Custom, Excise & Service Tax Tribunal
M/S Singareni Collieries Company Ltd vs Cce, Hyderabad-Ii on 26 July, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Division Bench Court I Appeal No. E/28177, 26083/2013 & 20090/2015 (Arising out of Order-in-Original No. 07/2013-Adjn (C.Ex.,)(Commr) dt. 26.08.2013, O-I-O No. 08/2012-Adjn (C.Ex.,)(Commr) dt. 31.12.2012 & O-I-O No. HYD-EXCUS-002-COM-34-14-15 DT. 16.10.2014 passed by CC, CE & ST, Hyderabad-II) For approval and signature: Honble Ms. Sulekha Beevi, C.S., Member (Judicial) Honble Sh. Madhu Mohan Damodhar, Member(Technical) 1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? M/s Singareni Collieries Company Ltd., ..Appellant(s) Vs. CCE, Hyderabad-II ..Respondent(s)
Appearance Sh S. Thirumalai, Advocate for the Appellant.
Sh Ajay Saxena, Commissioner (AR) for the Respondent.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member (Judicial) Honble Sh. Madhu Mohan Damodhar, Member (Technical) Date of Hearing: 13.07.2016 Date of Decision: _________ FINAL ORDER No._______________________ [Order per: Madhu Mohan Damodhar] The facts of the case as narrated by the appellant are as follows:
1. M/s Singareni Collieries Company Ltd., Kothagudem (hereinafter referred to as Appellant), a joint venture between the Government of Andhra Pradesh (51%) and the Government of India (49%) is engaged in the mining and sale of coal. The Appellant undertakes mining activities across the districts of Adlabad, Karimnagar, Warangal and Khammam and supplies coal to various organizations. The Appellant has obtained Registration under the Clean Energy Cess Rules, 2010 with effect from July 01, 2010 and has been discharging Clean Energy Cess at the rate of Rs. 50/- per metric ton on the removal of Coal from their mine.
2. The Central Government issued Notification No. 28/2010-CE dated June 22, 2010 and Notification No. 29/2010-CE dated June 22, 2010 granting exemption from payment of Education Cess (hereinafter referred to E. Cess)and Secondary and Higher Education Cess (hereinafter referred to S.H.E Cess) respectively to goods on which Clean Energy Cess is leviable as specified in the Tenth Schedule of the Finance Act, 2010, which, inter alia includes Coal.
Coal was attracting Nil rate of duty upto Feb, 2011 in the First Schedule to CETA, 1985 with effect from March 01, 2011 the Finance Act, 2011 introduced Excise Duty on Coal, where under the manufacturer was granted an option of discharging Excise Duty either at the rate of:
* 1% provided CENVAT credit of inputs, input services and capital goods used for production of coal is not availed or * 5% with the facility of CENVAT credit.
In this regard, the Appellant classified the goods under Chapter Heading 2701 of the First Schedule to the Central Excise Tariff Act, 1975 and obtained Central Excise Registration bearing No. AAACT8873FEM001. The Appellant opted to remove Coal on payment of 5% Excise Duty.
On introduction of Excise Duty, the Appellant was advised that Education Cess and Secondary and Higher Education Cess is not payable on removal of Coal in view of the exemption granted under Notification No. 28/2010-CE dated June 22, 2010 and Notification No. 29/2010-CE dated June 22, 2010.
The department issued (hereinafter referred to as the Learned Commisioner) show cause notices proposing to recover Education Cess and Secondary and Higher Education Cess on the quantity of Coal removed during periods under Section 11A of the Central Excise Act, 1944 along with applicable interest and penalty.
3. On adjudication the lower authority confirmed the proposals in the notices along with interest. Hence these appeals.
2. The main contentions put forward by the Learned Counsel for appellant Advocate Sh S. Tirumalai are summarized as under:
1. Clean Energy Cess was introduced as a duty of excise on the production of goods which were specified in the Tenth Schedule. It is also to be noted that the provisions of the Central Excise Act, 1944 relating to levy of and exemption from duty of excise etc. as detailed in sub-section (7) of Sec 83 shall with such modifications and alterations be applicable in respect of the Cess levied. In this connection Notification No. 2/2010 Clean Energy Cess dated 22.06.2010 has made applicable the provisions of the Central Excise Act relating to levy and collection etc. to the Cess levied under sub-sec (3) of Sec 83.
2. As per the Tenth Schedule, the goods referred therein include coal which is the subject matter of production by the Appellant. Pursuant to section 83, the Central Government issued Notification No. 28/2010-CE dated 22.06.2010 and 29/2010-CE dated 22.06.2010 which provided for exemption from payment of E. Cess (EC) and S.H.E Cess (S.H.E.C), which are levied on duties of excise. The relevant notifications are extracted for ease of reference.
