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TMI Blog2024 (1) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... lly incurred by the assessee. The issue that arose for consideration before the Bombay High Court was whether in a case where excisable goods are manufactured and lying in stock on the last day of the accounting year, the manufacturer has incurred liability to pay excise duty on the manufactured goods. The Bombay High Court held that though the date of manufacturer may be the relevant date for dutiability, the relevant date for duty liability is the date on which the goods were cleared. Thus, in respect of excisable goods manufactured and lying in stock, the excise duty liability would get crystallized on the date of clearance of goods and not on the date of manufacture. The appellant was not required to pay CEC on repeal of the 2010 Finance Act on goods removed on or after 01.07.2017 even though they were lying in stock as on 30.06.2017. The impugned order dated 20.04.2022 passed by the Commissioner, therefore, cannot be sustained and is set aside - Appeal allowed. - MR. DILIP GUPTA, PRESIDENT AND MR. P.V. SUBBA RAO, MEMBER (TECHNICAL) Shri Rajeev Kumar Agarwal and Shri Sanjay Dixit, Advocates for the Appellant Shri Ajay Jain, Special Counsel and Shri Rakesh Agarwal Authorized R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mines on or after 01.07.2017, rule 4 of the 2010 Cess Rules stood repealed with the repeal of the 2010 Finance Act, 2017. The appellant, however, paid the applicable GST and GST Compensation Cess, as and when the coal was supplied within the meaning of the CGST Act. 5. The department believed that although the provisions relating to levy of CEC were repealed w.e.f. 01.07.2017 by virtue of section 18(1) of the Taxation Amendment Act, the liability of CEC @ 400 per M.T. had accrued on the stock of coal lying on 30.06.2017 by virtue of the savings clause contained in section 18(2) of the 2017 Taxation Amendment Act. Thus, CEC was recoverable on the stock of coal that was lying in balance with the appellant as on 30.06.2017. 6. Accordingly, a show cause notice dated 25.06.2019 was issued to the appellant on the grounds that: (i) The leviability of CEC accrued on the stock of coal held by the appellant on 30.06.2017 as the taxable event of production of coal had happened on the said date, and by virtue of savings clause under section 18(2) of the 2017 Taxation Amendment Act, CEC would be recoverable on the removal of coal stock available as on 30.06.2017; (ii) The appellant did not fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17, no liability for payment of CEC arose in the GST regime; (iii) The provisions contained in the savings clause are only relevant to enforce the recovery of the duty amount which has already accrued, but had not been paid by the appellant; (iv) Even otherwise, the charging section under 83(3) of the 2010 Finance Act is not attracted in the case of the appellant as coal was neither produced nor manufactured. Coal is formed naturally without any human intervention and the appellant cannot, therefore, be said to have produced coal. The only act done by the appellant is to have raised the coal; (v) A reasonable conclusion that can, therefore, be drawn is that the appellant was legally not required to take support of the Notification no. 12/2017 to claim any exemption from payment of central excise duty liability, as no liability had actually arisen under the Central Excise Act as on 30.06.2017 in the absence of removal of goods; and (vi) Penalty is not imposable. 10. Shri Ajay Jain, learned special counsel and Shri Rakesh Agarwal, learned authorized representative appearing for the department, however, made the following submissions: (i) CEC was a cess which was leviable under the 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as made leviable w.e.f. 01.07.2017 under the provisions of the 2017 Compensation Act. 13. The dispute in the present appeal relates to the stock of coal of the appellant as on 30.06.2017, which was subsequently removed by the appellant on or after 01.07.2017. According to the appellant, as the coal was removed on or after 01.07.2017, the appellant would have to pay the applicable CGST and GST Compensation Cess when the coal was supplied. According to the department, as the relevant date for determining the dutiability is the date of production, though the relevant date for payment of duty liability may be the date of clearance, the appellant would have to pay CEC on the stock of coal as on 30.06.2017, even though the stock of coal may have been removed on or after 01.07.2017. 14. To appreciate the contentions, it would be appropriate to reproduce section 83 of the 2010 Finance Act which deals with CEC. It is as follows: 83. Clean Energy Cess . (1) This Chapter extends to the whole of India. (2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. (3) There shall be levied and collected in accordance with the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iption Rate (1) (2) (3) (4) 1. 2701 Coal; briquettes, ovoids and similar solid fuels manufactured from coal Rs. 100 per tonne 2. 2702 Lignite, whether or not agglomerated, excluding jet Rs. 100 per tonne 3. 2703 Peat (including peat litter), whether or not agglomerated Rs. 100 per tonne 17. Thus, levy of cess on coal was to be at rate of Rs. 100 per tonne. It was subsequently revised to Rs. 400/- per tonne by the 2016 Finance Act. 18. In exercise of the powers conferred by section 84 of the 2010 Finance Act, the Central Government made the Clean Environment Cess Rules 2010 , which have been referred to as the 2010 Cess Rules. They came into force on 01.07.2010. 