2022 (10) TMI 285 - AT - Central Excise

CENVAT Credit - Clean Energy Cess - levied under Section 83 of Finance Act, 2010 read with Notification No.2/2010-CEC dated 22.06.2010 read with Clean Energy Cess Rules, 2016 - effect of discontinuation of Clean Energy Cess and introduction of a new Cess in the name of Clean Environment Cess w.e.f. 14.05.2016 vide Section 235 of Finance Act of 2016 - denial of credit on the ground that Clean Energy Cess was not specified in Rule 3 (1) of the Cenvat Credit Rules, 2004 - HELD THAT - A plain reading of Rule 3 of CCR, 2004 shows that it did not provide for Cenvat credit of every duty of excise and cess but only of some, and this list does not include CEC imposed vide Finance Act, 2010. It is the case of the assessee that since CEC is also a form of excise, they are entitled to Cenvat credit even in the absence of an explicit provision under Rule 3 of CCR, 2004 - fiscal statutes must be interpreted strictly as per the letter of word and not the spirit of the law, ignoring any amount of hardship and eschewing any equity in taxation. However, in the event of ambiguity in taxation liability, statute, the benefit should go to the assessee. From a plain reading of Rule 3 of CCR, 2004, there are no ambiguity. 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 etc. 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 Credit under CCR, 2004, we will be doing a great disservice to the country by replacing the principle of Polluter pays . Under Clean Energy Cess Rules, the cess has to be deposited through cash /PLA and cannot be deposited through debit to cenvat credit account. Further, proviso to Rule 3(4) of Cenvat Credit Rules specifically debars the payment of Clean Energy Cess by use of cenvat credit taken under Rule 3(1) of Cenvat Credit Rules. Thus, intent of legislature is evident that the Clean Energy Cess has been imposed for collection of cess on the polluting fossil fuels, so as to create additional funds for taking measures to reduce the carbon emissions/pollution. Thus, the intent of legislation is very clear not to allow the cenvat credit of Clean Energy Cess. This is evident as the Central Government is providing for maintaining separate accounts of Clean Energy Cess, to be utilized for specific purposes upon sanction by the Parliament. Appeal dismissed - decided against appellant.

Issues Involved:
1. Eligibility of Cenvat Credit on Clean Energy Cess.
2. Applicability of Cenvat Credit Rules, 2004 to Clean Energy Cess.
3. Interpretation of fiscal statutes and legislative intent.

Detailed Analysis:

1. Eligibility of Cenvat Credit on Clean Energy Cess:
The primary issue is whether the appellant is entitled to take Cenvat Credit on the Clean Energy Cess paid on imported coal. The appellant argued that Clean Energy Cess, being collected as an additional duty of customs under Section 3 of the Customs Tariff Act, 1975, should be eligible for Cenvat Credit as per Rule 3(vii) of the Cenvat Credit Rules, 2004. They cited the case of Ramco Cements Limited [2018(362) ELT 841 (T-Bang.)], which allowed Cenvat Credit on Clean Energy Cess.

However, the Department contended that Clean Energy Cess is not specified under Rule 3(1) of the Cenvat Credit Rules, 2004, and thus, credit cannot be availed. The Tribunal agreed with the Department, stating that Rule 3 of CCR, 2004 does not provide for Cenvat credit of Clean Energy Cess, and it is not open for the Tribunal to enlarge or modify the scope of the Act or rules.

2. Applicability of Cenvat Credit Rules, 2004 to Clean Energy Cess:
The Tribunal examined whether the provisions of the Central Excise Act, including the Cenvat Credit Rules, 2004, apply to Clean Energy Cess. The appellant argued that Clean Energy Cess should be treated as a duty of excise, and thus, Cenvat Credit should be available. They cited Section 83(3) of the Finance Act, 2010, which states that Clean Energy Cess shall be collected as a duty of excise.

The Department countered that the Clean Energy Cess is not covered under Rule 3(1) of the Cenvat Credit Rules, 2004, and that the rules under the Central Excise Act, including CCR, 2004, are not made applicable to Clean Energy Cess under the Finance Act, 2010. The Tribunal upheld this view, emphasizing that the Clean Energy Cess is not included in the list of duties and cesses eligible for Cenvat Credit under Rule 3 of CCR, 2004.

3. Interpretation of Fiscal Statutes and Legislative Intent:
The Tribunal stressed that fiscal statutes must be interpreted strictly as per the letter of the law, not the spirit, and without considering any hardship or equity in taxation. They noted that if the intention was to allow credit for all forms of duties of excise and cesses, Rule 3 would have explicitly stated so. The Tribunal also considered the purpose of levying the Clean Energy Cess, which is to discourage the use of polluting forms of energy and encourage cleaner energy sources. Allowing Cenvat Credit for Clean Energy Cess would undermine this purpose and violate the principle of "polluter pays."

Conclusion:
The Tribunal concluded that the assessees are not entitled to Cenvat Credit of Clean Energy Cess under Rule 3 of CCR, 2004. They disagreed with the Single Member Bench decision in the case of The Ramco Cements Ltd. and emphasized that the Clean Energy Cess should be treated as a separate levy intended to fund clean energy initiatives, not eligible for Cenvat Credit. The Tribunal rejected the appeal of the assessee and allowed the appeal of the Revenue, dismissing the cross objections.

Order Pronounced:
The judgment was pronounced on 07.10.2022, rejecting the appeal of the assessee and allowing the appeal of the Revenue. The cross objections were also dismissed.

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