Coal rejects under HSN 2701 attract compensation cess; coal-washery exemption does not extend to power plant supplies.

Coal rejects supplied by power plants were held classifiable under HSN 2701 and liable to compensation cess at Rs. 400 per MT because they fall within the coal entry notwithstanding nominal sale value. The exemption under Notification No. 02/2018-Compensation Cess (Rate) was confined to coal rejects from a coal washery, where cess had been paid on the underlying coal and input tax credit had not been availed. As the applicant's power plants were not coal washeries, and no other exemption applied, exemption was denied.

---

---

Issues: (i) Whether coal rejects supplied by the applicant's power plants attract compensation cess at the rate of Rs. 400 per MT and are classifiable under HSN 2701; (ii) whether the coal rejects are eligible for exemption from compensation cess under Notification No. 02/2018-Compensation Cess (Rate) dated 26.07.2018 or any other exemption notification.

Issue (i): Whether coal rejects supplied by the applicant's power plants attract compensation cess at the rate of Rs. 400 per MT and are classifiable under HSN 2701.

Analysis: Notification No. 01/2017-Compensation Cess (Rate) dated 28.06.2017 prescribes compensation cess of Rs. 400 per tonne for goods under heading 2701, which covers coal and similar solid fuels manufactured from coal. The ruling noted the departmental clarification that coal rejects fall under heading 2701 and that the applicant's coal rejects are not outside that entry merely because they are sold at a nominal price.

Conclusion: Yes. Coal rejects supplied by the applicant attract compensation cess of Rs. 400 per MT and are covered under HSN 2701.

Issue (ii): Whether the coal rejects are eligible for exemption from compensation cess under Notification No. 02/2018-Compensation Cess (Rate) dated 26.07.2018 or any other exemption notification.

Analysis: The exemption in Notification No. 02/2018-Compensation Cess (Rate) dated 26.07.2018 applies only to coal rejects supplied by a coal washery, arising out of coal on which compensation cess has been paid and in respect of which no input tax credit has been availed. The applicant's power plants were not held to be coal washeries, and no other exemption was found applicable.

Conclusion: No. The applicant's coal rejects are not eligible for exemption from compensation cess under the said notification or any other exemption notification.

Final Conclusion: The ruling confirms levy of compensation cess on the sale of coal rejects by the applicant's power plants and denies exemption, thereby answering all questions against the applicant.

Ratio Decidendi: Coal rejects remain classifiable under heading 2701 and attract compensation cess unless they fall within the specific coal-washery exemption provided by the relevant notification.

---