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2019 (7) TMI 1477 - AT - Central ExciseCENVAT Credit - clean energy cess on Coal - 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 - HELD THAT - The purpose of levying the CEC is evidently to promote and finance clean energy initiatives by taxing the coal - 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 in Finance Act, 2010. It is undisputed that a plain reading of Rule 3 of CCR, 2004 shows that Cenvat credit is admissible only in respect of some cesses and not in respect of all the cesses and duties of excise. Although it is now settled that taxing statutes must be literally interpreted, I 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 - The assessee is not entitled to Cenvat credit under Rule 3 of CCR, 2004. Penalty - HELD THAT - The dispute is an interpretational one and it is perfectly possible for the assessee to have entertained a belief that they are entitled to Cenvat credit of CEC and therefore, there is no justification for imposition of penalty under Rule 15 of CCR, 2004 - Further, they have also, on being pointed out, reversed the credit availed by them under protest. Therefore, the penalty is liable to be set aside. Appeal allowed in part.
Issues Involved:
1. Eligibility of Cenvat credit on Clean Energy Cess (CEC). 2. Applicability of Rule 3 of Cenvat Credit Rules (CCR), 2004 to CEC. 3. Interpretation of fiscal statutes in the context of CEC. 4. Applicability of the principle of "Polluter pays" to CEC. 5. Imposition of penalty under Rule 15 of CCR, 2004. Detailed Analysis: 1. Eligibility of Cenvat Credit on Clean Energy Cess (CEC): The primary issue is whether the respondent, a sugar manufacturer, is entitled to avail Cenvat credit of ?37,31,046/- on the CEC paid on coal. The departmental officers pointed out that CEC is not eligible for Cenvat credit under Rule 3(1) of CCR, 2004. The respondent reversed the credit under protest, leading to a show cause notice and subsequent confirmation of the demand by the Asst. Commissioner, along with an equal penalty under Rule 15 of CCR, 2004 read with Section 11AC of the Central Excise Act, 1944. 2. Applicability of Rule 3 of CCR, 2004 to CEC: Rule 3 of CCR, 2004 specifies the duties and cesses eligible for Cenvat credit, which does not include CEC. The first appellate authority allowed the credit based on the precedent set by the Karnataka High Court in Shree Renuka Sugars, where sugar cess was allowed as Cenvat credit despite not being listed in Rule 3. However, the Tribunal noted that the Karnataka High Court's decision was specific to sugar cess, where the entire Central Excise Act and Rules were applicable, unlike CEC which is governed by selective provisions of the Central Excise Act as per Notification No. 02/2010. 3. Interpretation of Fiscal Statutes: The Tribunal emphasized the need for strict interpretation of fiscal statutes, as held by the Constitutional bench of the Supreme Court in Dilip Kumar & Co. The Tribunal found no ambiguity in Rule 3 of CCR, 2004, which explicitly lists the duties and cesses eligible for credit, excluding CEC. Therefore, the Tribunal concluded that CEC is not eligible for Cenvat credit under the existing provisions of CCR, 2004. 4. Principle of "Polluter Pays": The Tribunal highlighted that CEC is levied to discourage the use of polluting forms of energy like coal and to promote clean energy initiatives. Allowing Cenvat credit for CEC would contradict the "Polluter pays" principle, effectively nullifying the purpose of the cess by returning the amount collected to the assessee. 5. Imposition of Penalty: Regarding the penalty, the Tribunal found that the dispute was interpretational, and it was reasonable for the assessee to believe they were entitled to the credit. The respondent had also reversed the credit under protest upon being pointed out. Hence, the Tribunal set aside the penalty imposed by the original authority. Conclusion: The Tribunal concluded that: - The respondent is not entitled to Cenvat credit of CEC under Rule 3 of CCR, 2004. - The provisions of CCR, 2004 or Section 37 of the Central Excise Act, under which they are framed, do not apply to CEC. - The Tribunal cannot enlarge or modify the scope of the Act or rules. - Allowing Cenvat credit of CEC would defeat the purpose of the cess and undermine the "Polluter pays" principle. - The ruling in Shree Renuka Sugars does not apply to CEC due to the selective applicability of Central Excise provisions to CEC. The Tribunal modified the impugned order to deny Cenvat credit of CEC but upheld the setting aside of the penalty. The appeal was disposed of accordingly.
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