2020 (2) TMI 1414 - AAR - GST

Levy of compensation cess - coal rejects to be supplied (disposed of) by way of sale at very nominal price by the power plants of the applicant - coal rejects to be supplied by the power plants of the applicant is covered under HSN 2701 - coal rejects to be supplied (disposed of) by way of sale at very nominal price by the power plants of the applicant - Benefit of N/N. 01/2017compensation cess (Rate) dated 28.06.2017, Sr. No. 41A - coal rejects to be supplied (disposed of) by way of sale at very nominal price by the power plants of the applicant. HELD THAT - As per Notification No. 01/2017- compensation cess (Rate) dated 28.06.2017, ₹ 400 per tone is leviable as compensation cess under Chapter Heading / Sub-heading 2701. Further as per Notification No. 01/2017- Central Tax (Rate) dated 28.06.2017, 2.5% Central GST is also leviable for the same heading i.e. 2701 under schedule l. Therefore, the power plant of the applicant attracts levy of compensation cess @ 400/per tonne - Coal rejects to be supplied by the power plant of the applicant is rightly covered under HSN 2701 for levy of compensation cess @ 400/- per tonne as HSN 2701 covers Coal; briquettes, ovoids and similar solid fuels manufactured from coal. CBIC prescribes nil rate of GST compensation cess on Coal rejects supplied by a coal washery, arising out of coal on which compensation cess has been paid and no input tax credit thereof has been availed by any person vide notification No. 02/2018- compensation cess (Rate) dt. 26.07.2018. As the applicant is not covered under the coal washery which is also endorsed by the applicant in Para 12 of their application, the applicant is not covered for the exemption from compensation cess vide notification No. 02/2018-compensation cess (Rate) dated 26.07.2018 - Thus, the applicant is not covered under any other exemption from levy of compensation cess.

Issues Involved:
1. Whether supplying coal rejects by power plants attracts compensation cess?
2. Classification of coal rejects under HSN 2701 for compensation cess.
3. Exemption eligibility for compensation cess on coal rejects.
4. Any other exemption applicable for compensation cess.

Analysis:

Issue 1:
The applicant, a power generation corporation, procures coal for power generation and supplies coal rejects to industries. The process of coal conversion into electrical energy is detailed, including the formation of fly ash. Coal transportation, crushing, and combustion processes are explained.

Issue 2:
The Advance Ruling Authority examines whether coal rejects supplied by power plants fall under Chapter Heading 2701 for compensation cess. The relevant notifications prescribing compensation cess rates are referenced, highlighting the specific rate for coal-related goods.

Issue 3:
The ruling discusses the Press Release clarifying that coal rejects attract 5% GST and compensation cess. The applicant's argument regarding the absence of a formal notification to legalize this clarification is considered. The exemption from compensation cess for coal rejects from washery, subject to certain conditions, is analyzed along with the definition of coal washery.

Issue 4:
The judgment evaluates the applicant's eligibility for exemption from compensation cess based on the specific notifications and provisions. The ruling confirms that the applicant is not covered under any other exemption from the levy of compensation cess.

In conclusion, the ruling states that supplying coal rejects by power plants attracts compensation cess, falls under HSN 2701, is not exempt from compensation cess, and the applicant is not eligible for any other exemption from the levy of compensation cess. The decision is ordered accordingly and to be communicated to the parties involved.

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