Custom, Excise & Service Tax Tribunal
North Eastern Coal Fields vs Dibrugarh on 5 March, 2025
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
KOLKATA
REGIONAL BENCH - COURT NO.2
Excise Appeal No. 76066 of 2014
(Arising out of Order-In-Original No.01/CE/ADJ/COMMR/DIB/14 dated 10.04.2014
passed by Commissioner of Central Excise & Service Tax, Dibrugarh)
M/s. North Eastern Coal Fields,
A unit of Coal India Ltd.
(10, N. S. Road, Kolkata-700001)
Appellant
VERSUS
Commr. of Central Excise and Service Tax, Dibrugarh
(Milan Nagar Lane "F", P. O. C. R. Building, Dibrugarh-786003)
Respondent
APPEARANCE :
Ms. Shilpi Sharma & Ms. Gujan Ganatra, C. A. for the Appellant Mr. J. Chattopadhyay, Authorized Representative for the Respondent CORAM:
HON'BLE MR. R. MURALIDHAR, MEMBER (JUDICIAL) HON'BLE MR. K. ANPAZHAKAN, MEMBER (TECHNICAL) FINAL ORDER NO.75560/2025 Date of Hearing : 12/09/2024 Date of Pronouncement : 05/03/2025 PER R. MURALIDHAR:
The Appellant is engaged in the production and clearance of coal falling under Chapter heading 2701. For arriving at the Assessable Value of the Coal, the appellants were not adding the components like "Royalty‟, „Stowing Excise Duty‟ (SED), and "Assam Land Tax". On the ground that these components are not excludible, the Dept issued a Show Cause Notice on 26.11.2013 for the period 1.3.2011 to 6.3.2011 by invoking the extended provisons. After due process of law, the Adjudicating Authority passed Orders-in-Original, confirming the Excise Duty and interest thereon. However, he dropped the penalty proposed under Section 11 AC. Being aggrieved the appellant is before the Tribunal. Towards dropping of the penalty the Revenue has not preferred any appeal before the Tribunal.2
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2. The Ld Chartered Accountants, submitted that the case law of India Cements rendered in 1989 [1990 (1 SCC 12], holding that Royalty is a Tax is being relied upon by the appellant, since this was the law during the period under dispute.
3. In respect of Stowing Excise Duty, the provisions of The Coal Mines (Conservation and Development) Act 1974 are being relied upon wherein Section 6 and 7 specify that the amount is being collected as „Duty of Excise‟.
4. In respect of Assam Land Tax, a separate legislation known as "The Assam Taxation (on specified lands) Act 1990 has been enacted and the tax is levied under these provisions.
5. In respect of all these components, namely, Royalty, Stowing Excise Duty and Assam Land Tax, these fall within the exclusion given under Section 4(3) (d) of the Central Excise Act 1944. Therefore, it is prayed that on merits the impugned Order may be set aside and the appeal may be allowed.
6. Without prejudice to the above submissions on merits, the appellant takes objection to invocation of the extended period. They submit that the appellant has been adopting the Assessable Value by excluding the Royalty, Stowing Excise Duty and Assam Land Tax components and submitting their Monthly Returns right from 2011, when the Excise Duty was levied for the first time on coal. The Dept. is well aware about their practice. Further all the facts have been properly recorded in their books of account. Apart from this, the appellant is a reputed Public Sector Undertaking. All these facts prove that the appellant has neither indulged in any suppression, nor has any intent to evade the Excise Duty by way of suppression.
7. The Ld Chartered Accountant further points out that the Adjudicating authority himself has considered these facts, including 3 E/76066/2014 the fact of paying the differential duty „Under Protest‟, and held that no case under Section 11AC has been made out to impose penalty on the appellant. He has dropped the penalty proceedings even while confirming the demand of Rs.4.42 crores. No appeal has been preferred against this dropping of the penalty by the Revenue. This shows that the Revenue also admits that there was no suppression on the part of the appellant.
8. In view of the above submissions, it is prayed that the confirmed demand for the extended period may be set aside on account of time- bar.
