2024 (1) TMI 1158 - HC - Central Excise

Levy of Cess under Clean Energy Cess 2010 which has been repealed by the GST Compensation Cess under the Goods Services (Compensation to States) Act, 2017 - Revenue can take recourse of first proviso to section 11A(1)/ section 11A(4) on the ground of suppression, fraud etc. - liability to pay interest penalty over the Cess amount. Whether the Revenue is entitled to levy Cess under Clean Energy Cess 2010 which has been repealed by the GST Compensation Cess under the Goods Services (Compensation to States) Act, 2017? - HELD THAT - Section 83(3) of Chapter VII of Finance Act, 2010 itself provides for Levy , Collection and Rates of Tax at Tenth Schedule. As per Section 83, the levy of duty is on the production of Coal. The taxable event is production of coal and not its removal. Further, the Finance Act, 2010 itself provides for Collection and Rates of Tax . Rules 4 Rule 6 of Cess Rules specifies the procedure that the Cess is payable by 5th of the second month. The Rule does not specify that the Cess is to be paid at the rate applicable at the time of removal. Therefore, prima-facie it appears that respondent had the power to levy and collect Clean Energy Cess on the coal already produced and lying in stock as on 30.06.2017 - respondent had the power to levy and collect Clean Energy Cess on the coal lying in stock as on 30.06.2017 at the specified rates which were produced when the said cess was in force. It is reiterated that liability to pay cess only accrues at the time of production and its payment is scheduled when the coal is removed in view of Rule 4 and 6 of Cess Rules since, as per section 83(3) of Finance Act, 2010 levy is on production of coal. Rule 4 and 6 deals only with time and manner of payment/discharge of cess and not the rate. In this regard, reference may be placed on the dictionary meanings of the words 'accrued' and 'acquired'. The Revenue is right is demanding the tax on production which was lying on stock as on the date of amendment and repeal of Clean Energy Cess for the sole reason that the taxable event was production and only the payment was deferred at the time of Removal - by virtue of Section 83(3) playability is created; and only the payment is deferred to be done in the manner provided in Rule 4 6 - issue decided in favour of Revenue. If the Revenue is entitled to levy Cess under Clean Energy Cess 2010 then as to whether in the facts and circumstance of this case the Revenue can take recourse of first proviso to section 11A(1)/ section 11A(4) on the ground of suppression, fraud etc.? - If the Assessee is liable to pay Cess under Clean Energy Cess 2010 then as to whether he is also liable to pay interest penalty over the Cess amount? - HELD THAT - Since, the present case is an interpretational issue and petitioner was paying GST Compensation Cess with a bona-fide belief that Clean Energy Cess was not payable. Further, the petitioner has been filing regular returns under GST law for all the supplies of coal made after introduction of GST. Petitioner was not filing returns under Clean Energy Cess Rules with a bona fide belief that Clean Energy Cess was not payable. Further, these facts were in the knowledge of the respondents; however, despite said facts being in the knowledge of the respondents, show cause notice was issued almost after two years from the date Clean Energy Cess was repealed. Thus, as aforesaid, since the instant case involves an interpretational issue, therefore in such circumstances, no penalty under Section 11AC can be levied as demand of Cess under the extended period of limitation is unsustainable. As the allegation of suppression and wilful intent to evade tax is baseless and incorrect, penalty under Section 11AC(1)(c) of the Central Excise Act, 1944 cannot be imposed - inasmuch as, no penalty under Section 11AC can be levied as demand of Cess and further extended period of limitation can not be invoked. However, the Assessee is liable to pay Cess for the normal period including interest over the same. The matter is remitted back to the adjudicating authority respondent no. 3 to recalculate the amount of clean environment cess confirming the demand to normal period of limitation - The instant writ application stands partly allowed.

Summary

Issues Involved:
1. Levy of Clean Energy Cess post-GST implementation.
2. Application of extended period of limitation for recovery.
3. Liability for interest and penalty on the Cess amount.

Summary:

Issue 1: Levy of Clean Energy Cess Post-GST Implementation
The court examined whether the Revenue is entitled to levy Clean Energy Cess under the repealed Clean Energy Cess Rules, 2010, following the introduction of GST Compensation Cess under the Goods & Services (Compensation to States) Act, 2017. The court held that Section 83(3) of the Finance Act, 2010 itself provides for "levy," "collection," and "rates of tax" at the Tenth Schedule. The levy of duty is on the production of coal, not its removal. The court noted that the taxable event is the production of coal, and the collection of the duty is regulated by the Rules. Therefore, the respondent had the power to levy and collect Clean Energy Cess on coal produced and lying in stock as of 30.06.2017, even after the repeal of the Clean Energy Cess Rules.

Issue 2: Application of Extended Period of Limitation
The court addressed whether the Revenue could invoke the extended period of limitation under Section 11A(1)/11A(4) of the Central Excise Act, 1944, on the grounds of suppression, fraud, etc. The court found that the case involved an interpretational issue, and the petitioner had a bona fide belief that Clean Energy Cess was not payable post-GST. The petitioner had been paying GST Compensation Cess and filing regular returns under GST law. Given these facts, the court held that the extended period of limitation was unsustainable, and no penalty under Section 11AC could be levied.

Issue 3: Liability for Interest and Penalty
The court considered whether the petitioner is liable to pay interest and penalty over the Cess amount. It held that while the petitioner is liable to pay Clean Energy Cess for the normal period, including interest, no penalty could be imposed due to the interpretational nature of the issue. The court quashed the adjudication order dated 29.09.2020 to the extent that it imposed penalties and invoked the extended period of limitation. The matter was remitted back to the adjudicating authority to recalculate the amount of Clean Energy Cess for the normal period of limitation.

Conclusion:
The court partly allowed the writ application, quashing the adjudication order to the extent of penalties and extended period of limitation, and remitted the matter back for recalculating the Cess amount for the normal period.