Relief to South Eastern Coalfields Ltd: CESTAT Rules No Clean Energy Cess on Coal Stock Lying Before July 1st, 2017 [Read Order]

The Customs Excise and Service Tax Appellate Tribunal (CESTAT) has provided relief to South Eastern Coalfields Ltd, affirming that the company is not required to impose Clean Energy Cess (CEC) on coal stock existing before July 1st, 2017. The tribunal clarified that the appellant company is exempt from paying CEC for goods removed on or after July 1, 2017, even if they were in stock as of June 30, 2017, following the repeal of the 2010 Finance Act.

South Eastern Coalfields Limited, the appellant involved in mining and coal sales, seeks to challenge the order dated April 20, 2022, passed by the Commissioner (Audit), CGST & C. Ex., Raipur, confirming the Clean Energy Cess demand and directing its recovery from the appellant with interest and penalty.

Before the introduction of Goods and Service Tax (GST) on July 1, 2017, the appellant discharged the Clean Energy Cess at Rs. 400 per M.T. on coal under the provisions of the Finance Act, 2010. The dispute revolves around whether CEC is payable on the coal stock held by the appellant on June 30, 2017.

The appellant contended that, as no removal of coal occurred on June 30, 2017, as defined in rule 4 of the 2010 Cess Rules, CEC payment was not required. The appellant also did not pay central excise duty on the coal stock, which is not in dispute.

According to the appellant, the repeal of the 2010 Finance Act in 2017 resulted in the repeal of rule 4 of the 2010 Cess Rules when coal was removed from the mines on or after July 1, 2017. The appellant paid the applicable GST and GST Compensation Cess when supplying coal under the CGST Act.

The department believed that although the provisions relating to levy of CEC were repealed w.e.f. 01.07.2017 by virtue of section 18(1) of the Taxation Amendment Act, the liability of CEC @ 400 per M.T. had accrued on the stock of coal lying on 30.06.2017 by virtue of the savings clause contained in section 18(2) of the 2017 Taxation Amendment Act. Thus, CEC was recoverable on the stock of coal that was lying in balance with the appellant as on 30.06.2017.

The bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Member), observed that in the present case, as the goods were removed on or after 01.07.2017, liability had not accrued or incurred on 30.06.2017 and even section 19 talks of collection and payment of arrears of duty.

Further observed that the appellant admittedly paid GST Compensation Cess w.e.f. 01.07.2017. The department is, however, contending that the appellant should have paid cess under section 83(3) of the 2010 Finance Act read with 2010 Cess Rules @ Rs. 400 per M.T. on goods lying in stock as on 30.06.2017, but removed on or after 01.07.2017 and not the GST Compensation Cess @ Rs. 400 per M.T. The decision of the Supreme Court in Vazir Sultan Tobacco, therefore, does not help the department.

Hence, the tribunal determined that the appellant was not obligated to remit Clean Energy Cess (CEC) following the repeal of the 2010 Finance Act for goods removed on or after July 1, 2017, even if they were in stock as of June 30, 2017. As a result, the commissioner's contested order was overturned.

To Read the full text of the Order CLICK HERE

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