NTF. No. 28/2010-CE, DT. 22/06/2010 G.S.R (E).- In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) read with sections 91 and 93 of the Finance (No.2) Act, 2004 (23 of 2004), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts all goods specified in the Tenth Schedule to the Finance Act, 2010 (14 of 2010) from the Education Cess leviable thereon under the said sections 91 and 93 of the said Finance (No.2) Act.
[F.No. 354/72/2010-TRU] NTF. No. 29/2010-CE, DT.22/06/2010 G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) read with sections 136 and 138 of the Finance Act, 2007 (22 of 2007), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts all goods specified in the Tenth Schedule to the Finance Act, 2010 (14 of 2010) from the Higher Education Cess leviable thereon under the said sections 136 and 138 of the said Finance Act.
[F.No. 354/72/2010-TRU]
3. Education Cess is nothing but a surcharge and its levy is completely independent of the levy of excise duty. Its calculation is also independent of the quantum of excise duty, since it is a flat rate of 2% of the aggregate of all duties of excise levied and collected by the Central Government. The Education Cess has a relation to the quantum of duty, since it is calculated on that basis. It has no connection, direct and proximate, or otherwise to the rate of duty payable on the manufacture of goods. Similarly, the rate of duty on the manufacture of goods, for the purposes of assessment, is not at all dependent on the levy or non-levy of the Education Cess.
Similar interpretation would be applicable in respect of the S.H.E Cess in terms of Sec 136 and 138 as well under the Finance Act, 2007.
It should be noted that unlike other types of cess levied as excise duties the E. Cess and S.H.E Cess is calculated on the aggregate of all duties of excise levied and collected by the Central Government.
This is in contrast with the National Calamity Contingency Duty levied by the Finance Act, 2001 and substituted by the Finance Act, 2005, where also in the former in terms of Sec 136 the goods were specified in the Seventh Schedule.
4. A comparison of the said Seventh Schedule with the Tenth Schedule under the Finance Act, 2010 would show that the former provides description for purpose of classification up to the Tariff Item level while the latter viz. Tenth Schedule provides the description only upto the level of heading. The obvious reason is that the National Commodity Contingency duty is levied with reference to the value of the product or any other unit of measure whereas the E. Cess and S.H.E Cess is on the aggregate of all duties of excise levied by the Central Government. Therefore for the purpose of the Tenth Schedule reference to the First Schedule to the Central Excise Tariff Act, 1985 is continuously required in order to ascertain and classify the product under the correct tariff item. In the instant case for example though the Tenth Schedule provides the Tariff heading for coal as 2701 but it is only with reference to the First Schedule to the Central Excise Tariff Act that the Appellants are in a position to discharge the obligation in respect of Clean Energy Cess under Section 83 of the Finance Act, 2010.
5. Notification No. 28 and 29 aforesaid regarding E. Cess and S.H.E Cess specifically exempt for purpose of levy of cess the goods specified in the Tenth Schedule which will have to be arrived at only by constant reference on a continuous basis with the First Schedule to the Central Excise Tariff Act, 1985.
6. In the Finance Act, 2011 a rate of excise duty was specified against the previous nil rate of duty with respect to the commodity Coal falling under Central Excise Tariff heading 2701 of the First Schedule to the Central Excise Tariff Act, 1985. In view of this, the Coal produced by Appellant became subject to payment of Central Excise duty at the specified rate with effect from 1st March, 2011. Even after the specification of rate of duty of excise on coal as aforesaid the exemption Notifications No. 28/2010-CE and 29/2010-CE both dated 22.06.2010 have remained unaltered providing exemption of E. Cess and S.H.E. Cess not only in respect of Clean Energy Cess but also the on the central excise duty under the First Schedule by way of duty of excise.
7. The exemption Notifications 28 and 29 of 2010 dated 22.06.2010 use the expression all goods specified in the Tenth Schedule to the Finance Act, 2010. The expression in the said Notification is qua the goods specified in the Tenth Schedule; that a blanket exemption has been given to the goods viz- coal; that advisedly the expression all specified goods in the Tenth Schedule is not employed but a much wider expression all goods specified in the Tenth Schedule.
8. Tenth Schedule which is very much part of the Finance Act, 2010 is legislation by reference of Statute and not legislation by incorporation.
9. Further, a bare perusal of the Notes appearing in Tenth Schedule to the Finance Act, 2010 would show that this is nothing but the First Schedule to the Central Excise Tariff Act, 1985 by reference in respect of the goods specified in the Tenth Schedule.
10. The requirement of continuous reference to the Central Excise Act and First Schedule to the Central Excise Tariff Act, 1985 for the purpose of working the Tenth Schedule is clearly brought out from the following:
(i) Registration under the Clean Energy Rules, 2010 in terms of Rule 3 will have to be with reference to Sec 6 of the Central Excise Act relating to registration as the same has been made applicable in terms of Sec 83(7) of the Finance Act, 2010.
