The Delhi Bench of the Customs, Excise & Service tax Appellate Tribunal (CESTAT), on deciding an excise appeal by M/s. J.K. Lakshmi Cement Ltd., held that, the payment of Clean Energy Cess by use of cenvat credit taken under Rule 3(1) of Cenvat Credit Rules,2004 was specifically debarred in the proviso to Rule 3(4) of Cenvat Credit Rules and disallowed the credit claim of the appellants.
The question before the Principal Bench comprising Anil Choudhary, Judicial Member and P V Subba Rao, Technical Member was, whether the appellant/assessees have rightly taken cenvat credit of ‘Clean Energy Cess’.
The appellant, M/s. J.K. Lakshmi Cement Ltd. has a cement manufacturing unit where Furnace (Kiln) is used in the manufacturing process. For heating the furnace, the appellant uses imported coal. At the time of import of coal during the disputed period, the appellants paid /bore the ‘Clean Energy Cess’ as additional duty of customs in terms of Section 3 of the Customs Tariff Act, 1975. The appellants were bonafidely 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. Since Clean Energy Cess was not specified in the Rules, the Department was of the view that the Cenvat Credit was not available.
In the instance of the issue being reviewed by the Commissioner after a show cause notice was issued to the appellant, distinguishing the judgments relied upon by the assessee, the Commissioner confirmed the disallowance of cenvat credit of ‘Clean Energy Cess’ holding that there is no provisions for taking credit of CEC under Rule 3(1) of Cenvat Credit Rules. Further, a penalty of Rs.29 lakhs was imposed under Rule 15(1) of Cenvat Credit Rules.
Deciding the cross appeals filed by the revenue and appellant, CESTAT observed that, the Commissioner’s order directing recovery of Cenvat credit in respect of Cess for the whole period has gone beyond the show cause notice since the show cause notice refers to Clean Energy Cess only, placing reliance on the substitution of the Clean Energy Cess with Clean Environment Cess.
The Tribunal observed that the appellant’s actions were not malafide and no penal provisions can be invoked. It was also clarified that it is explicit from the Section 2A of the Central Excise Act that, the expression, ‘duty, duties, duty of excise, and duties of excise’ shall be construed to include a reference to Cenvat, i.e. Central Value Added Tax. Thus, levy of any cess whatsoever as a duty of excise is duly covered under the ambit of the Act of 1944.
Additionally, the Bench considered the rival contentions and found that the levy of Clean Energy Cess is evidently to promote and finance measures for Clean Energy initiatives by taxing coal, lignite and peat. The proviso to Rule 3(4) of Cenvat Credit Rules specifically debars the payment of Clean Energy Cess by use of cenvat credit taken, under Rule 3(1) of Cenvat Credit Rules, 2004 was referred to and it was added that cess has to be deposited through cash/PLA and cannot be deposited through debit to cenvat credit account, while rejecting the appeal of the assessee and allowing the appeal of the revenue.
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