2025 (6) TMI 1724 - AT - Central Excise

Central excise duty interest cannot be waived but Section 11AC penalty set aside for bonafide non-payment by PSU

M/s Singareni Collieries Company Ltd. Versus Commissioner of Central Tax Audit-II, Hyderabad – GST

CESTAT Hyderabad addressed central excise duty payment and penalty issues for coal clearances post 30.06.2017. The tribunal held that interest on unpaid ... Payment of interest on central excise duty on certain quantity which were cleared post 30.06.2017 - Levy of penalty - HELD THAT:- In view of retrospective amendment of Finance Act 2024, whereby Notification No. 12/2017 has now covered the ‘cess’ also, subject to certain conditions, the issue of it’s being covered under the notification or otherwise upon fulfilling the stipulated conditions is no longer survives. However, whether Compensation Cess was paid even for clearance to them on TPP is not clear. While they have claimed to have paid applicable GST and even compensation cess, there is no clear evidence to the effect that said compensation cess is relatable to coal for captive consumption also. As far as payment of interest, it is found that it is a statutory requirement in the case of non- payment or short payment of central excise duty and cannot be waived. The submission to that extent is not tenable. Penalty under Section 11AC(1)(c) - HELD THAT:- It is found from the facts of the case that it was a bonafide belief and the fact there was no positive or substantive evidence was brought out by the Department that said non-payment was deliberate or with an intent to evade payment of duty. Further, their being a Public Sector Undertaking, penalty under Section 11AC(1)(c) is not justifiable and is therefore liable to be set aside. Moreover, the fact that a retrospective amendment was brought in to cover Cess under Notification No. 12/2017 also shows that it was not deliberate or intended evasion by the appellant. Thus, no penalty is imposable under Section 11AC(1)(c). Conclusion - The Order-in-Original dated 03.01.2019 is set aside and matter remanded back to Original Adjudicating Authority, who shall verify whether the conditions for exemption of Cess in terms of amended N/N. 12/2017, has been fulfilled or not. If fulfilled, demand would not sustain, along with interest - penalty under Section 11AC(1)(c) is not imposable. Appeal allowed partly by way of remand. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Tribunal in these appeals are:Whether Clean Environment Cess (hereinafter 'Cess') was leviable on the closing stock of coal lying with the appellant as on 30.06.2017, in light of the provisions of the Finance Act, 2010 and Clean Environment Cess Rules, 2010.The applicability and scope of Notification No. 12/2017-CE dated 30.06.2017, especially whether it exempts Cess on closing stock of coal as on 30.06.2017, and the effect of retrospective amendment by Finance Act, 2024, section 113, on this exemption.Whether the appellant's argument that Cess is tantamount to Central Excise Duty and thus covered under the exemption notification is tenable.The liability of interest and penalty under Section 11AC(1)(c) on the unpaid or short-paid Central Excise Duty and Cess, particularly on coal cleared for captive consumption in the appellant's thermal power plant.The applicability of limitation and penalty provisions, considering the appellant is a public sector undertaking, and the timing of the investigation and demand notices.Whether the invocation of extended period for recovery of duty and penalty is justified.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Levy of Clean Environment Cess on Closing Stock of Coal as on 30.06.2017Relevant legal framework and precedents: The Finance Act, 2010 and Clean Environment Cess Rules, 2010 impose Cess on coal production and stock. Notification No. 12/2017-CE dated 30.06.2017 exempts certain goods from excise duty subject to conditions. The retrospective amendment by Finance Act, 2024 (section 113) amended this notification to include Cess within its exemption scope, subject to conditions.Court's interpretation and reasoning: The Adjudicating Authority initially held that Notification No. 12/2017-CE exempts excise duty but not Cess, as there was no parallel notification explicitly exempting Cess on closing stock. The appellant argued that Cess is excise duty and should be covered. The Tribunal, however, accepted the retrospective amendment brought by Finance Act, 2024, which explicitly included Cess under the exemption notification subject to conditions, including payment of applicable GST and compensation Cess on clearance post 01.07.2017.Key evidence and findings: The appellant had coal stock of 5,882,429.44 MT as on 30.06.2017 and had cleared some quantity post 01.07.2017. It was found that the appellant complied with conditions of the retrospective exemption for most quantities except for some coal cleared for captive consumption in their thermal power plant.Application of law to facts: The Tribunal held that due to the retrospective amendment, the Cess demand on closing stock is not sustainable if the appellant fulfills the exemption conditions. This renders the original demand for Cess on closing stock largely unsustainable.Treatment of competing arguments: The Department contended that the exemption notification did not cover Cess originally and that the appellant failed to pay Cess on closing stock. The appellant argued retrospective amendment covers Cess, and they paid applicable GST and compensation Cess. The Tribunal sided with the appellant on the retrospective amendment's effect but noted lack of clarity on compensation Cess payment for captive consumption coal.Conclusions: The demand for Cess on closing stock as on 30.06.2017 is not maintainable to the extent the appellant fulfills exemption conditions under the retrospective amendment.Issue 