(ii) Unlike the Seventh Schedule to the Finance Act, 2001 with regard to National Calamity Contingency Duty when it comes to the Tenth Schedule to the Finance Act, 2010 in the instant case with regard to the goods specified therein a continuous reference to the First Schedule to the Central Excise Tariff is required for the discharge of obligations for payment of excise duties. This is because the item level classification is not provided in the Tenth Schedule to the Finance Act, 2010.
(iii) For the purpose of payment of cess as explained above the provisions of Central Excise Act relating to payment of duty, interest and recovery have been referred to in Rule 6 of the Clean Energy Cess Rules, 2010.
(iv) For the purpose of filing of the Return in Form I under the Clean Energy Cess Rules, the same cannot be completed except by reference to the First Schedule to the Central Excise Tariff Act because the CETA Heading has to be provided after classifying the product and this is not available in the Tenth Schedule to the Finance Act, 2010 except after reference to the First Schedule to the CETA, 1985.
(v) With regard to the registration and the filing of returns and payment dates these are synchronized with that of Central Excise.
11. Therefore in this case the amendment to the First Schedule from 01-03-2011 incorporating the rate of Central Excise duty for the Tariff item 2701 12 00 and 2701 19 90 (Bituminous Coal and other coal dealt with by the Appellants) will have to be read into the Tenth Schedule and so done the exemption from E. Cess and S.H.E. Cess in terms of Notf. No. 28 and 29 (supra) would continue to be available for the aggregate of duties of excise levied by the Central Government even after 01-03-2011. Therefore, there could be no levy of E. Cess and S.H.E. Cess on the Central Excise duty rate introduced from 01-03-2011.
12. The Clean Energy Cess is a Cess has been introduced by the Ministry of Finance vide section 83 of Finance Act, 2010. As extracted above, in the Board Circular at Para 4.13 above the Clean Energy Cess was introduced as a duty of excise, which was subject to exemption under Notification No. 28 and 29/2010 dated 22.06.2010.
13. It was clarified by the Department vide F.No. 354/72/2010-TRU dated 24.6.2010 that the Clean Energy Cess is a duty of Excise. It is thus submitted that the E. Cess and S.H.E. Cess should apply merely because no excise duty rate was prescribed under Sec 3 of the Central Excise Act at the time when the said notifications were issued is legally unsustainable in view of the specific reference in the Tenth Schedule to the First Schedule to the Central Excise Tariff Act.
14. Department itself had clarified that Clean Energy is a duty of Central Excise and that the exemptions from E. Cess and S.H.E. Cess would be applicable on payment of Clean Energy Cess by Notification No. 28 and 29 of 2010 dated 22.06.2010. When a Notification issued also pursuant to Section 5A of the Central Excise Act, 1944 which deals with excisable goods besides the relevant Finance Acts which exempts a manufacturer from the payment of E. Cess and S.H.E. Cess upon the payment of a Clean Energy Cess (which is a duty of excise), then the exemption Notification, is available towards E. Cess and S.H.E. Cess even when a rate of duty of excise is prescribed for purpose of payment of excise duty, by the process of by reference of Statue. This is so because in the present case for the purpose of working the Tenth Schedule to the Finance Act, 2010 the Appellants are entitled to refer to the First Schedule to the Central Excise Tariff, 1985 and the amendments made from time to time. Therefore, the Notification No. 28 and 29 regarding E. Cess and S.H.E. Cess having been issued under Sec 5A of CEA read with the Tenth Schedule will be available with equal force after 01-03-2011 and there will be no E. Cess or S.H.E. Cess on the said aggregate of duties of excise namely Central Excise and Clean Energy Cess.
15. They place reliance on a number judgments in support of their contentions, interalia:
(i) Tamil Nadu (Madras State) Handloom Weavers Co-operative Society Ltd., Vs ACCE, Erode [1978 (2) E.L.T. (J 57)(Mad)]
(ii) Wallace Flour Mills Company Ltd., Vs Collector of C.Ex [1989 (44) E.L.T. 598 (S.C.)]
(iii) Collector of C.Ex., Hyderabad Vs Vazir Sultan Tobacco Co.Ltd., [1996 (83) E.L.T. 3 (S.C.)]
(iv) Gopal Hosiery Vs Assistant Collector of C. Ex.
[1989 (41) E.L.T. 35 (Cal)]
(v) Barnagore Jute Factory Co. Vs Inspector of C. Ex., [1992 (57) E.L.T. 3 (S.C.)]
3. On behalf of Revenue Learned AR Sh. Ajay Saxena vehemently opposed the appeals, with the following main submissions:
1. The case of the appellant is that Education Cess and Higher Education Cess were exempted on Coal (being specified in Tenth Schedule of the Finance Act, 2010) and therefore no Education Cess is attracted on basic excise duty even when Tariff rate of 5% was introduced in Central Excise Tariff Act, 1985 in March, 2011 subsequently.
