2019 (7) TMI 764 - AT - Central Excise

CENVAT Credit - clean energy cess on coal imported by them for use in their factory - It is the case of the appellants that they are entitled to the Cenvat credit on the CEC paid by them while it is the case of the revenue that no Cenvat credit can be granted for the Clean Energy Cess as it is not covered under Rule 3 of CCR, 2004 - HELD THAT - Although it is now settled that taxing statutes must be literally interpreted, we have also examined the spirit and purpose of levying the CEC. It is evident from Section 83 of Finance Act, 2010 that CEC has been levied on coal to discourage use of the polluting forms of energy and encourage use of cleaner forms of energy. This is based on the principle of Polluter pays . If the CEC collected by the Government is returned to the assessee through the backdoor in the form of CCR, 2004, we will be doing a great disservice to the country by replacing the principle of Polluter pays with Pollution pays . We will be encouraging use of polluting forms of energy by undoing the very purpose for which CEC has been levied. Where there is a conflict between the constitutional provisions and the laws made or the parent act and the subordinate legislations vires of such act and rules are tested and decided by the Hon ble Supreme Court and Hon ble High Courts under Article 32 and 226 of the Constitution of India. The Tribunals (including this Tribunal) are created under Article 323B of the Constitution of India which was inserted by the 42nd amendment to the Constitution - this Tribunal can also examine the vires of the Act and Rules with the condition that the Statute under which this Tribunal was created (Customs Act, 1962) cannot be questioned by this Tribunal. Further, the power of this Tribunal to decide on the vires of the Act or Rules is subject to scrutiny by Division Bench of the High Courts. Thus, the assessees are not entitled to Cenvat credit under Rule 3 of CCR, 2004. Demand of Interest - HELD THAT - Wherever Cenvat credit has been availed but not utilized, the interest need not be paid but it has to be paid in cases where the Cenvat credit has been taken as well as utilized - demand of interest set aside. Imposition of penalties - HELD THAT - This is an interpretational issue and it is possible for the assessees to have held a genuine belief that they are entitled for Cenvat credit of CEC and hence have taken Cenvat credit. Therefore, we find that the imposition of penalty under Rule 15 of CCR, 2004 is not justified - Penalty set aside. Appeal allowed in part.

Summary

Issues Involved:
1. Eligibility of Cenvat credit on Clean Energy Cess (CEC).
2. Imposition of interest on availed Cenvat credit.
3. Imposition of penalties for availing Cenvat credit.

Detailed Analysis:

1. Eligibility of Cenvat Credit on Clean Energy Cess (CEC):
The appellants argued that they are entitled to Cenvat credit on the CEC paid on imported coal, claiming that CEC is a form of excise duty. They relied on precedents like Shree Renuka Sugars and The Ramco Cements Ltd, where courts allowed Cenvat credit on similar cesses. However, the revenue contended that Rule 3 of CCR, 2004 does not explicitly include CEC as eligible for Cenvat credit. They emphasized that CEC is levied to discourage pollution and promote clean energy, aligning with the principle of "Polluter pays." The Tribunal agreed with the revenue, noting that fiscal statutes must be interpreted strictly. Since Rule 3 does not list CEC, and the provisions of the Central Excise Act under which CCR is framed are not applicable to CEC, the appellants are not entitled to Cenvat credit on CEC.

2. Imposition of Interest on Availed Cenvat Credit:
The appellants contended that interest should not be imposed if the credit was availed but not utilized, citing the Bill Forge Pvt Ltd case. The Tribunal agreed with this view, stating that interest is payable only when Cenvat credit is both availed and utilized. Therefore, in cases where the credit was availed but not utilized, no interest is payable.

3. Imposition of Penalties for Availing Cenvat Credit:
The appellants argued that penalties should not be imposed as they had a genuine belief that they were entitled to the credit. The Tribunal found this argument valid, noting that the issue is interpretational. Consequently, the imposition of penalties under Rule 15 of CCR, 2004 was deemed unjustified and was set aside.

Conclusion:
- The denial of Cenvat credit on Clean Energy Cess is upheld.
- No interest is payable where Cenvat credit was availed but not utilized; interest is payable where the credit was both availed and utilized.
- All penalties are set aside.

Separate Judgment by Ms. Sulekha Beevi C.S.:
Ms. Sulekha Beevi C.S. concurred with the conclusion that credit on Clean Energy Cess is not eligible but provided additional reasoning. She highlighted that Rule 3 of CCR, 2004 does not expressly allow credit on CEC and noted the specific provisions applicable to CEC under the Finance Act, 2010. She also emphasized that the intention behind CEC was to promote clean energy, and allowing credit would contradict this purpose. She agreed with the findings on interest and penalties and added that any refund claims for unutilized credit on CEC are not eligible since the credit itself is ineligible.

Final Order:
The appeals are partly allowed, with the denial of Cenvat credit on CEC upheld, interest payable only on utilized credit, and all penalties set aside.