE dated June 22, 2010.The department issued show cause notices proposing to recover Education Cess and Secondary and Higher Education Cess on the quantity of Coal removed during periods under Section 11A of the Central Excise Act, 1944 along with applicable interest and penalty.On adjudication the lower authority confirmed the proposals in the notices along with interest. Hence these appeals.
The appellant contended that the exemption under Notification No. 28/2010-CE dated June 22, 2010 and Notification No. 29/2010-CE dated June 22, 2010 is applicable not only to clean energy cess, but also to excise duty levied under the First Schedule to the Central Excise Tariff Act, 1985.
After hearing both sides, the Tribunal upheld the demand by holding inter alia that:
+ Section 83(5) of Finance Act, 2010 clearly lays down that Clean Energy Cess shall be in addition to any Cess or Duty leviable on the goods specified in the Tenth Schedule or under any other law for the time being in force, which shows that Clean Energy Cess is only one of the duties of Excise leviable on coal, limited to the said Tenth Schedule. Hence, an exemption from E. Cess and S.H.E. Cess on Clean Energy Cess does not mean exemption from E. Cess and S.H.E. Cess on Central Excise Duty. Since the Basic Excise Duty on coal was introduced only w.e.f 2011, it is incongruous that a notification issued in 2010 can exempt E. Cess and S.H.E. Cess on Basic Excise Duty, because E. Cess and S.H.E. Cess has to be calculated on the aggregate of Central Excise Duty.
+ It is also noted that vide the Finance Bill, 2015 which subsequently was passed in Parliament and received the assent of the President, inter alia, Education Cess and Secondary & Higher Education Cess leviable on all excisable goods were fully exempted. However, the Government, with the approval of the legislature, considered it necessary to issue separate notifications for rescinding the 2010 notification which exempted Clean Energy Cess from E. Cess and S.H.E. Cess. The very fact that the Government found it necessary to issue a separate Notification No. 17/2015-CE to rescind erstwhile Notification No. 28 and 29/2010-CE vindicates the conclusion that the impugned exemption from E. Cess and S.H.E. Cess was initially available only to Clean Energy Cess, w.e.f. 22.06.2010, and that E. Cess and S.H.E. Cess was very much imposable on Central Excise Duty till the amending Notification 14 & 15/2015-CE dated 01.03.2015.
+ Even the CBEC had clarified vide Circular 354/42/2014-TRU 22ndSeptember, 2015 that the exemption from Education Cess and S.H.E. Cess under Notifications No. 28/2010-CE and 29/2010-CE both dated 22.06.2010 (prior to 01.03.2015), is applicable only in respect of Clean Energy Cess leviable on Coal under Tenth schedule to Finance Act, 2010, hence Education Cess and S.H.E. Cess shall be leviable on Excise Duty on Coal.
+ The above discussions will put the final nail on the argument that exemption of E. Cess and S.H.E. Cess vide Notifications No.28/2010-Central Excise and No. 29/2010-Central Excise, both dated 22nd June, 2010, also meant that the Notification simultaneously exempted E. Cess and S.H.E. Cess on duty of excise. If this was the case, there would have been no need for the Government to issue, after four years, Notification No.15/2015-Central Excise dated 1stMarch, 2015 specifically exempting duty of excise from E. Cess and S.H.E. Cess, on all excisable goods. Only because all excisable goods now stood exempted from E. Cess and S.H.E. Cess w.e.f 1st March 2015, there arose the necessity for the Government to issue Notification No.17/2015-Central Excise dated 1stMarch, 2015 rescinding Notifications No. 28/2010-Central Excise and No. 29/2010-Central Excise, which had already exempted the levy of Education Cess and Secondary & Higher Education Cess on the Clean Energy Cess leviable on coal much earlier on 22nd June, 2010.
+ In view of foregoing discussions, there is no difficulty in concluding that exemption from E. Cess and S.H.E. Cess under Notifications No. 28 and 29/2010 both dated 22.06.2010 is applicable only with respect to Clean Energy Cess levied under the Finance Act, 2010, but will not be applicable with respect to Central Excise duty levied on coal w.e.f 01.03.2011. The issue is answered in favor of Revenue. The appeals are dismissed.
(See 2016-TIOL-2858-CESTAT-HYD)