19. Rule 2(g) defines removal to mean despatch of specified goods from a mine and shall include despatch of such goods for captive consumption within that mine for any purpose other than for raising of such goods. The specified goods under rule 2(h) are raw coal, raw lignite and raw peat. 20. Chapter 2 of the 2010 Cess Rules, deals with collection and assessment of cess. Rules 4, 5 and 6 contained in Chapter 2 are reproduced below: Rule 4. Cess payable on removal. Every producer shall pay the cess leviable on the removal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 23. In exercise of the powers conferred by section 5A(1) of the Central Excise Act, the Central Government issued a notification dated 30.06.2017 exempting all excisable goods, except petroleum crude, high speed diesel, motor spirit (commonalty known as petrol), natural gas, aviation turbine fuel, tobacco and tobacco products, from the whole of the duty of excise leviable thereon under the Central Excise Act subject to the following conditions: (a) The goods should have been manufactured on or before 30th June, 2017 but not cleared from the factory of production before the 1st July, 2017; and (b) The appropriate Central tax, State tax, Union territory tax or integrated tax, as the case may be, shall be payable on such goods, if cleared on or after the 1st July, 2017 as leviable on such goods under the Central Goods and Service Tax Act, 2017 (12 of 2017), the State Goods and Services Tax Act of the State concerned, the Union Territory Goods and Services Tax Act, 2017 (14 of 2017) or the Integrated Goods and Services Tax Act, 2017 (13 of 2017) 24. The aforesaid Notification dated 30.06.2017 came into force w.e.f. 01.07.2017. 25. Section 18 of the 2017 Taxation Amendment Act deals w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been advanced by the learned counsel for the parties have to be examined. 29. What transpires from the records is that the appellant had been paying central excise duty and CEC on coal removed from the mines till 30.06.2017 and the statutory returns had also been filed for the month of June 2017. 30. The dispute in the present appeal is as to whether CEC is payable on the stock of coal lying with the appellant as on 30.06.2017 which stock was removed on or after 01.07.2017. According to the appellant, since the coal had not been removed before 01.07.2017 within the meaning of rule 4 of the 2010 Cess Rules, the appellant would not be required to pay CEC and when the coal was removed on or after 01.07.2017, rule 4 of the 2010 Cess Rules stood repealed with the repeal of the 2010 Finance Act and the appellant also paid the applicable CGST and GST Compensation Cess as and when the coal was supplied within the meaning of CGST Act, 2017. 31. The contention of the department, however, is that the levy of cess is on the production of goods and, therefore, the moment the coal is produced, the appellant incurred the duty liability, though cess is required to be paid on removal of the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010 Cess Rules specifically provides that every producer shall pay the cess leviable on the removal of the specified goods in the manner provided in rule 6. 36. Learned counsel for the appellant relied upon a decision of the Delhi High Court in Caltex Oil Refining (India) Limited vs. Union of India and others [1979 (4) E.L.T. (J 581) (Del.)] to contend that the liability of cess occurs only on removal of the goods and not when the goods are produced. The provisions of sections 3 and 4 of the Central Excise Act had come up for consideration. The Delhi High Court held that though a particular article that is produced may attract levy of central excise duty contemplated under section 3, but removal is the essence of the crystallization of the charge as would be clear from section 4 and the Rules. The High Court further held that section 3 lays down the legislative policy on what products central excise duty can be levied but the quantum of the charge is on the value of the goods at the time of removal. The observations are as follows: 17. ***** Indeed though a particular article produced may attract levy of excise duty, as contemplated by Section 3 of the Act, which is the charging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C. Ex. [1992 (58) E.L.T. 270 (Tribunal)] and the relevant observations of the Tribunal are reproduced below: 11. We have heard both sides. It is clear from Rule 49 that duty cannot be demanded unless excisable goods are to be issued out of place of manufacture or storage. Accordingly, though levy of duty is attracted on the manufacture or production, the power to collect duty is only when the excisable goods are to be issued out. Therefore, even if the production has taken place, duty cannot be demanded unless the goods are to be issued out. A combined reading of Rule 9 and Rule 49 makes it clear beyond doubt that there is no liability to pay duty until the goods are to be removed. Liability to duty and liability to pay duty are separate and distinct. Liability to duty is not the same thing as liability to pay duty. (emphasis supplied) 38. In Radhakrishna Ramnarain Limited vs. R. Parthasarathy other [1980 (6) E.L.T. 709 (Bom)], the Bombay High Court also observed that the taxable event is the removal of goods and not the manufacture. The relevant observations are: 6. Though it may be in doubt in the year 1968 as to whether the contentions raised by Mr. Phadnis are correct or not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability already acquired or accrued or incurred under the repealed enactment shall not be affected. Learned special counsel for the department also placed reliance upon section 19 of the 2017 Taxation Amendment Act to contend that notwithstanding the repeal of Chapter VII of the 2010 Finance Act, the proceeds of duties levied under section 83 immediately preceding the appointed date i.e. 01.07.2017, if collected but not paid into the Reserved Bank of India or if not collected, shall be paid or as the case may be, collected and paid into the Reserve Bank of India for being credited to the Consolidated Fund of India. 