9. The Ld AR appearing on behalf of the Revenue submits that the issue as to whether Royalty is Tax or not was under litigation before the Supreme Court on several occasions. In the case of India Cement Limited v State of Tamil Nadu, (1990) 1 SCC 12, the Supreme Court held that Royalty is a Tax. Subsequently by way of judgement in the case of State of West Bengal vs. Kesoram Industries Limited (2004) 10 SCC 201, the Supreme Court held that earlier India Cements decision is not correct and the Royalty is not a Tax. Subsequently, noticing the divergent views of India Cements and Kesoram Cements case, in the case of Mineral Area Development Authority and Ors. v. Steel Authority of India and Ors. (2011) 4 SCC 450, the matter was referred to 9 Member Bench. Finally the Nine Member Bench of the Supreme Court vide Mineral Area Development Authority vs. Steel Authority of India (2024) 21 Centax 378 (SC), pronounced on 25.07.2024 [MADA 2024 in short] clarified that Royalty is not a Tax. This decision is retrospective in nature. Therefore, this Supreme Court‟s decision would prevail to decide the issue as to whether the Royalty component is excludible or includible in the present case also. The Ld AR submits, in view of this decision of the Supreme Court, the appellant has no case on merits.
10. In respect of the time-bar argument adduced by the appellant, the Ld AR submits that the Adjudicating authority has basically 4 E/76066/2014 considered the fact the appellant has paid the entire differential duty and because of this, he has set aside the penalty. Dropping of the penalty on its own cannot be construed as dropping of the suppression charges against the appellant. Hence, he justifies the confirmed demand for both the normal and extended period.
11. Heard both the sides and perused the appeal papers and other submissions made.
12. Section 4(3)(d) of the CEA stipulates that the „transaction value‟ of goods chargeable to excise duty would not include "the amount of duty of excise, sales tax and other taxes, actually paid or payable on such goods". This means that only these components are excludible for arriving at the Assessable Value.
13. The appellant has mainly argued on the ground that they were relying on the case of the 7 Member Supreme Court Bench decision of India Cements rendered in 1990, wherein it was held that the „Royalty‟ is a tax. Hence, the „Tax‟ component is excludible while arriving at the Assessable Value. But we find that this argument cannot be accepted for various reasons. In case of every classification / valuation dispute, it is always the issue of interpretation. Just because the interpretation of the assessee is based on certain case law, the Revenue cannot be made to stop in tracks and not issue the SCN, if their interpretation is different. All the issues of classification / valuation usually get finally clarified at Supreme Court level only. But it is for the parties [ the assessee / the Revenue], to keep the matter alive by litigating till this stage. In the present case, to justify their different interpretation, the Revenue had the Kesoram judgement in 2004, favouring their view point. Hence, holding the belief that they are following the correct case law, the Revenue continued their litigation and succeeded before the 9 Member Bench of the Supreme Court in 2024. Therefore, in this case, the balance weighs with the Revenue rather than with the appellant.
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14. As on date, the issue as to whether „Royalty‟ is tax of not, stands clearly held against the appellant in view of the 9 Member Supreme Court decision in the case of Mineral Area Development Authority Vs Steel Authority of India (2024) 21 Centax 313(SC) [MADA for short]. Therefore, on merits the appellants do not have any case. Accordingly, we hold that the Royalty component is required to be added to arrive at the Assessable Value. We dismiss the appeal on merits to this extent in respect of Royalty component.
15. We find that The Coal Mines (Conservation and Development) Act 1974 describes the levy as „Duty of Excise‟ and under Section 7, a reference is made to Customs Duty, wherein it is stated that the Excise Duty equivalent to the rate referred to at Section 6 may be imposed when the coal is imported. This shows the intent of the Central Govt to treat the levy as „Duty of Excise‟ and „Additional Duty of Excise‟ [CVD]. The Section 4 (3) (d) of the Central Excist Act 1944, reads as under :
(d) "transaction value" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.
16. We have seen that the levy is being termed as „Duty of Excise‟ and also being treated as such. It is also not disputed that in the case of the goods in question, the Stowing Excise Duty is being paid by the appellant. The Revenue cannot take a contorted and narrow view that only when the Duty of Excise is paid as Central Excise Duty, such exclusion is available. It is to be noted that the word used is „duty of excise‟ along with „sales tax‟ and „other taxes‟, which would clarify that if these are paid to State Govt or to any other agency also, the 6 E/76066/2014 transaction value should exclude the same. Considering these provisions, we set aside the confirmed demand in respect of the Stowing Excise Duty and allow the Appeals.
