Refund of C.Cess paid on coal for manufacturing of coke

[Karan Agarwal]

Dear all

Coal is the input for manufacturing of Coke.Coal attracts GST @ 5% and @ 400/- per MT as Compensation Cess whereas the rate of GST in case of coke is 5%.

As a manufacturer of coke, it is felt that, we are incurring loss to the extent of amount paid as Compensation cess as C.Cess is not leviable on supply of Coke.Unlike,in Central excise regime, can C.Cess is equatable with tax and the provisions of Section 54 of the CGST Act, 2017 be supportive for claiming refund of such C. Cess .

Please share the view

[Shilpi Jain]

This situation will be viewed as the cess taxable product being used for supply of a product which is cess exempt. So no credit of cess eligible in the first place. Refund is far fetched.

In case you export under LUT then cess credit eligible and can also claim refund. Circular also aviailable to this effect.

[KASTURI SETHI]

Sh.Pranab Panda Ji,

In my view, compensation cess cannot be equated with tax for the purpose of Section 54 of CGST Act However, the following case laws (pertaining to pre-GST era ) can be useful :-

(i) Cess vis-à-vis tax - Education Cess, Secondary & Higher Education Cess and Krishi Kalyan Cess are considered as additional levy and not to be termed as tax/Excise duty. [paras 7, 13]---held by Commissioner (Appeals), Jaipur in the case of BOSCH LTD 2021 (7) TMI 1 - COMMISSIONER (APPEALS) CENTRAL GOODS AND SERVICE TAX, JAIPUR

(ii) Cenvat - Cess - Sugar cess is duty of Excise and not fee - Payment of duty once established, assessee entitled to the Cenvat credit - Rule 3 of Cenvat Credit Rules, 2004. [paras 33, 40] held by Karnataka High Court in the case of COMMISSIONER OF C. EX., CUS. & S.T., BELGAUM Versus SHREE RENUKA SUGARS LTD. 2014 (1) TMI 1469 - KARNATAKA HIGH COURT.

(iii) On 12.2.2016, the department has filed SLP with Hon'ble Supreme against the judgement of Karnataka High Court. which is still pending.

[KASTURI SETHI]

It is relevant to know the difference among the terms tax, fee and cess

"Tax, Fee and Cess - Difference between - Tax recovered by Government goes into Consolidated Fund of India which is utilised for all public purposes and no money out of Consolidated Fund of India shall be appropriated except in accordance with law and for purposes and in manner provided in Constitution - Whereas cess or fee does not become part of “Consolidated Fund” and earmarked for purpose of services for which same levied - Cess can never become part of Consolidated Fund. [para 8]"-----CESTAT MUMBAI REPORTED in the case of STATE STREET SYNTEL SERVICES PVT. LTD. Versus COMMR. OF CGST & C. EX., MUMBAI - 2019 (5) TMI 1568 - CESTAT MUMBAI

AI Summary

Coke Manufacturer's Refund Claim for Compensation Cess on Coal Denied; Section 54 of CGST Act Examined A manufacturer of coke raised a query about the refund of Compensation Cess (C.Cess) paid on coal, used as an input for coke production. The issue centers on the non-leviability of C.Cess on coke and whether Section 54 of the CGST Act, 2017 supports a refund claim. Respondents clarified that C.Cess paid on coal, a cess-taxable product, is not creditable when used for cess-exempt coke. Refunds are possible only if exported under LUT. Legal precedents were cited to explain the distinction between tax, fee, and cess, highlighting that cess does not equate to tax for refund purposes.