Coal cess and excise exemptions require statutory support, while return mismatches alone cannot confirm duty demand without reconciliation.

Coal cleared to a captive power plant was held not to qualify for exclusion from Clean Energy Cess, because the claimed link with further coal raising was not proved by direct evidence and the statutory removal rules did not support that treatment. Notification No. 67/95-CE was also found inapplicable to deny Central Excise Duty exemption, as it is confined to goods manufactured and used within a factory, not coal removed from mines for power generation. However, discrepancies between ER-1 and Clean Energy Cess returns alone were insufficient to confirm the demand, since the authorities had to reconcile actual removals, spillovers, rejects, and amounts already paid before recomputing any short payment.

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Issues: (i) Whether coal cleared to the captive power plant could be excluded from Clean Energy Cess on the footing that it was used for further raising of coal. (ii) Whether Notification No. 67/95-CE could be invoked to deny Central Excise Duty on coal consumed captively in the power plant. (iii) Whether discrepancies between ER-1 returns and Clean Energy Cess returns, by themselves, were sufficient to sustain the duty demand, or whether the matter required fresh reconciliation and recomputation.

Issue (i): Whether coal cleared to the captive power plant could be excluded from Clean Energy Cess on the footing that it was used for further raising of coal.

Analysis: Clean Energy Cess is leviable under section 83(3) of the Finance Act, 2010 and is payable on removal of coal from the mine. The definition of removal in Rule 2(g) of the Clean Energy Cess Rules, 2010 extends to dispatch for captive consumption within the mine only where it is for purposes other than raising of the goods. The claimed nexus between coal sent to the captive power plant and raising of coal was not established by direct evidence, and there was no sufficient correlation between power generation and the actual extraction process.

Conclusion: The exclusion from Clean Energy Cess was not available for coal sent to the captive power plant.

Issue (ii): Whether Notification No. 67/95-CE could be invoked to deny Central Excise Duty on coal consumed captively in the power plant.

Analysis: Central Excise Duty is chargeable under section 3 of the Central Excise Act, 1944 and, in the facts of the case, becomes payable at removal from the mines, the place of removal being governed by section 4 of the Central Excise Act, 1944. Notification No. 67/95-CE was found inapplicable because it is confined to goods manufactured within a factory and used within the factory in relation to the manufacture of final products, whereas the present clearance concerned coal from mines and use in power generation, which is not a dutiable final product for the claimed exemption purpose.

Conclusion: The exemption under Notification No. 67/95-CE was not available.

Issue (iii): Whether discrepancies between ER-1 returns and Clean Energy Cess returns, by themselves, were sufficient to sustain the duty demand, or whether the matter required fresh reconciliation and recomputation.

Analysis: The two levies operate under different statutory schemes and at the same time, the record showed staggered clearances, washery movements, rejects, slurry, and spillover effects that could create month-wise differences. Mere comparison of the two returns was held insufficient without a holistic verification of the actual quantities removed and the duty or cess already discharged. The proper course was to reconcile the entire set of clearances and verify whether any short payment existed on the total quantity produced in the mines.

Conclusion: The matter required remand for fresh computation and verification, and the demand could not rest on a bare comparison of the two returns alone.

Final Conclusion: Both sides succeeded only to the extent of obtaining a remand, and the adjudicating authority was directed to recompute the liability after a full reconciliation of clearances and payments.

Ratio Decidendi: Where a fiscal demand for coal is based only on discrepancies between two statutory returns, the authority must reconcile the actual removals and payments under the respective levy provisions before confirming any short payment; captive power consumption does not, by itself, establish entitlement to exclusion unless supported by the governing exemption or a clear statutory exclusion.

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