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TMI Blog2016 (8) TMI 1112X X X X Extracts X X X X X X X X Extracts X X X X ..... Cess on Clean Energy Cess does not mean exemption from E. Cess and S.H.E. Cess on Central Excise Duty. Substance is also find in the argument that since Basic Excise Duty on coal was introduced only w.e.f 2011, it is incongruous that a notification issued in 2010 can exempt E. Cess and S.H.E. Cess on Basic Excise Duty, for the simple reason that E. Cess and S.H.E. Cess has to be calculated on the aggregate of Central Excise Duty. The Government found it necessary to issue a separate Notification No. 17/2015-CE to rescind erstwhile Notification No. 28 and 29/2010-CE, in our opinion, vindicates the conclusion that the impugned exemption from E. Cess and S.H.E. Cess was initially available only to Clean Energy Cess, w.e.f. 22.06.2010, and that E. Cess and S.H.E. Cess was very much imposable on Central Excise Duty till the amending Notification 14 & 15/2015-CE dated 01.03.2015. Even the CBEC had clarified vide Circular 354/42/2014-TRU 22nd September, 2015 that the exemption from Education Cess and S.H.E. Cess under Notifications No. 28/2010-CE and 29/2010-CE both dated 22.06.2010 (prior to 01.03.2015), is applicable only in respect of Clean Energy Cess leviable on Coal under Tenth sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8/2010-CE dated June 22, 2010 and Notification No. 29/2010-CE dated June 22, 2010 granting exemption from payment of Education Cess (hereinafter referred to E. Cess) and Secondary and Higher Education Cess (hereinafter referred to S.H.E Cess) respectively to goods on which Clean Energy Cess is leviable as - specified in the Tenth Schedule of the Finance Act, 2010, which, inter alia includes Coal. Coal was attracting Nil rate of duty upto Feb, 2011 in the First Schedule to CETA, 1985 with effect from March 01, 2011 the Finance Act, 2011 introduced Excise Duty on Coal, where under the manufacturer was granted an option of discharging Excise Duty either at the rate of: * 1% provided CENVAT credit of inputs, input services and capital goods used for production of coal is not availed or * 5% with the facility of CENVAT credit. In this regard, the Appellant classified the goods under Chapter Heading 2701 of the First Schedule to the Central Excise Tariff Act, 1975 and obtained Central Excise Registration bearing No. AAACT8873FEM001. The Appellant opted to remove Coal on payment of 5% Excise Duty On introduction of Excise Duty, the Appellant was advised that Education Cess and S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . [F. No. 354/72/2010-TRU]" NTF. No. 29/2010-CE, DT. 22/06/2010 "G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) read with sections 136 and 138 of the Finance Act, 2007 (22 of 2007), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts all goods specified in the Tenth Schedule to the Finance Act, 2010 (14 of 2010) from the Higher Education Cess leviable thereon under the said sections 136 and 138 of the said Finance Act. [F. No. 354/72/2010-TRU]" 3. Education Cess is nothing but a surcharge and its levy is completely independent of the levy of excise duty. Its calculation is also independent of the quantum of excise duty, since it is a flat rate of 2% of the aggregate of all duties of excise levied and collected by the Central Government. The Education Cess has a relation to the quantum of duty, since it is calculated on that basis. It has no connection, direct and proximate, or otherwise to the rate of duty payable on the manufacture of goods. Similarly, the rate of duty on the manufacture of goods, for the purposes of assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Central Excise duty at the specified rate with effect from 1st March, 2011. Even after the specification of rate of duty of excise on coal as aforesaid the exemption Notifications No. 28/2010-CE and 29/2010-CE both dated 22.06.2010 have remained unaltered providing exemption of E. Cess and S.H.E. Cess not only in respect of Clean Energy Cess but also the on the central excise duty under the First Schedule by way of duty of excise. 7. The exemption Notifications 28 and 29 of 2010 dated 22.06.2010 use the expression "all goods specified in the Tenth Schedule to the Finance Act, 2010". The expression in the said Notification is qua the goods specified in the Tenth Schedule; that a blanket exemption has been given to the goods viz- coal; that advisedly the expression "all specified goods" in the Tenth Schedule is not employed but a much wider expression all goods specified in the Tenth Schedule. 8. Tenth Schedule which is very much part of the Finance Act, 2010 is legislation by reference of Statute and not legislation by incorporation. 9. Further, a bare perusal of the Notes appearing in Tenth Schedule to the Finance Act, 2010 would show that this is nothing but the First ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss on the Central Excise duty rate introduced from 01-03-2011. 