Concessional rate of excise duty on coal

[Balaknath Bhattacharyya]

we are a power sector company producing power which is exempted from charging of excise duty . we purchase coal as raw material from different coal companies. From March 11 they are charging 5% excise duty ad valorem. But as per notification 1/2011--CE  chapter  27 it has been stated that   'A tariff rate of 5% has been prescribed for all tariff items falling under headings 2701-2704 and 2006(coal, lignite etc). However these items would attract the concessional rate of 1% without CENVAT credit facility. Now we being a power sector producing excise duty exempted material is not entitled to any CENVAT credit. My question is whether as a power producer we will pay excise duty @ 5% on coal purchased or @ 1% on that as stated above.

 

[Vijay kumar]

Dear Sir, both the rates are applicable since the relevant notifications are optional in nature. In your case, since your final product i.e. power is exempted, you may ask your suppliers to go for 1% duty (now 2% w.e.f. 17.3.2012), which however is subject to the condition of no CENVAT facility for you or your supplier. Alternately, you may purchase coal from those suppliers who do not avail the CENVAT facility so that the duty burden on you is minimized. Regards - Vijay Kumar.

[NEERAJ KUMAR, RANCHI]

Dear Sir, 

It is correct that you are not availing cenvat credit but your coal supplier must be availing cenvat credit, and since he is availing cenvat credit he can not pay duty under Notification No.1/2011-CE

 

AI Summary

Concessional excise rate on coal applies only where CENVAT is not availed, affecting power producers' procurement choices. Concessional excise treatment for coal provides a lower tariff only on the condition that no CENVAT credit is availed; power producers whose output is excise exempt cannot claim CENVAT, and suppliers may apply the concessional rate only if they themselves forgo CENVAT. Suppliers who continue to avail CENVAT must charge the standard non concessional rate, so the effective duty paid by an excise exempt power purchaser depends on the supplier's election on CENVAT.