2. Clean Energy Cess was introduced in Budget 2010 and Exemption Notifications 28 and 29/2010 were issued on 22.06.2010, whereas on the same goods Central Excise duty was imposed for the first time in March, 2011 when the Tariff rate in the 1st Schedule to the Central Excise Tariff Act was brought from Nil to 5%. No Notification in 2010 can exempt a duty (basic excise duty) which was not in existence in 2010. Basic Excise duty on Coal was introduced from Budget 2011 and could not have been exempted by a Notification which was issued in the previous year.
3. In any case effect from April, 2013, M/s Singareni Collieries Co have been paying due Cess on BED on Coal produced on their own without any protest and without any dispute. It is further confirmed that other Coal producing Companies like M/s Neyveli Lignite Corporation Limited, M/s Bharat Cooking Coal Limited (BCCL), Dhanbad etc., are also paying Education Cess and S.H.E. Cess on basic Excise duty on Coal since 01-03-2011.
4. The Board had clarified on 22nd September, 2015 after Chief Commissioners Tariff Conference held at Pune on 16th & 17th September, 2015 that the exemption from Education Cess and S.H.E. Cess under Notifications No. 28/2010-CE and 29/2010-CE both dated 22.06.2010 is applicable only in respect of Clean Energy Cess leviable on Coal under 10th schedule to Finance Act, 2010. Hence Education Cess and S.H.E. Cess shall be leviable on Excise duty on Coal.
5. He made the following further arguments:
I) Exemption from Education Cess and S.H.E. Cess under Notifications No. 28/2010 and 29/2010 E. Cess is applicable with only respect to Clean Energy Cess levied under the Finance Act 2010 and on the goods specified under Tenth schedule thereon and is not applicable to Central Excise duty on COAL which was introduced in subsequent year i.e. 2011.
II) Notifications 28 and 29/2010 specifically exempt only the goods specified in the Tenth Schedule to the Finance Act, 2010 from Education Cess. However, these Notifications do not exempt same goods when specified next year in the 1st Schedule to Central Excise Tariff Act.
III) Though the Notifications 28/2010 and 29/2010 are issued under Section 5A of the Central Excise Act, 1944, they do not exempt the Coal from Education Cess when it is made dutiable to basic Excise duty on being amended in the 1st Schedule to the Central Excise Tariff Act.
IV) Power under Section 5A of the Central Excise Act to issue Notification No. 28 & 29/2010 is derived from Notification No. 2/2010-Clean Energy Cess dated 22.06.2010, which is issued under Sub-section 7 of Section 83 of the Finance Act, 2010 and makes the Section 5A of Central Excise Act applicable to Clean Energy Cess. Bothe Section 83 of Finance Act, 2010 and Notification No. 2/2010 Clean Energy Cess are limited to collection, levy and exemption related to Clean Energy Cess only and it cannot exempt E. Cess on basic Central Excise duty specified under First Schedule of Central Excise Tariff Act.
V) Notifications 28 and 29/2010 specifically exempts the goods specified in Tenth Schedule to Finance Act, 2010. Chapter VII of Finance Act and Tenth Schedule of the same are confined only to Clean Energy Cess.
VI) Same commodity can be covered/specified under different Schedules for the purpose of different levies like Basic Excise duty, Additional Excise duties, Special Excise Duties, Cess, etc. Therefore any levy or exemption with respect to same goods in a particular Schedule has to be applied and construed with respect to that Schedule only.
VII) Section 83(5) of Chapter VII of Finance Act, 2010 clearly lays down that Clean Energy Cess shall be in addition to any Cess or duty leviable on the goods specified in the Tenth Schedule under any other law for the time being in force. This shows that Clean Energy Cess is only one of the duties of Excise leviable on Coal and is limited to the Tenth Schedule to Finance Act, 2010. An exemption from Educational Cess on Clean Energy Cess does not mean exemption of Education Cess from Basic Central Excise duty.
VIII) The exemption from the goods specified under Tenth Schedule to Finance Act, 2010 cannot be extended to exemption on goods specified under First Schedule to Central Excise Tariff Act.
IX) No Notification in 2010 can exempt a duty (basic excise duty) which was not in existence in 2010. Basic Excise duty on Coal was introduced from Budget 2011 and could not have been exempted by a Notification which was issued in the previous year.
6. Clean Energy Cess is required to be discharged on the quantity of coal produced, while basic Excise Duty is required to be calculated on the quantity cleared at factory gate, after washing etc., therefore the quantity at factory gate is lower than the quantity produced. Thus even the manner of calculations of Clean Energy Cess and BED are different.
