South Eastern Coalfields Limited Vs Commissioner of Central Excise and Service Tax (CESTAT Delhi)
The judgment of the 9 Judges Bench of the Hon’ble Supreme Court in the case of Mineral Area Development Authority vs. Steel Authority of India held that “Royalty is not in the nature of tax”. The said judgment overruled the earlier 7 Judges Bench decision in India Cement Case which held the field for nearly 35 years holding that “Royalty is in the nature of tax”.
The outcome directly impacted Excise Appeals filed by several Assessee Coal Companies which were sub-judice awaiting outcome of the judgment of 9 Judges Bench. Though the assessee had subsequently paid Central Excise Duty on Royalty “under protest” for the period March 2011 to February 2013 in March 2013, the liability to pay interest for the period in delay loomed large, in view of the compensatory and mandatory nature of interest under the statute. Further, the levy of Central Excise Duty on “other levies”, all intrinsically connected to mineral bearing land, posed a real challenge.
The Hon’ble CESTAT, New Delhi, vide its Final Order dated 06.02.2026 has held that:
(a) Demand of Central Excise Duty on all other levies (Stowing Excise Duty, Forest Transit Fee, Madhya Pradesh Rural Infrastructure & Road Tax (MPGATSVA), Entry Tax, Terminal Tax, Chhattisgarh Paryavaran Cess & Upkar Cess) cannot be legally sustained for the reason that the said levies are in the nature of “other tax” and hence, do not form part of assessable value.
(b) Demand of Central Excise Duty on Royalty (only) is payable as Royalty is not a ‘tax’, as held by 9 Judges Bench of Supreme Court in the case of MADA.
(c) Even though the demand of Central Excise Duty on royalty is upheld, the Assessee Coal Company is not liable to pay any interest.
(d) No Penalty is not imposable.
FULL TEXT OF THE CESTAT DELHI ORDER
