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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.

7.2 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