7. They rely on the following case laws:
(i) Hoechst India Limited Vs Collector of Central Excise, Bombay [1998 (102) E.L.T. 213 (Tribunal)]
(ii) Star Industries Vs Commissioner of Customs (Imports), Raigad [2015 (324) E.L.T. 656 (S.C.)]
(iii) Tawi Chemical Industries Ltd., Vs Commissioner of Central Excise, J & K [2012 (286) E.L.T. 553 (Tri.-Del)]
4. We have heard both sides at length and gone through the appeal records, notifications and judgments laid before us.
5. Before entering into the analysis of the issue it would be worthwhile to state the details of demand, the period of dispute etc in these appeals.
S. No. Particulars E/26083/2013-DB E/28177/2013 E/20090/2015-DB
1. Period of dispute April, 2011 to March, 2012 April, 2012 to February, 2013 March, 2013
2. SCN No. and Date OR No. 10/2012, dated 09.05.2012 OR No. 08/2013, dated 02.05.2013 OR No. 02/2014, dated 30.01.2014
3. OIO No. and Date OIO No. 08/2012, dated 31.12.2012 OIO No. 07/2013, dated 26.08.2013 OIONo.HYD-EXCUS-COM-34-14-15, dated 16.10.2014
4. Amount of Education Cess and S.H.E. Cess in dispute Rs. 15,53,34,780/- (E. Cess Rs.10,35,56,520/- and S.H.E. Cess Rs. 5,17,78,260/-) Rs. 18,47,67,960/- (E. Cess Rs.12,31,78,640/- and S.H.E. Cess Rs. 6,15,89,320/-) Rs.2,39,99,523/- (E. Cess Rs.1,59,99,682/- and S.H.E. Cess Rs. 79,99,841/-)
6. The issue that comes up for appellate decision is whether exemption extended under Notifications 28/2010-CE and 29/2010-CE are applicable only with regard to Clean Energy Cess levied on coal as contended by department or whether the said exemption will also be applicable with regard to Central Excise Duty levied on coal as contended by the appellant.
7. Clean Energy Cess is a kind of carbon tax and is levied in India as a duty of Excise under section 83 (3) of the Finance Act, 2010 on Coal, Lignite and Peat (goods specified in the Tenth Schedule to the Finance Act, 2010) in order to finance and promote clean environment initiatives, funding research in the area of clean environment or for any such related purposes. In many countries carbon taxes are levied also on other fossil fuels like petroleum, natural gas etc. This is in line with the principle of "polluter pays", which is the basic guiding criterion for pollution management. However, in India this is applied only on coal and its variants - lignite and peat.
7.1 This was introduced, with effect from 1st July, 2010, through the Union Budget 2010-11, on coal produced in India or imported to India. Relevant portion of the Budget speech is reproduced to get the intention of the legislation:
Environment
154. Harnessing renewable energy sources to reduce dependence on fossil fuels is now recognised as a credible strategy for combating global warming and climate change. To build the corpus of the National Clean Energy Fund announced earlier, I propose to levy a clean energy cess on coal produced in India at a nominal rate of Rs.50 per tonne. This cess will also apply to imported coal.
7.2 Thus when imposed, Clean Energy Cess was levied for the purposes of financing and promoting clean energy initiatives and funding research in the area of clean energy. However, in the Union Budget 2014-15, the scope was also expanded to include financing and promoting clean environment initiatives and funding research in the area of clean environment. Relevant portion of the Budget speech is reproduced:
237. Clean Energy Cess is presently levied on coal, peat and lignite for the purposes of financing and promoting clean energy initiatives and funding research in the area of clean energy. I propose to expand the scope of purposes of levying the said cess to include financing and promoting clean environment initiatives and funding research in the area of clean environment. To finance these additional initiatives, I propose to increase the Clean Energy Cess from 50 per tonne to 100 per tonne.
7.3 Vide Finance Act, 2016 the Clean Energy Cess was renamed as Clean Environment Cess.
7.4 Thus the intention and purpose of levy of Clean Energy Cess are very different in scope from that of Central Excise duty, which is a tax on goods manufactured or produced in India. Further, Clean Energy Cess is in the form of a surcharge for the purposes of the Union, while Central Excise Duty covered by Article 270 as Taxes levied and collected by the Union and distributed between the Union and the States
8. Main plank of the learned counsels arguments is that for the purpose of the Tenth Schedule of the Finance Act, 2010, reference to First Schedule of Central Excise Tariff Act, 1985 is continuously required for ascertaining classification. Hence the said Tenth Schedule needs to be considered as legislation by reference and not legislation by incorporation, therefore all amendments and modifications of the law in the referred statute, subsequent to the time the reference law was enacted will automatically be read into the adopting statute.
9. While, we have no quarrel with this established principle of law, with regard to legislation by reference, we are not able to agree that Section 83 of the Finance Act, 2010 and the related Tenth Schedule thereof, will constitute legislation by reference.