2: Liability for Central Excise Duty, Interest, and Penalty on Coal Cleared for Captive ConsumptionRelevant legal framework and precedents: Central Excise law mandates payment of duty, interest on delayed payment, and penalty under Section 11AC(1)(c) for non-compliance. The appellant cited precedents establishing that penalty is not leviable where there is no deliberate evasion, especially for public sector undertakings (PSUs), including:Commissioner of Central Excise, Bangalore Vs KPTCLBSNL Vs Commissioner of Central Excise, AhmedabadExecutive Engineer, Tubewell Division Vs Commissioner Central Excise, KanpurPratik Enterprises Vs Commissioner, Central Excise & Customs, VapiCommissioner of Central Excise, Chandigarh Vs Pepsi Foods Ltd.Court's interpretation and reasoning: The Tribunal noted that the appellant had paid Central Excise duty on coal cleared for captive consumption but had not paid interest and penalty demanded. The Tribunal held that payment of interest is statutory and non-waivable. However, penalty under Section 11AC(1)(c) was not justified as there was no evidence of deliberate evasion or intent to avoid duty. The appellant's status as a PSU and bona fide belief supported this conclusion.Key evidence and findings: The appellant admitted to paying Central Excise duty and interest under protest. The Department failed to produce substantive evidence of deliberate evasion. The retrospective amendment's existence further indicated absence of intent to evade Cess.Application of law to facts: Interest on delayed payment was upheld as mandatory. Penalty was set aside due to lack of mens rea and bona fide conduct of the appellant.Treatment of competing arguments: The Department argued for penalty and interest recovery. The appellant argued against penalty due to PSU status and lack of deliberate evasion. The Tribunal balanced these views, allowing interest recovery but setting aside penalty.Conclusions: Interest on Central Excise duty is payable. Penalty under Section 11AC(1)(c) is not imposable on the appellant for the coal cleared for captive consumption.Issue 3: Applicability of Retrospective Amendment and Notification No. 12/2017-CERelevant legal framework and precedents: Finance Act, 2024 retrospectively amended Notification No. 12/2017-CE to include Cess within its exemption scope, subject to conditions including payment of GST and compensation Cess on clearance after 01.07.2017.Court's interpretation and reasoning: The Tribunal emphasized that the retrospective amendment effectively covers the Cess liability on closing stock, provided the conditions are met. The appellant's compliance with these conditions was crucial to the exemption.Key evidence and findings: The appellant's payment of GST and claimed payment of compensation Cess on clearances post 01.07.2017 was noted, though the evidence for compensation Cess on captive consumption coal was unclear.Application of law to facts: The retrospective amendment negates the Department's demand for Cess on closing stock, except for quantities not meeting exemption conditions.Treatment of competing arguments: The Department argued non-applicability of exemption to Cess. The appellant relied on retrospective amendment. The Tribunal accepted the amendment's effect.Conclusions: Retrospective amendment renders Cess demand on closing stock unsustainable where conditions are met.Issue 4: Limitation and Extended Period for RecoveryRelevant legal framework and precedents: Provisions regarding limitation and extended period for recovery of duty and penalty under Central Excise laws.Court's interpretation and reasoning: The appellant contended that delayed investigation and PSU status preclude penalty and extended period invocation. The Tribunal found no explicit discussion on extended period but implied that bona fide belief and lack of deliberate evasion negate penalty.Key evidence and findings: Investigation started in 2020 for the 2017 stock. The appellant's conduct was bona fide.Application of law to facts: The Tribunal's decision to set aside penalty implicitly supports appellant's contention against extended period penalty.Treatment of competing arguments: The Department sought penalty despite delay. The appellant relied on PSU status and bona fide conduct.Conclusions: Penalty under extended period provisions is not justified in this case.3. SIGNIFICANT HOLDINGS'In view of the retrospective amendment of Finance Act 2024, whereby Notification No. 12/2017 has now covered the 'cess' also, subject to certain conditions, the issue of it's being covered under the notification or otherwise upon fulfilling the stipulated conditions is no longer survives.''As far as payment of interest is concerned ... it is a statutory requirement in the case of non- payment or short payment of central excise duty and cannot be waived.''In so far as penalty under Section 11AC(1)(c) is concerned ... there was no positive or substantive evidence ... that said non-payment was deliberate or with an intent to evade payment of duty ... penalty under Section 11AC(1)(c) is not justifiable and is therefore liable to be set aside.''The fact that a retrospective amendment was brought in to cover Cess under Notification No. 12/2017 also shows that it was not deliberate or intended evasion by the appellant.'Final determinations:Demand for Clean Environment Cess on closing stock as on 30.06.2017 is unsustainable where conditions of retrospective exemption notification are met.Interest on delayed payment of Central Excise duty is payable and cannot be waived.Penalty under Section 11AC(1)(c) is not imposable due to absence of deliberate evasion and bona fide conduct of appellant, a public sector undertaking.Original orders are set aside and remanded for verification of compliance with exemption conditions; penalty is set aside; interest and duty demand upheld where applicable.