17. So far as the Assam Land Tax is concerned, the very word used therein is Tax. As we have observed above, the Section 4 (3) (d), when speaking of Tax, speaks of Central Govt and State Govt Taxes. Hence, we hold that the Assam Land Tax is not required to be included while arriving at the Assessable Value. Accordingly, we set side the confirmed demand on account of the Assam Land Tax component.
18. Thus, we hold that the appellant fails in the appeal in respect of Royalty component and succeeds in respect of Stowing Excise Duty and Assam Land Tax components on merits.
19. Now we turn to the arguments of the appellant towards their submissions on time-bar aspect of the demand. Admittedly the appellant is a reputed Public Sector Undertaking, having no necessity to indulge in any suppression with an intent to evade Excise Duty payment. They have been paying the Excise Duty on the AV arrived at by them as per their interpretation and filing their Returns. Hence, no case of suppression has been made out by the Revenue, so as to invoke the extended period provisions.
20. On going through the impugned Order in Original, it is observed that the Adjudicating authority has given the following findings while dropping the penalty proposed under Section 11 AC.
5.6. In this regard, I have observed that the said noticee discharged their tax liability like submission of ER-1, Form-1 Returns, etc. regularly and deposition of Central Excise Duty, etc. as per their assessment except the fact that they did not take into account of inclusion of „Royalty‟, „Stowing Excise duty‟ and „Assam Land Tax‟ in the transaction value during the period 01.03.2011 to 28.02.2013. However, they are taking into account the same with effect from 1st March, 2013 as stated above. I have observed that 7 E/76066/2014 Central Excise Duty on Coal has been introduced by the Central Government with effect from 01.03.2011 under the provisions of the Central Excise Tariff Act, 1985, under Tariff heading 2701 and since then they are paying Central Excise duty with regular submission of ER-I and ER-4 returns. They have not included the three items as mentioned above is their transaction value, which should be parts of assessable value, on the ground that they had interpreted the three items as 'other tax'. However, the differential central excise duty, by considering the elements of Royalty, Stowing Excise Duty and Assam Land Tax, has been deposited under protest through GAR-7 Challan for the period 01.03.201 10 28.02.2013 before issuance of Show Cause Notice. From the above, it is observed that the short payment /dispute is in the nature of interpretation of law. So, I am in favour to waive the penalty under Section 11AC of the Central Excise Act, 1944. Since, the noticee is a Maharatna Company of the Govt. of India. In this regard, I rely upon the case of M/S Uniflex Cables Ltd. Vs. Commissioner of Central Excise, Surat-1l [2011(271)E.L.T. 161(SC)] wherein it was held that no penalty could be and is liable to be imposed when issue involved is of interpretational nature. I also rely upon the case of M/S Indian Oil Corporation Ltd. Vs. Commissioner of Central Excise, Ahmedabad [2013(291)E.L.T.449 (Tri-Admd.)] wherein it was held that the appellant being a Public Sector Undertaking, there cannot be mala fide for non-discharge of excise duty, if any and there cannot be allegation of intention to evade duty. It was also held in accordance of the decision of this Tribunal in the case of Markfed Refined Oil & Allied Indus, (supra), wherein the Tribunal held that "We are of the view that in the absence of any material showing any positive intention on the part of the appellant, which is a Government undertaking, to evade duty or fraud, collusion, etc., imposition of penalty was not justified."
21. The Section 11AC of the CEA 1944, in respect of the SCNs invoking the extended period demand, reads as under :
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(c) where any duty of excise has not been levied or paid or has been short-
levied or short-paid or erroneously refunded, by reason of fraud or collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub- section (10) of section 11A shall also be liable to pay a penalty equal to the duty so determined :
Provided that in respect of the cases where the details relating to such transactions are recorded in the specified record for the period beginning with the 8th April, 2011 up to the date on which the Finance Bill, 2015 receives the assent of the President (both days inclusive), the penalty shall be fifty per cent. of the duty so determined;
22. We have observed from the finding of the Adjudicating authority that he has found no material to invoke the above provision of Section 11AC to impose the penalty. In the normal course, he could have imposed the penalty of Rs.4.42 crores and given an option to pay 50 % / 25% to the appellant. However, on the ground that no case has been made out against the appellant towards suppression, he has refrained from imposing penalty. Since the Revenue has not filed any appeal against on such dropping of the penalty, we observe that they are not aggrieved by this act of the Adjudicating authority and the issue has reached finality.