12. The Clean Energy Cess is a Cess has been introduced by the Ministry of Finance vide section 83 of Finance Act, 2010. As extracted above, in the Board Circular at Para 4.13 above the Clean Energy Cess was introduced as a duty of excise, which was subject to exemption under Notification No. 28 and 29/2010 dated 22.06.2010. 13. It was clarified by the Department vide F. No. 354/72/2010 TRU dated 24.6.2010 that the Clean Energy Cess is a duty of Excise. It is thus submitted that the E. Cess and S.H.E. Cess should apply merely because no excise duty rate was prescribed under Sec 3 of the Central Excise Act at the time when the said notifications were issued is legally unsustainable in view of the specific reference in the Tenth Schedule to the First Schedule to the Central Excise Tariff Act. 14. Department itself had clarified that Clean Energy is a duty of Central Excise and that the exemptions from E. Cess and S.H.E. Cess would be applicable on payment of Clean Energy Cess by Notification No. 28 and 29 of 2010 dated 22.06.2010. When a Notification issued also pursuant to Section 5A of the Central Excise Act, 1944 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was not in existence in 2010. Basic Excise duty on Coal was introduced from Budget 2011 and could not have been exempted by a Notification which was issued in the previous year. 3. In any case effect from April, 2013, M/s Singareni Collieries Co have been paying due Cess on BED on Coal produced on their own without any protest and without any dispute. It is further confirmed that other Coal producing Companies like M/s Neyveli Lignite Corporation Limited, M/s Bharat Cooking Coal Limited (BCCL), Dhanbad etc., are also paying Education Cess and S.H.E. Cess on basic Excise duty on Coal since 01-03-2011. 4. The Board had clarified on 22nd September, 2015 after Chief Commissioner's Tariff Conference held at Pune on 16th & 17th September, 2015 that the exemption from Education Cess and S.H.E. Cess under Notifications No. 28/2010-CE and 29/2010-CE both dated 22.06.2010 is applicable only in respect of Clean Energy Cess leviable on Coal under 10th schedule to Finance Act, 2010. Hence Education Cess and S.H.E. Cess shall be leviable on Excise duty on Coal. 5. He made the following further arguments: l) Exemption from Education Cess and S.H.E. Cess under Notifications No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Educational Cess on Clean Energy Cess does not mean exemption of Education Cess from Basic Central Excise duty. VIII) The exemption from the goods specified under Tenth Schedule to Finance Act, 2010 cannot be extended to exemption on goods specified under First Schedule to Central Excise Tariff Act. IX) No Notification in 2010 can exempt a duty (basic excise duty) which was not in existence in 2010. Basic Excise duty on Coal was introduced from Budget 2011 and could not have been exempted by a Notification which was issued in the previous year. 6. Clean Energy Cess is required to be discharged on the quantity of coal produced, while basic Excise Duty is required to be calculated on the quantity cleared at factory gate, after washing etc., therefore the quantity at factory gate is lower than the quantity produced. Thus even the manner of calculations of Clean Energy Cess and BED are different. 7. They rely on the following case laws: (i) Hoechst India Limited Vs Collector of Central Excise, Bombay [1998 (102) E.L.T. 213 (Tribunal)] (ii) Star Industries Vs Commissioner of Customs (Imports), Raigad [2015 (324) E.L.T. 656 (S.C.)] (iii) Tawi Chemical Industries Ltd., Vs C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnessing renewable energy sources to reduce dependence on fossil fuels is now recognised as a credible strategy for combating global warming and climate change. To build the corpus of the National Clean Energy Fund announced earlier, I propose to levy a clean energy cess on coal produced in India at a nominal rate of ₹ 50 per tonne. This cess will also apply to imported coal. 7.2 Thus when imposed, Clean Energy Cess was levied for the purposes of financing and promoting clean energy initiatives and funding research in the area of clean energy. However, in the Union Budget 2014-15, the scope was also expanded to include financing and promoting clean environment initiatives and funding research in the area of clean environment. Relevant portion of the Budget speech is reproduced: 237. Clean Energy Cess is presently levied on coal, peat and lignite for the purposes of financing and promoting clean energy initiatives and funding research in the area of clean energy. I propose to expand the scope of purposes of levying the said cess to include financing and promoting clean environment initiatives and funding research in the area of clean environment. To finance these additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the Central Excise Act, 1944 and the Central Excise Tariff Act, 1985. For example Subsection 7 of Section 83 provides for issue of notification to make applicable specifically listed provisions of the Central Excise Act, relating to levy of exemption from duty of excise, refund, offences and penalties, confiscation and procedure relating to offences and appeals, with such modifications and alterations as may be considered necessary. So also, the said Tenth Schedule specifically mentions that for the purpose of the Tenth Schedule, "Chapter", "heading", "sub heading", and "tariff Item" and Rules for interpretation etc., of the First Schedule of the Central Excise Tariff Act, shall apply interpretation of that Schedule. 