AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (1) TMI 179
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....ppellant was discharging the levy of CEC @ Rs. 400 per M.T. on coal under section 83 of Chapter VII of the Finance Act, 2010 [the 2010 Finance Act] read with the Clean Environment Cess Rules, 2010 [the 2010 Cess Rules], in addition to the central excise duty which was payable @ 6% ad valorem. Clean Energy Cess was renamed as Clean Environment Cess by the 2016 Finance Act. 3. Section 18(1) of the Taxation Laws (Amendment) Act, 2017 [the 2017 Taxation Amendment Act] repealed enactments specified in the third column of the Third Schedule w.e.f. 01.07.2017. Chapter VII of the 2010 Finance Act was also included in the Third Schedule. Thus, on repeal of the 2010 Finance Act w.e.f. 01.07.2017, the 2010 Cess Rules that had been framed under the said Act also stood repealed w.e.f. 01.07.2017. However, a new levy of cess, namely, GST Compensation Cess @ Rs. 400 per M.T. was made leviable w.e.f. 01.07.2017 under the provisions of the Goods and Service Tax (Compensation to States) Act, 2017 [the 2017 Compensation Act]. 4. The appellant claims that it had been paying central excise duty and CEC on the coal removed from the mines till 30.06.2017, and the statutory returns in ER-1 and Form-....
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....leviable at the time of production of coal and there is no ambiguity in the provisions contained in section 83(3) of the 2010 Finance Act; (ii) The contention of the appellant that CEC is leviable on removal of coal as per rule 4 of the 2010 Cess Rules is not correct. The provisions of section 83(3) of the 2010 Finance Act shall prevail over the 2010 Cess Rules. CEC is leviable on the incidence of production of coal, though it is payable on its removal; (iii) The saving clause under section 18(2) of the 2017 Taxation Amendment Act provides that the leviability of CEC accrued on the production of coal lying in stock on 30.06.2017 shall not be affected despite the repeal by section 18(1) of the said Act; and (iv) The appellant failed to file periodical returns under rule 11 of the 2010 Cess Rules and also failed to assess the liability towards CEC on stock of coal as on 30.06.2017. 9. Shri Rajeev Kumar Agarwal, learned counsel appearing for the appellant made the following submissions: (i) Liability to pay CEC did not accrue on 30.06.2017. Hence, saving clause under section 18(2) of the 2017 Taxation Amendment Act would not be applicable. CEC is....
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.... (ii) By virtue of section 18(1) the 2017 Taxation Amendment Act, the provisions contained in Chapter VII of the 2010 Finance Act relating to levy of CEC were repealed, but under section 18(2) the liability that had already accrued and the proceedings for collection of these liabilities would not be affected; (iii) The procedural requirements of assessing the liability under rule 5 of the 2010 Cess Rules and to pay cess at the time of clearance under rule 4 of the 2010 Cess Rules and to file a return under rule 11 will continue in terms of the savings clause contained in section 18(2) of the 2017 Taxation Amendment Act. To support this contention, reliance has been placed on the decision of the Supreme Court in Collector of C. Ex., Hyderabad vs. Vazir Sultan Tobacco Co. Ltd. [1996 (83) E.L.T. 3 (S.C.)]; and (iv) The appellant is not justified in claiming exemption under the notification dated 30.06.2017 as the exemption is only with respect to duty of excise which is leviable under the Central Excise Act. CEC is leviable under the 2010 Finance Act under which CEC leviable as a duty of excise. CEC is, therefore, different from the duties of excise leviable under....
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....eeds of the cess levied under sub-section (3) shall first be credited to the Consolidated Fund of India and the Central Government may, after due appropriation made by Parliament by law in this behalf, utilise such sums of money of the cess for the purposes specified in sub-section (3), as it may consider necessary. (5) The cess leviable under sub-section (3) shall be in addition to any cess or duty leviable on the goods specified in the Tenth Schedule under any other law for the time being in force. (6) The cess leviable under sub-section (3) shall be for the purposes of the Union and the proceeds thereof shall not be distributed among the States and the manner of assessment, collection, utilisation and any other matter relating to cess shall be such as may be prescribed by rules. (7) The Central Government may, by notification in the Official Gazette, declare that any of the provisions of the Central Excise Act, 1944(1 of 1944), relating to levy of and exemption from duty of excise, refund, offences and penalties, confiscation and procedure relating to offences and appeals shall, with such modifications and alterations as it may consider necessary, be a....