10. Incorporation of an earlier Act into a later Act is a legislative device adopted for the sake of convenience in order to avoid verbatim reproduction of the provisions of the earlier Act into the latter. As held by the Honble Apex Court in Ramsarup Vs Munshi [AIR 1963 SC 553] and reiterated in Nagpur Improvement Trust Vs Ampik Singh [AIR 2002 SC 3499], When an earlier Act or certain of its provisions are incorporated into a later Act, the provisions so incorporated become part and parcel of the later Act as if they had been bodily transposed into it. The result is to constitute the later Act which is not modified or repealed by a modification or repeal of the earlier Act. (Narottamdas Vs State of M.P. [AIR 1964 SC 1667]), reiterated in Sneh Enterprises Vs Commissioner of Customs [(2006) 7 SCC 714].
11. In the instant case, the impugned Section 83 of the Finance Act, 2010 and the related Tenth Schedule thereof have merely incorporated specific and limited provisions of the Central Excise Act, 1944 and the Central Excise Tariff Act, 1985. For example - Subsection 7 of Section 83 provides for issue of notification to make applicable specifically listed provisions of the Central Excise Act, relating to levy of exemption from duty of excise, refund, offences and penalties, confiscation and procedure relating to offences and appeals, with such modifications and alterations as may be considered necessary. So also, the said Tenth Schedule specifically mentions that for the purpose of the Tenth Schedule, Chapter, heading, sub heading, and tariff Item and Rules for interpretation etc., of the First Schedule of the Central Excise Tariff Act, shall apply to the interpretation of that Schedule.
12. When there is general reference in the Act in question to some earlier Act, but there is no specific mention of the provisions of the former Act, then it is clearly considered as legislation by reference. In the case of legislation by reference, the amending laws of the former Act would normally become applicable to the later Act; but, when the provisions of an Act are specifically referred and incorporated in the later statute, then those provisions alone are applicable and the amending 79provisions of the former Act would not become part of the later Act. This principle is generally called legislation by incorporation. General reference, ordinarily, will imply exclusion of specific reference and this is precisely the fine line of distinction between these two doctrines. Both are referential legislations, one merely by way of reference and the other by incorporation. It normally, will depend on the language used in the later law and other relevant considerations. While the principle of legislation by incorporation has well defined exceptions, the law enunciated as of now provides for no exceptions to the principle of legislation by reference. This is the view propounded by the Honble Apex Court in the landmark judgment in the case of Girnar Traders (3) Vs State of Maharastra [(2011) 3 SCC 1].
13. We find that the same view is echoed even in the case laws relied upon by the Learned Counsel himself, namely in CCE, Calcutta Vs National Jute Manufactures Corporation Ltd [1985(22) ELT 907 (Tri)], and also in New Central Jute Mills Vs ACCE , Allahabad [1978 (2) ELT- J 393].
14. This being the case, the Learned Counsels mention of Clean Energy Cess Rules, 2010 and references thereof to Section 6 of Central Excise Act relating to registration, and adoption of other provisions in the said Act, relating to payment of duty, interest, filing of returns, recovery etc., are merely legislation by incorporation, only for the limited purpose of adopting procedural modalities. So also, reference to First Schedule of Central Excise Tariff Act in the said Tenth Schedule is only for the limited purpose of ensuring that for classification purposes of the type of coal produced and on which Clean Energy Cess is leviable, the rules for interpretation and the classification methodology of the Tariff Act are followed. This will not however mean, for the reasons discussed above, that whenever there is an increase or decrease in the rates of E. Cess and S.H.E. Cess leviable on Clean Energy Cess there will be a domino effect on the rates of E. Cess and S.H.E. Cess leviable on Central Excise duty per se. Thus we are of the considered opinion that the aforesaid relevant portions of Section 83 and Tenth Schedule are in the nature of legislation by incorporation only and not legislation by reference as vigorously argued by the Learned Counsel.
15. On the other hand, considerable merit is found in the arguments put forth by the department. We find ourselves in agreement with the submission of the Learned AR that Section 83(5) of Finance Act, 2010 clearly lays down that Clean Energy Cess shall be in addition to any Cess or Duty leviable on the goods specified in the Tenth Schedule or under any other law for the time being in force, which shows that Clean Energy Cess is only one of the duties of Excise leviable on coal, limited to the said Tenth Schedule. Hence, an exemption from E. Cess and S.H.E. Cess on Clean Energy Cess does not mean exemption from E. Cess and S.H.E. Cess on Central Excise Duty. Substance is also find in the argument that since Basic Excise Duty on coal was introduced only w.e.f 2011, it is incongruous that a notification issued in 2010 can exempt E. Cess and S.H.E. Cess on Basic Excise Duty, for the simple reason that E. Cess and S.H.E. Cess has to be calculated on the aggregate of Central Excise Duty.
