2012 (11) TMI 817 - HC - Central Excise

Court rules in favor of Coal India Ltd., allowing 5.15% excise duty on coal sales

The court concluded that Coal India Ltd. is entitled to levy excise duty at the rate of 5.15% (including cess) on coal sold to the petitioners, as the ... Challenge to the levy of excise duty on coal - Petitioner challenged the levying of 5% excise duty with cess on the coal purchased by them from the Coal India Ltd. claiming that levying of such 5% of excise duty is illegal and instead ought to have been levied only 1.03% duty in terms of the Government of India’s Notification No. 1/2011-C.E., dated 1-3-2011. – Held that:- Coal attracts excise duty at the rate of 5% plus cess w.e.f. 1-3-2011. However, the aforesaid excise duty will be exempted and leviable only to the extent of 1% ad valorem plus cess, in the event credit of duty on inputs has not been taken under the provisions of CENVAT Credit Rules, 2004 as also provided under the Government of India’s Notification dated 1-3-2011. Since Coal India Ltd. as a manufacturer of “coal” has decided to avail credit of duty on inputs under the provisions of CENVAT Credit Rules, 2004, the exemption provided under Notification No. 1/2011-C.E, dated 1-3-2011 will not be applicable. Therefore, excise duty at the rate of 5% would be leviable on “coal”. The writ petitioners who are mere traders and not manufacturers, obviously, cannot claim CENVAT Credit under the CENVAT Credit Rules, 2004 and accordingly, has to pay the excise duty on coal at the rate of 5% plus cess on duty as a purchaser. - Decided against the petitioner. Issues Involved:1. Legality of levying 5% excise duty with cess on coal purchased by petitioners.2. Applicability of Government of India's Notification No. 1/2011-C.E., dated 1-3-2011.3. Entitlement of Coal India Ltd. to avail CENVAT Credit under the CENVAT Credit Rules, 2004.4. Petitioners' claim for refund of excess excise duty paid.5. Maintainability of writ petitions in light of alternative remedy under Section 11(B) of the Central Excise Act, 1944.Detailed Analysis:1. Legality of levying 5% excise duty with cess on coal purchased by petitioners:The petitioners, limited companies engaged in coal trading, challenged the imposition of 5% excise duty with cess by Coal India Ltd., arguing it should be 1.03% as per Notification No. 1/2011-C.E., dated 1-3-2011. The court noted that coal falls under Chapter 27 of the Central Excise Tariff Act, 1985, and generally attracts 5% excise duty plus 3% cess on the duty tariff. However, the petitioners argued that they should be charged only 1.03% excise duty since they were not availing of CENVAT Credit.2. Applicability of Government of India's Notification No. 1/2011-C.E., dated 1-3-2011:The notification exempts excisable goods, including coal, from excise duty exceeding 1% ad valorem, provided no CENVAT Credit is availed. The court confirmed that the exemption applies only if the credit of duty on inputs or tax on input services under the CENVAT Credit Rules, 2004, is not taken. The notification was intended to provide a conditional exemption, not a total exemption, from excise duty.3. Entitlement of Coal India Ltd. to avail CENVAT Credit under the CENVAT Credit Rules, 2004:Coal India Ltd. contended that it had availed CENVAT Credit under the CENVAT Credit Rules, 2004, thus making the exemption inapplicable. The court agreed, stating that since Coal India Ltd. decided to avail CENVAT Credit, the excise duty at the rate of 5% plus cess is correctly levied. The court rejected the petitioners' argument that Coal India Ltd. should not be entitled to CENVAT Credit due to negligible inputs in coal manufacturing.4. Petitioners' claim for refund of excess excise duty paid:The petitioners claimed that since they were not availing CENVAT Credit, they should be charged only 1.03% excise duty and sought a refund of the excess amount paid. The court dismissed this claim, emphasizing that the petitioners, being traders and not manufacturers, could not claim the exemption meant for manufacturers who do not avail CENVAT Credit. The court also noted that the petitioners had not contested Coal India Ltd.'s claim of availing CENVAT Credit.5. Maintainability of writ petitions in light of alternative remedy under Section 11(B) of the Central Excise Act, 1944:Coal India Ltd. argued that the petitioners should seek a refund through Section 11(B) of the Central Excise Act, 1944, which provides an alternative remedy. The court agreed, citing precedents that support the requirement to exhaust alternative remedies before approaching the court.Conclusion:The court concluded that Coal India Ltd. is entitled to levy excise duty at the rate of 5.15% (including cess) on coal sold to the petitioners, as the company had decided to avail CENVAT Credit under the CENVAT Credit Rules, 2004. Consequently, the exemption under Notification No. 1/2011-C.E., dated 1-3-2011, was not applicable. The writ petitions were dismissed, with no order as to costs.