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TMI Blog2021 (5) TMI 1052X X X X Extracts X X X X X X X X Extracts X X X X ..... envisaged under the contractual CMDA, between the Applicant and RVUNL, the Mining Contractor AEL not only undertakes mining, but has also been entrusted upon with the work of washing of the coal. Accordingly, once the mined raw coal is subjected to the process of washing, emergence of rejects is inevitable in the course of washing of raw coal. There is no ambiguity as regards the fact that washed coal and coal rejects are two separate commercial products arising consequent to the process of washing of raw mined coal. It is also seen from the CMDA that both the parties involved viz.. Applicant and RVUNL Chhattisgarh have also separately recognized and dealt with washed coal and rejects in the said CMDA. RVUNL Chhattisgarh transfers washed coal to RVUNL Rajasthan. This is a supply under Section 7 of the CGST Act, 2017. RVUNL Chhattisgarh and RVUNL Rajasthan are distinct persons having separate GST registrations. Consequently, RVUNL Chhattisgarh, as required under law issues a taxable invoice in the name of RVUNL Rajasthan for the quantity of the washed coal supplied - it follows that the Applicant has a right to receive the coal rejects from RVUNL. It also follows from the said C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PROCEEDINGS [U/s 98 of the Chhattisgarh Goods Services Tax Act, 2017 (herein- after referred to as CGGST Act, 2017)) No. STC/AAR/04/2021 Raipur Dated 25/5/2021 The Applicant M/s Parse Kente Collieries Limited, Kharsia Ambikapur, District Sarguja, Chhattisgarh [herein after also referred to as the Applicant] holding GSTIN-22AAECP5581E1ZL, has filed an application U/s 97 of the Chhattisgarh Goods Services Tax Act, 2017 requesting an advance ruling regarding levy of Compensation Cess on coal and coal rejects. 2. Facts of the case and Noticee's contention:- The Applicant has furnished following details regarding the issue for which they are seeking advance ruling:- i. Government of India allotted Coal Blocks (Parsa Kente) in the State of Chhattisgarh to Rajasthan Rajya Vidyut Utpadan Nigam Limited ( RVUNL ) on 19 th /25 th June, 2007 (the Coal Blocks). ii. RVUNL issued tender inviting bids for selection of suitable persons to enter into a joint venture arrangement with RVUNL and form a joint venture company to undertake coal mining and arrange for its transportation and delivery to the Thermal Power Stations ( TPS ) of RVUNL in the State of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e raw coal, washes the same. (i) Prior to GST regime, when Clean Energy Cess was applicable, RVUNL was paying the same on entire quantity of coal. With introduction of GST on 151 July, 2017, all parties-AEL, PKCL and RVUNL have obtained registration for the establishments located in the State of Chhattisgarh. To comply with the GST laws, having regard to the provisions of the CMDA and the Mining Contract with AEL, the parties execute the following documents:- AEL issues three Invoices - two for the mining fees (one for 90% and other for balance 10%) of washed coal and the other for the quantity of the coal rejects, obtained post washing. AEL charges GST @ 18% in both the invoices; The Applicant (PKCL), in turn, issues 3 Invoices on RVUNL towards mining fees. The first two invoices are in respect of the fee payable in cash, while the third is in respect of the fee payable in kind (by way of transfer of property in the reject coal). The first invoice is for 90% of the mining fee payable in cash, which is computed with reference to the quantity of washed coal at the contract price as per CMDA. The second invoice is for the balance 10% of the mining fee payable in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts supplied by 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 (n) # (the word no has been removed vide Corrigendum F. No.354/255/2018-TRU (Pt-II), dated 2-8-2018)Two conditions are imposed by the aforesaid Notification. They are (i) Compensation Cess is paid on coal and (ii) ITC is not availed of the Compensation Cess so paid. These two conditions are satisfied in this case. (o) After the said Notification dated 26th July 2018, while the Applicant continued to deposit Rs. 400/- per ton on the total quantity of the coal in the electronic cash ledger of RVUNL, which is a sum of total of washed coal and coal rejects, the Applicant did not avail of ITC of the Compensation Cess paid by RVUNL and shown in the taxable invoice issued by RVUNL in relation to coal rejects. The Applicant in fact, did not charge or collect Compensation Cess from its customer to whom coal rejects were sold. (p) While the Applicant showed the payment of Compensation Cess, which was paid after availing ITC of the Compensation Cess paid by RVUNL, the Applicant issued a Credit Note to the customer for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) applicability of a notification issued under the provisions of this Act; (c) determination of time and value of supply of goods or services or both; (d) admissibility of input tax credit of tax paid or deemed to have been paid; (e) determination of the liability to pay tax on any goods or services or both; (f) whether applicant is required to be registered; (g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term. Further 103 of CGST Act, 2017 stipulates about the ruling pronounced as under: - The advance ruling pronounced by the Authority or the Appellate Authority under this Chapter shall be binding only - a. On the applicant who had sought it in respect of any matter referred to in sub-section (2) of section 97 for advance ruling; b. On the concerned officer or the jurisdictional officer in respect of the applicant. Thus in view of the above section 103 of CGST Act, 2017, the ruling so sought by the Applicant would be binding only on the Applicant and on the concerned officer or the jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41A 27 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. NIL ; (ii) after S. No. 42 A and the entries relating thereto, the following serial numbers and the entries shall be inserted, namely:- 42B 87 Fuel Cell Motor Vehicles NIL . 