16. These views also find sustenance from a number of judgments. In the case of UOI Vs Modi Rubber Ltd & others [1986 (25) ELT 849 SC], the Honble Apex Court held that exemption from duty of excise does not mean exemption from special excise duty, additional excise duty or auxialiary duty in a situation where the latter was not leviable at the time of issuing the notification.. The relevant portion of the judgment is extracted as under:
10. Moreover, at the date when the first notification was issued, namely, 1st August, 1974, there was no special duty of excise leviable on tyres. It came to be levied on tyres with effect from the financial year 1978 under various Finance Acts enacted from year to year. It is therefore difficult to understand how the expression duty of excise in the Notification dated 1st August, 1974 could possibly be read as comprehending special duty of excise which did not exist at the date of this notification and came to be levied almost four years later. When special duty of excise was not in existence at the date of this notification, how could the Central Government, in issuing this notification, have intended to grant exemption from payment of special excise duty? The presumption is that when a notification granting exemption from payment of excise duty is issued by the Central Government under Rule 8(1), the Central Government would have applied its mind to the question whether exemption should be granted and if so to what extent. And obviously that can only be with reference to the duty of excise which is then leviable. The Central Government could not be presumed to have projected its mind into the future and granted exemption in respect of excise duty which may be levied in the future, without considering the nature and extent of such duty and the object and purpose for which such levy may be made and without taking into account the situation which may be prevailing then. It is only when a new duty of excise is levied, whether special duty of excise or auxiliary duty of excise or any other kind of duty of excise, that a question could arise whether any particular article should be exempted from payment of such duty of excise and the Central Government would then have to apply its mind to this question and having regard to the nature and extent of such duty of excise and the object and purpose for which it is levied and the economic situation including supply and demand position then prevailing, decide whether exemption from payment of such excise duty should be granted and if so, to what extent. It would be absurd to suggest that by issuing the notification dated 1st August, 1974 the Central Government intended to grant exemption not only in respect of excise duty then prevailing but also in respect of all future duties of excise which may be levied from time to time.
17. This dictum has been followed in many subsequent judgments, for example by the Honble High Court of Sikkim in Unicorn Industries Vs UOI [2015(324) ELT498 (Sikkim)] and by the Honble High Court of P&H in Riba Textiles Vs Cestat, New Delhi [2015 (322) ELT 74 (P&H)]. In the Unicorn Industries judgment, the Honble High Court, following the ratio of Modi Rubber case, held as follows:
32.?Apart from the fact that the Central Government never expressed its intention nor such intention is apparent from any of the notifications, cesses imposed under Finance Acts, 2001, 2004 and 2007 are not in essence the duties of Excise. The later two duties were imposed after the grant of exemption and incentives by the Central Government, it could not have visualised by the Central Government at the time of framing the IPR, 1997 and IPR, 2002 in regard to the State of Sikkim or even the exemption Notification No. 71/2003-C.E. to grant exemption from any duty which may be imposed in future. Exemption could only be granted in respect of the duties which were levied or had been imposed at the time of grant of incentives.
36.?The position in the present case is no different. The respondents have placed on record various notifications regarding grant of exemption from the NCCD or Education Cess levied under the Finance Acts, in question. This further clarifies that the Excise duty envisaged under the exemption Notification No. 71/2003-C.E., dated 9-9-2003 as also under IPR, 1997 and Notification dated 17-2-2003 could not be expanded to include the duties that may be levied, subsequently under any finance act or special duty levied by the Parliament for a different purpose. The petitioners are availing the benefit in respect to the exemption under the impugned notification itself since 2003. They illegally availed the benefit of exemption in respect to NCCD, Education Cess and Secondary and Higher Education Cess levied under the Finance Acts, 2001, 2004 and 2007 respectively without any exemption notification having been issued pursuant to these Finance Acts meaning thereby that the benefits secured by them was without any sanction of law. The respondents rightly raised demand of duties levied under the Finance Acts.
18. It is also noted that vide the Finance Bill, 2015 which subsequently was passed in Parliament and received the assent of the President, inter alia, Education Cess and Secondary & Higher Education Cess leviable on all excisable goods were fully exempted. However, the Government, with the approval of the legislature, considered it necessary to issue separate notifications for rescinding the 2010 notification which exempted Clean Energy Cess from E. Cess and S.H.E. Cess.
18.1 For the sake of clarity on this finding, relevant portions of the Joint Secretary, TRU I, CBEC, Ministry of Finance, summarizing the Budget 2015 proposals are reproduced below:
Letter D.O.F.No.334/5/2015-TRU New Delhi, the 28th February, 2015, of the Joint Secretary, TRU I, CBEC, Ministry of Finance Dear Chief Commissioner / Principal Commissioner, The Finance Minister has introduced the Finance Bill, 2015 in Lok Sabha today, i.e., 28th February, 2015. Changes in Customs and Central Excise law and rates of duty have been proposed through the Finance Bill, 2015 (clauses 80 to 89, 163, 164 for Customs and clauses 90 to 104, 163, 164, 184 and 188 for Central Excise).
