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.

 

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.