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.... payment. - (1) Cess on the specified goods removed from the mine during a month shall be paid by the 5th of the second month, following the month in which the removals were made. (2) ***** (3) ***** (4) ***** (5) ***** (6) The provisions of Section 11 of the Central Excise Act , 1944 (1 of 1944) shall be applicable for recovery of the cess as assessed under rule 5 and the interest under sub-rule (4) in the same manner as they are applicable for recovery of any sums payable to the Central Government. Explanation.− For the purposes of this rule, - (i) Cess liability shall be deemed to be discharged only if the amount payable is credited to the account of the Central Government by the specified date; (ii) Where the registered person deposits cess by cheque, the date of presentation of the cheque in the bank designated by the Board for this purpose shall be deemed to be the date on which the cess has been paid subject to realization of the cheque." 21. Rule 11 relates to filing of return and it is reproduced below: "Rules 11. Filing of return. - Every producer shall submit to the Jurisdictional C....
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....n enactments. It is reproduced below: "18. (1) The enactments specified in the third column of the Third Schedule are hereby repealed to the extent specified in the fourth column thereof. (2) Notwithstanding the repeal under sub-section (1), such repeal shall not- (a) affect any other law in which the repealed enactment has been applied, incorporated or referred to; (b) affect the validity, invalidity, effect or consequences of anything already done or suffered or any right, title, obligation or liability already acquired, accrued or incurred or any remedy or proceeding in respect thereof, or any release or discharge of or from any debt, penalty, obligation, liability, claim or demand, or any indemnity already granted, or the proof of any past act or thing under the repealed enactment; (c) affect any principle or rule of law, or established jurisdiction, form or course of pleading, practice or procedure, or existing usage, custom, privilege, restriction, exemption, office or appointment, notwithstanding that the same respectively may have been in any manner affirmed or recognised or derived by, in or from any enactment hereby repealed; ....
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...., the appellant incurred the duty liability, though cess is required to be paid on removal of the goods. 32. To examine the contentions that have been advanced, it would be appropriate to examine the provisions under which cess was levied under section 83 of the 2010 Finance Act and the 2010 Cess Rules. Sub-section (3) of section 83 of the 2010 Finance Act stipulates that there shall be levied and collected a cess to be called Clean Energy Cess, as duty of excise, on goods specified in the Tenth Schedule, being goods produced in India, at the rates set forth in the said Schedule for the purposes of financing and promoting clean energy initiatives and for funding research in the area of clean energy. 33. Sub-section (4) of section 83 of the 2010 Finance Act provides that the proceeds of the cess levied shall first be credited to the Consolidated Fund of India. Sub-section (5) of section 83 of the 2010 Finance Act provides that the cess shall be in addition to any cess or duty leviable on the goods specified in the Tenth Schedule. The Tenth Schedule includes, amongst others, coal and the rate of duty that has been specified is Rs. 100 per tonne. This was subsequently revised to....
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.... particular article produced may attract levy of excise duty, as contemplated by Section 3 of the Act, which is the charging section, removal is the essence of the crystalisation of the charge as would be apparent from a reading of Section 4 of the Act and Rule 4 of the Excise Rules. The quantum of the charge is on the value at the time of removal and the value at the time of removal is the yard-stick for quantifying the charge. Though levy is attracted on production the power to collect duty is only on removal. There may be circumstances where production may take place and yet the product may not be issued out, utilised, or marketed in which case the scheme of the Act and the Rules tend to show that no excise duty would be collected on the product. For example the glut of a particular article in the market may make it expedient for a manufacturer to hold back his product or financial circumstances may prevent the finished product to be marketed. It is in this context, therefore, that the provisions of Section 3 of the Act and Rules 9 and 49 of the Excise Rules have to be harmonised. Indeed, these provisions complement each other. Section 3 lays down the legislative policy on what ....
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..... The relevant observations are: "6. Though it may be in doubt in the year 1968 as to whether the contentions raised by Mr. Phadnis are correct or not in view of the judgment of this Court in Union of India v. Elphinston Spinning & Weaving Co. Ltd. - 1978 (2) E.L.T. 680, it is now beyond dispute that the duty payable is at rate applicable on the date of removal, even though the goods may have been manufactured earlier. It is further held in the said judgment that the taxable event is the removal of the goods and not the manufacture. This was so held by accepting the contention raised on behalf of the Union of India that the stage of point of time at which the duty is to be levied, by reason or the provisions of the said Act and the rules, is not the point of time of manufacture or production of goods but at a subsequent stage when the goods are soughs to be removed from the factory concerned. It is therefore clear that no demand for payment of duty can be made before the goods are removed or sought to be removed. It is also clear that the rate applicable is the rate prevailing at the time of removal. In view of this position the demand notices are clearly bad." (emphasi....
