Middlings not Taxable as Washed Coal: CESTAT Quashes ₹45.95 Cr Excise Demand on Jindal Steel & Power and Bars Extended Limitation [Read Order]

In a significant ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) New Delhi quashed a ₹45.95 crore excise duty demand on Jindal Steel & Power Ltd. (JSPL), holding that middlings generated during coal washing qualify as by-products of the process, and thus may not be taxed as washed coal.

The appeal arose out of an Order-in-Original dated 20 December 2017 passed by the Principal Commissioner, Central Tax, Raipur, which had confirmed the excise duty demand of ₹45,95,95,499 with interest and penalty under Section 11A(4) of the Central Excise Act, 1944. The appellant, Jindal Steel & Power Ltd. (JSPL), operates a captive coal mine and supplies both ROM (Run-of-Mine) coal and by-products such as washed coal and middlings to its steel plant.

CESTAT WEEKLY ROUND-UP [Apr 25 to May 02, 2025] Read More

Complete practical guide to Drafting Commercial Contracts Click here

While part of the Run-of-Mine (ROM) coal is directly used, the remainder undergoes washing, resulting in Washed Coal, Middlings and Rejects. The dispute arose when the Principal Commissioner treated the entire quantity cleared, other than ROM coal, as Washed Coal and raised a tax demand accordingly.

Vipin Jain, Tuhina Sinha and Neha Gulati appearing for the Appellant submitted that Middlings, being a distinct by-product, were separately valued and duty-paid based on market prices of lower-grade coal, in line with CAS-4 cost accounting standards. It was also submitted that the ER-1 returns were supplemented with Form B returns filed with the Coal Controller, evidencing distinct clearances of Middlings

‘No Change in Facts from AY 2013-14 TDS Ruling’: ITAT Relies on Consistency Principle to Dismiss Revenue’s Appeal Read More

The Counsel further derided the Revenue’s attempt to reclassify Middlings as Washed Coal led to inflated duty demands and that the invocation of extended limitation was unjustified as the department was aware of all material facts as early as 2012 through audits and other material in their possession.

Complete Blueprint for Preparing Project Reports, click here

Raj Pal Sharma, Special Counsel for the Department, defended the original order by asserting lack of separate disclosure of ROM coal, washed coal and Middlings in the ER-1 returns and contended that the Form B returns could not override self-assessment documents as per rule 12 of the Central Excise Rules.

The Bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) observed that Middlings could not be treated as Washed Coal, as the process of coal washing yields three distinct products, all with separate uses and market values.

The Tribunal further found that the appellant had discharged duty on Middlings and properly deducted its value while computing the cost of production for Washed Coal, in accordance with CAS-4 and that the Appellant had duly submitted the Form B returns, which were part of the record since 2012 and admitted by the Revenue as accurate, which evidenced Middlings as a distinct clearance.

Know How to Prepare Estimation and Viability for Project Reports? Know more Click here

Win for Wipro: CESTAT Rules Value Reassessment Unjustified for Free Replacement of Defective Goods Read More

Observing that the Appellant had by no means intended to evade duty, the Tribunal set aside the Revenue’s attempt to invoke extended limitation and proceeded to set aside the impugned order passed by the Principal Commissioner.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates