Tribunal rules Clean Energy Cess exemptions don't apply to Central Excise Duty on coal.

The tribunal concluded that the exemptions under Notifications 28/2010-CE and 29/2010-CE applied only to the Clean Energy Cess and not to the Central Excise Duty on coal. The appeals were dismissed, upholding the department's position that E. Cess and S.H.E. Cess were leviable on the Central Excise Duty imposed on coal from March 1, 2011.

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Issues Involved:
1. Applicability of exemption under Notifications 28/2010-CE and 29/2010-CE to Clean Energy Cess and Central Excise Duty on coal.
2. Nature and scope of Clean Energy Cess.
3. Interpretation of legislation by reference versus legislation by incorporation.
4. Validity of exemption notifications issued prior to the imposition of Central Excise Duty on coal.

Detailed Analysis:

1. Applicability of exemption under Notifications 28/2010-CE and 29/2010-CE to Clean Energy Cess and Central Excise Duty on coal:
The core issue is whether the exemptions provided under Notifications 28/2010-CE and 29/2010-CE apply solely to the Clean Energy Cess or also extend to the Central Excise Duty imposed on coal from March 1, 2011. The appellant argued that these notifications exempted goods specified in the Tenth Schedule (including coal) from Education Cess (E. Cess) and Secondary and Higher Education Cess (S.H.E. Cess), thus covering the Central Excise Duty as well. However, the department contended that these exemptions were only applicable to the Clean Energy Cess and not to the Central Excise Duty, which was introduced later.

2. Nature and scope of Clean Energy Cess:
Clean Energy Cess, introduced by the Finance Act, 2010, is a duty of excise levied on coal, lignite, and peat to fund clean energy initiatives. It was later expanded to include clean environment initiatives. This cess is distinct from the Central Excise Duty, which is a tax on goods manufactured or produced in India. The Clean Energy Cess is in the form of a surcharge for the Union, while Central Excise Duty is distributed between the Union and the States.

3. Interpretation of legislation by reference versus legislation by incorporation:
The appellant argued that the Tenth Schedule of the Finance Act, 2010, required continuous reference to the First Schedule of the Central Excise Tariff Act, 1985, making it legislation by reference. This would mean that any amendments to the Central Excise Tariff Act would automatically apply to the Tenth Schedule. However, the tribunal held that Section 83 of the Finance Act, 2010, and the Tenth Schedule constituted legislation by incorporation, meaning only specific provisions of the Central Excise Act and Tariff Act were incorporated for limited purposes, such as procedural modalities and classification of coal. Thus, changes in the Central Excise Tariff Act do not affect the applicability of exemptions under the Tenth Schedule.

4. Validity of exemption notifications issued prior to the imposition of Central Excise Duty on coal:
The tribunal agreed with the department that a notification issued in 2010 could not exempt a duty (Central Excise Duty) that was not in existence at that time. This principle was supported by several judgments, including the Supreme Court's decision in UOI vs. Modi Rubber Ltd., which held that exemption from a duty of excise does not imply exemption from future duties unless explicitly stated. The tribunal also noted that subsequent notifications in 2015 explicitly exempted all excisable goods from E. Cess and S.H.E. Cess, further clarifying that the 2010 notifications only applied to Clean Energy Cess.

Conclusion:
The tribunal concluded that the exemptions under Notifications 28/2010-CE and 29/2010-CE applied only to the Clean Energy Cess and not to the Central Excise Duty on coal. The appeals were dismissed, upholding the department's position that E. Cess and S.H.E. Cess were leviable on the Central Excise Duty imposed on coal from March 1, 2011. This decision was pronounced on July 26, 2016, in open court.

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