2013 (6) TMI 2 - HC - Central Excise

Levy of excise duty @1% or 5% on exempted goods vide Finance Act, 2011 - petition by the traders - levy on purchase of coal - held that - Division Bench of Gauhati High Court, Guwahati has held that, It is clear that the appellants are only traders purchasing manufactured goods having no liability to pay central excise duty. Their liability, if any, could arise only on manufacturing and in respect of such liability claim for Cenvat Credit could be made. Till manufacturing was done, question of Cenvat Credit did not arise nor question of exercising option arises. Trader was liable to pay duty element to seller under a contract. The Coal India opted for availing CENVAT facility in respect of inputs used by it and not to avail of concessional rate of exercise duty in terms of notification dated 1-3-2011. In such a situation, Coal India could not be disentitled from reimbursing itself of the central excise duty paid by it. - Decision in ANMOL INDIA LTD. Versus COAL INDIA LIMITED 2012 (11) TMI 817 - GAUHATI HIGH COURT was upheld. Only 10% of the coal is sold by Coal India Limited to the traders. The Coal India Limited has decided to avail CENVAT credit under the CENVAT Credit Rules, 2004 in order to avoid the cascading effect of the central excise duty, and to ultimate benefits to the end users of 90% of the coal. - Decided against the traders.

Summary

Issues:
1. Whether private limited companies engaged in coal trading are liable to pay central excise duty at the rate of 5.15% on coal purchased from Coal India Limited after it decided to avail CENVAT credit?
2. Whether the decision of Coal India Limited to avail CENVAT credit is against public interest and would burden the consumers?
3. Whether the traders purchasing coal from Coal India Limited are entitled to avail CENVAT credit as per the notification providing for a concessional rate of excise duty?

Analysis:
Issue 1: The petitioners, private limited companies engaged in coal trading, challenged the imposition of central excise duty at the rate of 5.15% on coal purchased from Coal India Limited after it decided to avail CENVAT credit under the CENVAT Credit Rules, 2004. The petitioners argued that as traders, they are not manufacturers or consumers of coal, and thus should not be subject to this duty. However, the High Court upheld the decision, emphasizing that the purpose was to avoid the cascading effect of central excise duty and benefit the end users.

Issue 2: The petitioners contended that the decision of Coal India Limited to avail CENVAT credit would be against public interest and ultimately burden the consumers. The court noted that only 10% of the coal was sold to traders, while the rest was for end users. By availing CENVAT credit, Coal India Limited aimed to prevent the cascading effect of central excise duty, benefiting the majority of consumers. The court agreed with this reasoning and dismissed the petitioners' argument.

Issue 3: The traders purchasing coal from Coal India Limited raised a question regarding their entitlement to avail CENVAT credit as per a notification providing for a concessional rate of excise duty. The Gauhati High Court had previously addressed a similar issue, clarifying that traders were not entitled to avail CENVAT credit as they were not manufacturers. The court upheld this decision, emphasizing that traders had no liability to pay central excise duty until manufacturing was done, and the option to avail CENVAT credit did not apply to them.

In conclusion, the High Court dismissed all writ petitions, affirming the imposition of central excise duty at 5.15% on coal purchased by private limited companies engaged in coal trading from Coal India Limited after its decision to avail CENVAT credit. The court supported Coal India Limited's initiative to avoid the cascading effect of duty and benefit the end users, while clarifying that traders were not entitled to avail CENVAT credit as they were not manufacturers.