23. When the penalty under Section 11AC is waived on the ground that no case of suppression has been made out, even the duty demand would not legally sustain. There cannot be a case where it is held that there is no suppression, but only the penalty is dropped, but the Duty is confirmed. Both the Duty as well as penalty are required to be dropped if the case of suppression is not made out.
24. We have for reference the case law of Lohia Paperboards Pvt Ltd Vs CCE Appeals Raipur - 2019 (370) ELT 892 (Tri-Del), wherein it has been held as under :
6. I find that admittedly, the demands on all three aspects stand raised by way of show cause notice issued on 12-10-2012 raising demand for the period 9 E/76066/2014 2008-2011, thus by invoking the longer period of limitation. Commissioner (Appeals) while disposing the appeal filed by the appellants has granted the benefit of penalty by setting aside the same on the finding that the adjudicating authority has not brought the fact of fraud, wilful misstatement, collusion or suppression of facts or contravention of any of the provision of Excise Act or Rules therein with intent to evade payment of duty in the impugned order. Such findings of the Commissioner (Appeals) have not been appealed against by the Revenue and as such, have attained finality.
7. If the appellate authority has held absence of any mala fide on the part of the assessee for setting aside of penalty, same ingredient would apply for the purpose of limitation. In the absence of any suppression, misstatement or fraud, with a guilty mind extended period would not be available to the Revenue for raising the demand. As such, on this short issue itself, I set aside the impugned order and allow the appeal with consequential relief to the appellants
25. In the recent decision of Kolkata Bench in the case of Mahanadi Coalfields Vs CCE & ST Rourkela, vide Final Order No.75508/2025 dated 27.02.2025, has held as under :
7. For better appreciation, the observations made by the adjudicating authority is incorporated herein below :
"In terms of the above Rule, it should be seen whether the ingredients such as fraud, collusion, willful mis-statement, suppression of fact or contravention of any of the provisions of the Rule, postulates a positive act to result in intention to evade payment of duty and mere failure to pay duty would not be sufficient to attract the penaty provisions under the aforesaid Rule. When we perused the case of the facts, it is evidently clear that is no allegation against the assessee and having committed any fraud or made any willful mis-statement or suppressed the facts or contravened any of the provisions of the Rule with an intention to evade payment of duty. Unless these ingredients are present in the show-cause notice , the question of levying penalty does not arise. Therefore, the Tribunal rightly deleted the penalty." 3 Excise Appeal No.75110 of 2017
8. As this finding has attained finality, we hold that the extended period of limitation is not invokable. Consequently, whole of the demand is set aside.10
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26. We find that to the factual matrix of the present case, the ratio of these cases are squarely applicable. Accordingly, the confirmed demand for the extended period is legally not sustainable. We set aside the same and allow the appeal to this extent.
27. To summarize :
(a) On merits, the demand on account of Royalty component sustains and appeal fails to this extent.
(b) On merits, the demand on account of Stowing Excise Duty and Assam Land Tax components gets set aside and appeal stands allowed to this extent.
(c) The confirmed demand towards the extended period stands set aside and the demand stands allowed on account of time-
bar to this extent.
(d) For the limited purpose of quantifying and dropping the demand towards Stowing Excise Duty, Assam Land Tax components and for quantifying the demand for the normal period, the jurisdictional authority is directed to carry out proper verification giving opportunity to the appellant to submit necessary documents.
28. Thus, the appeal stands allowed partly. The appellant would be eligible for consequential relief, if any, as per law.
(Pronounced in the open court on 05/03/2025.) Sd/-
(R. Muralidhar) Member (Judicial) Sd/-
(K. Anpazhakan) Member (Technical) Pooja