2024 (1) TMI 179 - AT - Central Excise

Clean Energy Cess on coal stock cleared after 01.07.2017 repeal held not payable; demand order set aside

The dominant issue was whether Clean Energy Cess (CEC) remained payable on coal lying in stock on 30.06.2017 but removed on or after 01.07.2017 after ... Levy of Clean Energy Cess - whether CEC is payable on the stock of coal lying with the appellant as on 30.06.2017 which stock was removed on or after 01.07.2017? HELD THAT:- In Radhakrishna Ramnarain Limited vs. R. Parthasarathy & other [1980 (4) TMI 116 - HIGH COURT OF BOMBAY], the Bombay High Court also observed that the taxable event is the removal of goods and not the manufacture. It is useful to refer to a decision of the Bombay High Court in Commr. of Income Tax, Pune-III vs. Loknete Balasaheb Desai S.S.K. Ltd. [2011 (6) TMI 48 - BOMBAY HIGH COURT]. The issue that arose before the Bombay High Court was regarding the excise duty liability incurred on the manufacture of sugar in the light of the provisions of section 145A(b) of the Income Tax Act, 1961 - The Bombay High Court held that the expression ‘incurred’ in section 145A(b) must be construed to mean liability that was actually incurred by the assessee. The issue that arose for consideration before the Bombay High Court was whether in a case where excisable goods are manufactured and lying in stock on the last day of the accounting year, the manufacturer has ‘incurred’ liability to pay excise duty on the manufactured goods. The Bombay High Court held that though the date of manufacturer may be the relevant date for dutiability, the relevant date for duty liability is the date on which the goods were cleared. Thus, in respect of excisable goods manufactured and lying in stock, the excise duty liability would get crystallized on the date of clearance of goods and not on the date of manufacture. The appellant was not required to pay CEC on repeal of the 2010 Finance Act on goods removed on or after 01.07.2017 even though they were lying in stock as on 30.06.2017. The impugned order dated 20.04.2022 passed by the Commissioner, therefore, cannot be sustained and is set aside - Appeal allowed. Issues Involved:1. Whether Clean Energy Cess (CEC) is payable on the stock of coal lying with the appellant on 30.06.2017.2. Applicability of the savings clause under section 18(2) of the 2017 Taxation Amendment Act.3. Interpretation of the provisions under the 2010 Finance Act and the 2010 Cess Rules.4. The relevance of the repeal of the 2010 Finance Act and the introduction of GST Compensation Cess.Issue-wise Comprehensive Details:1. Whether Clean Energy Cess (CEC) is payable on the stock of coal lying with the appellant on 30.06.2017:The appellant argued that since no 'removal' of coal took place on 30.06.2017, CEC was not payable. The department contended that the leviability of CEC accrued on the stock of coal lying on 30.06.2017 due to the savings clause in section 18(2) of the 2017 Taxation Amendment Act. The Tribunal concluded that CEC is payable only at the time of removal of coal, not at the time of production, as per rule 4 of the 2010 Cess Rules. Since the coal was removed after 01.07.2017, when the 2010 Finance Act and the 2010 Cess Rules were repealed, CEC was not payable.2. Applicability of the savings clause under section 18(2) of the 2017 Taxation Amendment Act:The appellant argued that the savings clause was not applicable since the liability to pay CEC did not accrue on 30.06.2017. The department believed that the savings clause preserved the liability of CEC on the coal produced before 01.07.2017. The Tribunal held that section 18(2) of the 2017 Taxation Amendment Act did not apply because the liability for CEC had not crystallized by 30.06.2017. The savings clause is relevant only for liabilities that had already accrued but not paid.3. Interpretation of the provisions under the 2010 Finance Act and the 2010 Cess Rules:The appellant cited various judgments to argue that the liability to pay CEC arises only upon the removal of goods, not their production. The department maintained that CEC was leviable on the production of coal. The Tribunal agreed with the appellant, stating that the provisions of the 2010 Finance Act and the 2010 Cess Rules indicate that the levy of CEC is linked to the removal of goods, not their production. This interpretation was supported by precedents, including decisions of the Delhi High Court and the Bombay High Court.4. The relevance of the repeal of the 2010 Finance Act and the introduction of GST Compensation Cess:The appellant contended that with the repeal of the 2010 Finance Act and the 2010 Cess Rules on 01.07.2017, CEC was no longer leviable, and GST Compensation Cess was applicable instead. The department argued that the repeal did not affect the accrued liability for CEC on coal produced before 01.07.2017. The Tribunal concluded that the repeal of the 2010 Finance Act and the introduction of GST Compensation Cess meant that CEC was not payable on coal removed after 01.07.2017, even if it was produced before that date. The appellant's payment of GST Compensation Cess from 01.07.2017 onwards was deemed appropriate.Conclusion:The Tribunal set aside the impugned order dated 20.04.2022, holding that the appellant was not required to pay CEC on the coal removed after 01.07.2017, even though it was lying in stock on 30.06.2017. The appeal was allowed.