Clean Energy Cess To Be Imposed For Collection Of Cess On Polluting Fossil Fuels: CESTAT

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the Clean Energy Cess has been imposed for the collection of cess on polluting fossil fuels so as to create additional funds for taking measures to reduce carbon emissions and pollution.

The two-member bench of Anil Choudhary (Judicial Member) and P.V. Subba Rao (Technical Member) has observed that under the Clean Energy Cess Rules, the cess has to be deposited through cash/PLA and cannot be deposited through debit to a cenvat credit account.

The appellant/assessee has a cement manufacturing unit located in the district of Sirohi, Rajasthan. A furnace (kiln) is used in the manufacturing process. The appellants use imported coal.

The issue raised was whether the assesses had rightly taken cenvat credit for the "Clean Energy Cess", which was levied under Section 83 of the Finance Act, 2010 read with Notification dated 22.06.2010 read with Clean Energy Cess Rules, 2016. Further, the 'Clean Energy Cess' was discontinued and a new Cess in the name of 'Clean Environment Cess' was introduced w.e.f. 14..05.2016 vide Section 235 of the Finance Act of 2016.

The appellants/assessee have their cement manufacturing unit located in the district of Sirohi, Rajasthan. A furnace (kiln) is used in the manufacturing process. The appellants use imported coal for heating the furnace.

For the first time in the year 2010, vide Section 83 of the Finance Act, 2010, a cess, called the "Clean Energy Cess", was imposed on goods produced in India and specified in the Tenth Schedule of the Finance Act, 2010. Coal was one of the items specified in the Tenth Schedule.

At the time of the import of coal during the disputed period, the appellants paid the 'Clean Energy Cess' as an additional duty of customs in terms of Section 3 of the Customs Tariff Act, 1975.

The appellants were bonafide of the view that they were eligible for and, accordingly, took Cenvat Credit on the said amount of Clean Energy Cess.

The Department, however, was of the view that under the Cenvat Credit Rules, 2004, credit could be availed only in respect of those duties, taxes, or cesses as were specified in Rule 3 (1) of the Cenvat Credit Rules, 2004. The Department was of the view that since the Clean Energy Cess was not specified in the rules, the Cenvat Credit was not available.

The assessee contended that if the Cenvat Credit Rules, 2004 do not apply to Clean Energy Cess, recovery of improperly obtained and used Clean Energy Cess credit cannot be made under the Cenvat Credit Rules, 2004. There is no other mechanism provided in the Central Excise Law for recovering irregularly available and/or utilised Clean Energy Cess credit. Due to a lack of machinery provisions, the instant demand cannot be sustained.

The department contended that the goods were imported or domestically manufactured and had no bearing on the denial of the Cenvat Credit. Moreover, if the imported goods are differentiated from the domestically produced goods, the very principle of "polluter pay" will become redundant and run counter to the intentions of the legislation.

The CESTAT held that the Clean Energy Cess is levied as a duty of excise on goods specified in the Tenth Schedule. Thus, it is a cess in the nature of excise duty on the "production" of coal and is collected at the time of removal of raw coal, raw ignite, and raw peat from the mines to the factory. The intention of the levy of the cess is to finance and promote clean energy initiatives, fund research in the area of clean energy or for any other purposes relating thereto.

Case Title: M/s. J.K. Lakshmi Cement Ltd. Versus Commissioner of Central Excise & Central Goods & Service Tax

Citation: Excise Appeal No.51255 Of 2019

Date: 07.10.2022

Counsel For Appellant: Advocate A.K. Prasad

Counsel For Respondent: Authorised Representative Sanjay Kumar Singh

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