2020 (3) TMI 1426 - AAR - GST

Levy of compensation cess - Applicability of GST Notification No. 02/2018-Compensation Cess (Rate) dated 26/07/2018 - sale of coal reject by a power plant of Chhattisgarh State Power Generation Company Limited (CSPGCL) to the applicant - whether the said Power Plant selling coal reject to them is liable to collect compensation cess even though the applicant don't get ITC on coal, resulting in increase in cost of coal waste? HELD THAT - The notification prescribes nil 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. In the applicant's case, it receives coal rejects from the power plant and not from the coal washery - In a case where there is no ambiguity in the stipulated provisions, there apparently exists no scope of any interpretation whatsoever. In other words, if the provision is unambiguous and if from the provision the legislative intent is clear, there exists no need for any interpretation. It may be mentioned in this connection that the first and foremost, principle of interpretation of a statute in every system of interpretation is the literal rule of interpretation. The other rules of interpretation e.g. the purposive interpretation etc. can only be resorted to when the plain words of a statute are ambiguous or lead to no intelligible results or if read literally would nullify the very object of the statute. Hon'ble Supreme, Court in the case of Swedish Match AB vs. Securities and Exchange Board) India, 2004 (8) TMI 389 - SUPREME COURT held that Where the words of a statute are absolutely clear' and Unambiguous, recourse cannot be had to the principles of interpretation. A held in Prakash Nath Khanna vs. CIT 2004 (2) TMI 3 - SUPREME COURT , the language employed in a statute is the determinative factor of the legislative intent. The legislature is presumed to have made no mistake. The presumption is that it intended to say what it has said. Assuming there is a defect or an omission in the words used by the legislature, the Court cannot correct or make up the deficiency. Hon'ble Supreme Court in CIT vs. Keshab Chandra Mandal, 1950 (5) TMI 3 - SUPREME COURT held that Hardship or inconvenience cannot after the meaning of the language employed by the Legislature if such meaning is clear on the face of the statute''. The aforementioned judgments of Hon'ble Apex Court, confirms that a notification has to be understood from the plain language of the said notification as also that there is no scope of interpretation in such a case - GST Notification No. 02/2018-Compensation Cess (Rate) dated 26/07/2018 extending nil liability of compensation cess on coal rejects supplied by a coal washery, will not be applicable to coal rejects supplied by a power plant and further such power plant supplying coal rejects to the applicant is liable to collect compensation cess.

Summary

Issues Involved:
1. Applicability of GST Notification No. 02/2018-Compensation Cess (Rate) to a power plant.
2. Liability of a power plant selling coal rejects to collect compensation cess despite not availing Input Tax Credit (ITC).

Detailed Analysis:

Issue 1: Applicability of GST Notification No. 02/2018-Compensation Cess (Rate) to a Power Plant

The Applicant, M/s Akaltara Minerals, sought an advance ruling on whether the GST Notification No. 02/2018-Compensation Cess (Rate) dated 26/07/2018, which prescribes nil compensation cess on coal rejects supplied by a coal washery, applies to coal rejects supplied by a power plant. The applicant contended that the notification should logically apply to anyone dealing in the same process resulting in the same product, not just coal washeries.

The Authority for Advance Ruling (AAR) analyzed the notification and noted that it explicitly mentions "coal washery" and not power plants. The notification reads: “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 not been availed by any person.” The AAR emphasized that the language of the notification is clear and unambiguous, and as per the principle of literal interpretation, the benefits of the notification cannot be extended to entities not mentioned within its scope.

Issue 2: Liability of a Power Plant Selling Coal Rejects to Collect Compensation Cess Despite Not Availing ITC

The applicant argued that if the power plant selling coal rejects is liable to collect compensation cess, it would result in double taxation since the cess has already been paid on the coal during its initial purchase. They also claimed that such a scenario would violate the GST law's intent to avoid double taxation and would be discriminatory if the benefit of the notification is only given to coal washeries.

The AAR referred to the legal provisions under the CGGST Act, 2017, specifically Section 97(2) and Section 103, which outline the applicability and binding nature of advance rulings. The AAR noted that the ruling sought by the applicant pertains to the liability of the supplier (the power plant) to collect compensation cess, which is outside the applicant's direct purview.

The AAR further cited several Supreme Court judgments emphasizing the principle of strict interpretation of fiscal statutes and notifications. It was highlighted that where the language of a statute or notification is clear, there is no room for interpretation or hypothetical constructions. The judgments cited included:
- Swedish Match AB vs. Securities and Exchange Board of India, AIR 2004 SC 4219
- Prakash Nath Khanna vs. CIT 2004 (9) SCC 686
- CIT vs. Keshab Chandra Mandal, AIR 1950 SC 265
- Pandian Chemicals Ltd. vs. C.I.T. 2003(5) SCC 590

The AAR concluded that since the notification specifically mentions coal washery and not power plants, the power plant in question is liable to collect compensation cess on coal rejects sold to the applicant.

Order:

The AAR ruled that GST Notification No. 02/2018-Compensation Cess (Rate) dated 26/07/2018, which extends nil liability of compensation cess on coal rejects supplied by a coal washery, does not apply to coal rejects supplied by a power plant. Consequently, the power plant supplying coal rejects to the applicant is liable to collect compensation cess.