2. This notification shall come into force on the 27th July, 2018. [F. No. 354/255/2018-TRU] (Gunjan Kumar Verma) Under Secretary to the Government of India Note : The principal notification No.1/2017-Compensation Cess (Rate) dated the 28th June, 2017 was published in the Gazette of India, Extraordinary, Part II, Section 3, Subsection (1), vide number G.S.R. 720 (E), dated the 28th June, 2017 and last amended vide notification No. 1/2018-Compensation Cess (Rate) dated the 25th January, 2018, published vide number G,S.R.93(E), dated the 25th January, 2018. 5.4 Thus the above Notification prescribes nil compensation cess on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that they do not avail any ITC of the Compensation Cess discharged by RVUNL Chhattisgarh on the quantity of reject coal and that likewise RVUNL Rajasthan does not avail ITC on the quantity of washed coal. The entire quantum of Compensation Cess deposited upfront on the quantum of raw coal is appropriated against the Compensation Cess paid on the quantum of washed coal and reject coal. The Applicant, on a back to back basis, has subcontracted the work of mining and washing of coal to AEL, the mining contractor and AEL has set up a Coal Washery close to mine pithead and upon mining of the raw coal, washes the same. 5.6 In this context, it is also observed that the GST Council in its 25th Council Meeting held on 18.01.2018, has in Part M of its recommendation under the caption Modification in definition/clarification in respect of changes in GST/GST rates on goods recommended that coal rejects are classifiable under heading 2701 and attract 5% GST and Compensation Cess at the rate of Rs. 400 per metric tonne. Subsequently the GST Council in, its 28th Council Meeting held on 21.07.2018 recommended that coal rejects be granted an exemption from the levy of Compensation Cess. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he work of actual mining to AEL, who is the Mining Contractor. The mining contractor raises an invoice for mining services and discharges GST at the rate applicable to services, which is 18%. Thereafter, the Applicant, on a back to back basis, as per the CMDA with RVUNL, raises an invoice on RVUNL. The Applicant levies and collects 18% GST on the mining fee charged by it under the contract. 5.11 As per the conditions envisaged under the contractual CMDA, between the Applicant and RVUNL, the Mining Contractor AEL not only undertakes mining, but has also been entrusted upon with the work of washing of the coal. Accordingly, once the mined raw coal is subjected to the process of washing, emergence of rejects is inevitable in the course of washing of raw coal. 5.12 There is no ambiguity as regards the fact that washed coal and coal rejects are two separate commercial products arising consequent to the process of washing of raw mined coal. It is also seen from the CMDA that both the parties involved viz.. Applicant and RVUNL Chhattisgarh have also separately recognized and dealt with washed coal and rejects in the said CMDA. RVUNL Chhattisgarh transfers washed coal to RVUNL Rajast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2017 and the Compensation Cess Act, at the initial stage of supply consequent to raising / mining of raw coal. What is important is that the supplier of coal, which is RVUNL in the present case, has declared that they are paying the appropriate tax and cess on the total quantity of the coal raised / mined, through the mining services received by it from the said mining contractor. 6. As discussed in the preceding para, Notification No.1/2017-Compensation Cess (Rate) dated the 28th June, 2017, as amended vide Notification No. 2/2018-Compensation Cess dated 26th July, 2018 (read with corrigendum F. No.354/255/2018-TRU(Pt-II) dated 02.08.2018) by insertion of Sr. No. 41A effective from 27th July, 2018 therein stipulates NIL rate of tax on Coal rejects supplied by a coal washery, subject to fulfillment of the following conditions - Coal rejects are supplied by a coal washery Coal rejects must arise out of coal on which Compensation Cess has been paid No input tax credit of the Compensation Cess paid on coal is availed by any person. 6.1 Clause 3.2.3 of the impugned CMDA covers the aspect of establishment of coal washery and it stipulates that the 'Applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of would mean 'to originate from' or 'come into being' and the expression 'arise' has been defined in the Concise Oxford Dictionary to mean 'to occur as a result of'. In the facts and circumstances of the present case, the raw coal is the genus of which washed coal and reject coal are subsets. The reject coal arises on account of washing of the raw coal. Thus we are of the considered view that for NIL Compensation Cess to be applicable in terms of the entry at Sr. No. 41A supra, the coal rejects supplied by the Applicant should arise out of the raw coal mined and Compensation Cess on the entire quantity of raw coal mined as applicable has been paid and further that it would not be sufficient compliance of the conditions of Sr. No. 41A of Notification No. 1/2017-CC supra, if Compensation Cess has been paid only on the washed coal and not on the entire quantity of row coal raised /mined. Besides this for availing the said exemption, input tax credit on the compensation cess so paid on the said raw coal raised should also not be availed by any person. 8. In view of the deliberations and discussions as above, we pass the following order:- ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X
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