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....ad not accrued or incurred for the simple reason that when CEC itself did not crystallize/accrue, there is no question of it being saved by the savings clause. The provisions contained in the savings clause are relevant to enforce the recovery of the cess amount which had already accrued, but had not been paid. 43. In this connection it would be useful to refer to a decision of the Bombay High Court in Commr. of Income Tax, Pune-III vs. Loknete Balasaheb Desai S.S.K. Ltd. [2015 (315) E.L.T. 534 (Bom.)]. The issue that arose before the Bombay High Court was regarding the excise duty liability incurred on the manufacture of sugar in the light of the provisions of section 145A(b) of the Income Tax Act, 1961. The relevant portion of this section is reproduced below: "145A. Method of accounting in certain cases. - Notwithstanding anything to the contrary contained in Section 145, the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head "Profits and gains of business or profession" shall be - ***** (b) further adjusted to include the amount of tax, duty, cess or fee (by whatever n....
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....n of incurring excise duty liability. 12. In the present case, it is not in dispute that the manufactured sugar was lying in stock and the same were not cleared from the factory. Therefore, in the facts of the present case, the ITAT was justified in holding that in respect of unsold sugar lying in stock, central excise liability was not incurred and consequently the addition of excise duty made by the assessing officer to the value of the excisable goods was liable to be deleted." (emphasis supplied) 45. It would also be useful to refer to a decision of the Gujarat High Court Asst. Commr. of I.T., Bharuch vs. Narmada Chematur Petrochem Ltd. [2012 (278) E.L.T. 178 (Guj.)] wherein a similar view, as expressed by the Bombay High Court in Loknete Balasaheb Desai, was expressed. The relevant portions of the judgment are reproduced below: "17. If one reads Section 3(1) of the Excise Act in isolation, it appears to indicate that the charge is levied in Section 3 and the liability stands incurred upon manufacture of excisable goods at the rates set out in First Schedule to the Central Excise Tariff Act, 1985. However, though the opening portion of sub-section (1) st....
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....ext that one finds various judgments in relation to disputes raised on the basis of a particular cut-off date say, 28th February or 1st March qua the goods already manufactured and lying in stock up to 28th February which become amenable to duty of central excise only upon the point of time of removal namely, after 1st March. Therefore, to read provisions of Section 3 of the Excise Act to be a complete provision for the purposes of charging duty of central excise would not be a fully correct proposition of law. Under a taxing statute when a charge is fastened, the purpose is to collect tax. A levy is for the purposes of imposing a tax or a duty, by whatever name called, and for the purposes of collection of such impost. A State cannot be interested in a levy which does not result in inflow of revenue to the exchequer. ***** 22. Excise duty is admittedly an indirect levy. The manufacturer does not effectively pay from his own pocket. The duty of central excise is collected by a manufacturer from the purchaser, whether wholesaler or retailer. Hence at the time and place of removal of excisable goods the duty is recovered by the manufacturer from the purchaser and si....
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....yderabad vs. Vazir Sultan Tobacco Co. Ltd. [1996 (83) E.L.T. 3 (S.C.)] to contend that the levy of cess accrued on the production of goods. The relevant portions of the judgment are reproduced below: "9. ***** According to sub-rule (1) of Rule 9A, the rate of duty [apart from tariff valuation] applicable to any "excisable goods" shall be the rate in force on the date of actual removal of such goods from the factory or the warehouse, as the case may be. This is the general rule. Sub-rules (2), (3) and (3A) provide certain exceptional situations which are not relevant for the purpose of these appeals. It is the general rule contained in sub-rule (1) - and in particular clause (ii) of sub-rule (1) - that is relevant here. In other words, the rate of duty as well as the valuation of goods shall be the rate and the valuation as on the date of actual "removal". This rule too opens with the expression "excisable goods". 10. Sri Vellapally contended that if the above interpretation is adopted, it may lead to an enigmatic situation. He explains his apprehension thus: the special excise duty is levied only for the period March 1, 1978 to February 28, 1979. Take a case, wher....
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....ould be liable to special duty of excise. When the goods were manufactured or produced prior to 01.03.1978 there was no levy of special excise duty on such goods, but when the goods were removed between 01.03.1978 and 31.03.1979 special excise duty was leviable under section 37(1) of the 1978 Finance Act. The Supreme Court held that as there was no levy of special excise duty at that time the goods were manufactured, no duty could be levied on removal. 50. In the instant case, the position is different. Section 83(3) of the 2010 Finance Act provided that there shall be levied and collected in accordance with the provisions of the Chapter a cess at the rates set forth in the Tenth Schedule. Section 83(3) was repealed by section 18(1) of the 2017 Taxation Amendment Act w.e.f. 01.07.2017 and consequently the 2010 Rules also stood repealed. However, a new levy of cess, namely, the GST Compensation Cess @ Rs. 400 per M.T. was made leviable w.e.f. 01.07.2017 under the provisions of the 2017 Compensation Act. Section 18(2) of the 2017 Taxation Amendment Act merely provides that notwithstanding the repeal of section 83(1) of the 2010 Finance Act, the liability already acquired, accrued ....