12. When there is general reference in the Act in question to some earlier Act, but there is no specific mention of the provisions of the former Act, then it is clearly considered as legislation by reference. In the case of legislation by reference, the amending laws of the former Act would normally become applicable to the later Act; but, when the provisions of an Act are specifically referred and incorporated in the later statute, then those provisions alone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel. 15. On the other hand, considerable merit is found in the arguments put forth by the department. We find ourselves in agreement with the submission of the Learned AR that Section 83(5) of Finance Act, 2010 clearly lays down that Clean Energy Cess shall be in addition to any Cess or Duty leviable on the goods specified in the Tenth Schedule or under any other law for the time being in force, which shows that Clean Energy Cess is only one of the duties of Excise leviable on coal, limited to the said Tenth Schedule. Hence, an exemption from E. Cess and S.H.E. Cess on Clean Energy Cess does not mean exemption from E. Cess and S.H.E. Cess on Central Excise Duty. Substance is also find in the argument that since Basic Excise Duty on coal was introduced only w.e.f 2011, it is incongruous that a notification issued in 2010 can exempt E. Cess and S.H.E. Cess on Basic Excise Duty, for the simple reason that E. Cess and S.H.E. Cess has to be calculated on the aggregate of Central Excise Duty. 16. These views also find sustenance from a number of judgments. In the case of UOI Vs Modi Rubber Ltd & others [1986 (25) ELT 849 SC], the Hon'ble Apex Court held that exemption from duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be absurd to suggest that by issuing the notification dated 1st August, 1974 the Central Government intended to grant exemption not only in respect of excise duty then prevailing but also in respect of all future duties of excise which may be levied from time to time. 17. This dictum has been followed in many subsequent judgments, for example by the Hon'ble High Court of Sikkim in Unicorn Industries vs UOI [2015 (324) ELT 498 (Sikkim)] and by the Hon'ble High court of in Riba Textiles vs Cestat, New Delhi [2015 (322) ELT 74 (P&H)]. In the Unicorn Industries judgment, the Hon'ble High Court, following the ratio of Modi Rubber case, held as follows. 32. Apart from the fact that the Central Government never expressed its intention nor such intention is apparent from any of the notifications, cesses imposed under Finance Acts, 2001, 2004 and 2007 are not in essence the duties of Excise. The later two duties d after the grant of exemption and incentives by the Central Government, it could not have visualised by the Central Government at the time of framing the [PR, 1997 and PR, 2002 in regard to the State of Sikkim or even the exemption Notification No. 71/2003-C.E. to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stoms and clauses 90 to 104, 163, 164, 184 and 188 for Central Excise). 2 Important changes in respect of Customs and Central Excise duty and legislative changes are contained in the four Annexes appended to this letter: I) Annex I contains Chapter wise changes relating to Customs; (ii) Annex II contains Chapter wise changes relating to Central Excise: Education Cess and Secondary & Higher Education Cess leviable on all excisable goods are being fully exempted. ANNEX II 1) Education Cess levied on all excisable goods as a duty of excise under section 91 read with section 93 of the Finance Act, 2004 is being fully exempted. In this regard, notification No. 14/2015-Central Excise dated 1st March, 2015 refers. Similarly, Secondary & Higher Education Cess leviable on excisable goods as a duty of excise under section 136 read with 138 of the Finance Act, 2007 is also being fully exempted. In this regard, notification No. 15/2015-Central Excise dated 1st March, 2015 refers. 5) S.No. 1A and 1B of notification No.23/2003-Central Excise, dated 31.03.2003 exempt the Customs component of Education Cess and Secondary & Higher Education Cess. Since Education Cess and Secondary & Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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