42. Section 18(2) of the 2017 Taxation Amendment Act would not come to the aid of the department. Section 18(2) of the 2017 Taxation Amendment Act merely provides that notwithstanding the repeal of section 83(1) of the 2010 Finance Act, the liability already acquired, accrued or incurred shall not be affected. In the present case, as the goods were removed on or after 01.07.2017, liability had not accrued or incurred for the simple reason that when CEC itself did not crystallize/accrue, there is no question of it being saved by the savings clause. The provisions conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (S.C.) has held that the dutiability of excisable goods is determined with reference to the date of manufacture and the rate of excise duty payable has to be determined with reference to the date of clearance of the goods. Therefore, though the date of manufacture is the relevant date for dutiability, the relevant date for the duty liability is the date on which the goods are cleared. In other words, in respect of excisable goods manufactured and lying in stock, the excise duty liability would get crystallised on the date of clearance of goods and not on the date of manufacture. Therefore, till the date of clearance of the excisable goods the excise duty payable on the said goods does not get crystallised and consequently the assessee cannot be said to have incurred the excise duty liability. In respect of the excisable goods lying in stock, no liability is determined as payable and consequently, there would be no question of incurring excise duty liability. 12. In the present case, it is not in dispute that the manufactured sugar was lying in stock and the same were not cleared from the factory. Therefore, in the facts of the present case, the ITAT was justified in holding that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and valid. ***** 20. Thus, though Section 3 of the Excise Act talks of levy and collection, the actual collection is only at the time of removal of excisable goods from the factory premises or any other specified place of removal. The duty is leviable and is actually imposed on the transaction value defined in sub-section (3D) of Section 4 of the Excise Act. In these circumstances, it is not possible to state that under the Excise Act, the duty has become due and payable only by operation of Section 3 simpliciter . If Section 3 of Excise Act is considered to be the only charging section and Section 4 of the Excise Act is considered as only a provision for assessment, the charge levied by Section 3 of the Excise Act cannot be brought home. Sections 3 and 4 have to be read together to bring the charge home. The charge is partially embedded in both the provisions. It is in this context that one finds various judgments in relation to disputes raised on the basis of a particular cut-off date say, 28th February or 1st March qua the goods already manufactured and lying in stock up to 28th February which become amenable to duty of central excise only upon the point of time of removal namel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se department to takes steps for recovery if the liability is not discharged. 47. Section 19 of the 2017 Taxation Amendment Act would also not come to the aid of the department. The said section talks of the proceeds of duties levied under the 2010 Act immediately preceding 01.07.2017 and its collection and payment as arrears of duty, as the marginal note to the section also indicates. It is only when the cess has been collected but not paid into the Reserve Bank of India or if actually leviable but not collected that it could be deposited or collected. In the present case, there were no proceeds of cess levied under section 83 before 01.07.2017, as the goods had not been removed on or before 30.06.2017. 48. The learned special counsel appearing for the department, however, placed reliance upon a decision of the Supreme Court in Collector of C. Ex., Hyderabad vs. Vazir Sultan Tobacco Co. Ltd. [1996 (83) E.L.T. 3 (S.C.)] to contend that the levy of cess accrued on the production of goods. The relevant portions of the judgment are reproduced below: 9. ***** According to sub-rule (1) of Rule 9A, the rate of duty [apart from tariff valuation] applicable to any excisable goods shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e duty is also payable automatically. That is so as an ordinary rule. But insofar as the goods manufactured or produced prior to March 1, 1978 are concerned, the said rule cannot apply for the reason that there was no levy of special excise duty on such goods at the stage and at the time of their manufacture/production. The removal of goods is not the taxable event. Taxable event is the manufacture or production of goods. 49. It would be useful to reproduce the facts of the aforesaid judgment. Section 37(1) of the 1978 Finance Act levied a special duty of excise on goods and it came into effect on and from 01.03.1978 and was to remain in force upto 31.03.1979. The question that arose for consideration before the Supreme Court was whether the goods manufactured prior to 01.03.1978 but removed on or after 01.03.1978 would be liable to special duty of excise. When the goods were manufactured or produced prior to 01.03.1978 there was no levy of special excise duty on such goods, but when the goods were removed between 01.03.1978 and 31.03.1979 special excise duty was leviable under section 37(1) of the 1978 Finance Act. The Supreme Court held that as there was no levy of special excise ..... X X X X Extracts X X X X X X X X Extracts X X X X
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