2. Important changes in respect of Customs and Central Excise duty and legislative changes are contained in the four Annexes appended to this letter:
(i) Annex I contains Chapter wise changes relating to Customs;
(ii) Annex II contains Chapter wise changes relating to Central Excise:
Education Cess and Secondary & Higher Education Cess leviable on all excisable goods are being fully exempted.
ANNEX II
1) Education Cess levied on all excisable goods as a duty of excise under section 91 read with section 93 of the Finance Act, 2004 is being fully exempted. In this regard, notification No.14/2015-Central Excise dated 1st March, 2015 refers. Similarly, Secondary & Higher Education Cess leviable on excisable goods as a duty of excise under section 136 read with 138 of the Finance Act, 2007 is also being fully exempted. In this regard, notification No.15/2015-Central Excise dated 1st March, 2015 refers.
5) S.No.1A and 1B of notification No.23/2003-Central Excise, dated 31.03.2003 exempt the Customs component of Education Cess and Secondary & Higher Education Cess. Since Education Cess and Secondary & Higher Education Cess leviable on excisable goods are being fully exempted, there will be no levy of these Cesses either on CVD while calculating the aggregate of the duties of customs or on excise duty leviable under the proviso to section 3 of the Central Excise Act, 1944. Therefore, the entries S.No.1A and 1B are being omitted. Also, the entries at S.No.5A, 6 and 7A are being amended so as to substitute the rate of 12% with 12.5%. Notification No.16/2015-Central Excise dated 1st March, 2015 refers.
6) Notifications No.28/2010-Central Excise and No.29/2010-Central Excise, both dated 22nd June, 2010 exempt the levy of Education Cess and Secondary & Higher Education Cess on the clean energy cess leviable on coal. Since Education Cess and Secondary & Higher Education Cess are being exempted on excisable goods in general, notifications No.28/2010- Central Excise and No.29/2010-Central Excise, both dated 22nd June, 2010 are being rescinded. Notification No.17/2015-Central Excise dated 1st March, 2015 refers. (emphasis added) The very fact that the Government found it necessary to issue a separate Notification No. 17/2015-CE to rescind erstwhile Notification No. 28 and 29/2010-CE, in our opinion, vindicates the conclusion that the impugned exemption from E. Cess and S.H.E. Cess was initially available only to Clean Energy Cess, w.e.f. 22.06.2010, and that E. Cess and S.H.E. Cess was very much imposable on Central Excise Duty till the amending Notification 14 & 15/2015-CE dated 01.03.2015.
18.2 Even the CBEC had clarified vide Circular 354/42/2014-TRU 22nd September, 2015 that the exemption from Education Cess and S.H.E. Cess under Notifications No. 28/2010-CE and 29/2010-CE both dated 22.06.2010 (prior to 01.03.2015), is applicable only in respect of Clean Energy Cess leviable on Coal under Tenth schedule to Finance Act, 2010, hence Education Cess and S.H.E. Cess shall be leviable on Excise Duty on Coal.
18.3 The above discussions will put the final nail on the argument of the Learned Counsel that exemption of E. Cess and S.H.E. Cess vide Notifications No.28/2010-Central Excise and No. 29/2010-Central Excise, both dated 22nd June, 2010, also meant that the Notification simultaneously exempted E. Cess and S.H.E. Cess on duty of excise. If this was the case, there would have been no need for the Government to issue, after four years, Notification No.15/2015-Central Excise dated 1st March, 2015 specifically exempting duty of excise from E. Cess and S.H.E. Cess, on all excisable goods. Only because all excisable goods now stood exempted from E. Cess and S.H.E. Cess w.e.f 1st March 2015, there arose the necessity for the Government to issue Notification No.17/2015-Central Excise dated 1st March, 2015 rescinding Notifications No. 28/2010-Central Excise and No. 29/2010-Central Excise, which had already exempted the levy of Education Cess and Secondary & Higher Education Cess on the Clean Energy Cess leviable on coal much earlier on 22nd June, 2010.
19. In view of our foregoing discussions, we have no difficulty in concluding that exemption from E. Cess and S.H.E. Cess under Notifications No. 28 and 29/2010 both dated 22.06.2010 is applicable only with respect to Clean Energy Cess levied under the Finance Act, 2010, but will not be applicable with respect to Central Excise duty levied on coal w.e.f 01.03.2011. The issue is answered in favour of Revenue. The appeals are dismissed.
(Pronounced on in open court)
(MADHU MOHAN DAMODHAR) (SULEKHA BEEVI C.S.)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
Jaya.
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