In re Parse Kente Collieries Limited (GST AAR Chhattisgarh)
i. Compensation Cess is leviable on the total quantity of raw coal raised/mined and not only on the quantity of washed coal.
ii. Coal rejects supplied by a Coal Washery arising out of raw coal raised / mined, will attract NIL rate of Compensation Cess, only when due Compensation Cess on the total quantity of said raw coal raised / mined stands discharged as also when no Input Tax Credit of the Compensation Cess so paid is availed by any person, in terms of Sr. No. 41A of Notification no. 01/2017- Compensation Cess dated the 28th June, 2017 as amended vide Notification no. 02/2018-Compensation Cess (Rate) dated 26/07/2018, read with corrigendum issued under F.No. 354/255/2018-TRU (Pt-II) dated 2/8/2018, effective from 27th July, 2018.
iii. As the contract/ agreement relating to the proposed subsequent sale of coal rejects downstream along with the transaction details relating to the same is not forthcoming, this authority is not in a position to pass any ruling on the said supply downstream for want of the desired details.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, CHHATTISGARH
The Applicant M/s Parse Kente Collieries Limited, Kharsia Ambikapur, District Sarguja, Chhattisgarh [herein after also referred to as the Applicant) holding GSTIN-22AAECP5581 E 1 ZL, has filed an application U/s 97 of the Chhattisgarh Goods & Services Tax Act, 2017 requesting an advance ruling regarding levy of Compensation Cess on coal and coal rejects.
2. Facts of the case and Noticee’s contention:-
The Applicant has furnished following details regarding the issue for which they are seeking advance ruling:-
i. of India allotted Cod Blocks (Parsa Kente) in the State of Chhattisgarh to Rajasthan Rajya Vidyut Utpadan Nigam Limited (“RVUNL”) on 19th/25lh June, 2007 (the Coal Blocks).
ii. RVUNL issued tender inviting bids for selection of suitable persons to enter into a joint venture arrangement with RVUNL and form a joint venture company to undertdke coal mining and arrange for its transportation and delivery to the Thermal Power Stations (“TPS”) of RVUNL in the State of Rajasthan.
iii. Adani Enterprises Limited (“AEL”) was selected as a successful bidder, and accordingly incorporated a Joint Venture Company named Parse Kente Collieries Limited (“PKCL”) the Applicant herein. RVUNL holds 26% equity while AEL holds 74% equity in the Applicant company. A Coal Mining and Delivery Agreement (“CMDA”) was entered into on 16th July, 2008 between RVUNL and the Applicant. Broadly summarized, the salient features of the CMDA are as under:
(a) The Applicant would carry out all Works, as defined therein, from identification of techno commercially viable coal blocks to coal mining and arranging for delivery o: coal to RVUNL’s TPS;
(b) All expenses incurred for the Works are to be borne by the Applicant, including all expenses in relation to the cost of acquisition of land/lease of land, fees and arranging of clearances, reports and licenses and all charges incurred for arranging mining data, geological data and reports;
(c) The Applicant has no right or interest in the coal and the coal block, and the coal at all times remains the property of RVUNL;
(d) The Applicant is required to establsh a Coal Washery and deliver the washed coal of the required specifications to RVUNL;
(e) The coal rejects remaining after washing shall be the property of the Applicant and shall be disposed of by the Applicant subject to RVUNL’s right to observe the disposal of the rejects and the right to witness the determination of the grade thereof
(f) The Applicant shall arrange for transportation of coal from mines/washery to the delivery points by Rail and arrange for booking of rakes and payment of Railway freight charges to the Railways before dispatch;
(g) The Applicant shall also arrange for loading of the Railway Rakes and for that purpose, arrange necessary place of storage of mined/beneficiated coal at the Railway siding; Unloading of the coal at the delivery point shall be the responsibility of RVUNL; In consideration of the services rendered by the Applicant, RVUNL shall pay to the Applicant a contract price as agreed in the CMDA which is divided into basic price and reimbursables.
(h) The Applicant, on a back to bac< basis, has subcontracted the work of mining and washing of coal to Adani Enterprises Limited (“AEL”). AEL has set up` a Coal Washery close to mine pithead and upon mining of the raw coal, washes the same.
(i) Prior to GST regime, when Clean Energy Cess was applicable, RVUNL was paying the same on entire quantity of coal. With introduction of GST on 1st, July, 2017, all parties-AEL, PKCL and RVUNL have obtained registration for the establishments located in the State of Chhattisgarh. To comply with the GST laws, having regard to the provisions of the CMDA and the Mining Contract with AEL, the parties execute the following documents:-
AEL issues three Invoices – two for the mining fees (one for 90% and other for balance 10%) of washed coal and the other for the quantity of the coal rejects, obtained post washing. AEL charges GST @ 18% in both the invoices;
The Applicant (PKCL), in turn, issues 3 Invoices on RVUNL towards mining fees. The first two invoices are in respect of the fee payable in cash, while the third is in respect of the fee payable in kind (by way of transfer of property in the reject coal).
The first invoice is for 90% of the mining fee payable in cash, which is computed with reference to the quantity of washed coal at the contract price as per CMDA. The second invoice is for the balance 10% of the mining fee payable in cash, compyted with reference to the quantity of washed coal at the contract price as per CMDA. These two invoices are issued by PKCL, Chhattisgarh on RVUNL, Chhattisgarh. GST at the rate of 18% under heading 998622 is charged.
The third invoice issued by Applicant on RVUNL, Chhattisgarh is also for the mining fee, computed with respect to the property in the reject coal transferred to PKCL in terms of the CMDA. Here too, GST is charged at the rate of 18% under heading 998622;
On the basis of the two invoices for mining fees payable in cash issued by PKCL, AEL raises back to back invoices.
RVUNL, Chhattisgarh also issues two invoices, one for the washed coal on RVUNL’s TPS where such washed coal is delivered. The other invoice is on the Applicant for the coal rejects with the following description “Washery Rejects (Barter Supply against Mining Service)”.
Under the two invoices issued by RVUNL, Chhattisgarh GST is charged @ 5% which is. tax leviable on coal under heading 2701. It is in these invoices, for the first time, Compensation Cess is charged @ Rs.400/- PMT.
(j) Since the Applicant is required to initially incur all expenses in accordance with the CMDA, as far as the Compensation Cess is concerned, the Applicant, at all relevant times, deposited Compensation Cess, calculated @ Rs.400/- per metric ton on the total quantity of the ROM coal (equivalent to quantity of washed. coal and coal rejects) in the electronic cash ledger of RVUNL.
(k) The Applicant understands that instead of debiting the Compensation Cess on the total quantity of coal, RVUNL debited Compensation Cess equal to the quantity of the washed coal upon issuance of an invoice by RVUNL, Chhattisgarh to the respective TPS located in the State of Rajasthan, and thereafter, debited the balance Compensation Cess at the time of issuance of an invoice for the coal rejects in the name of the Applicant.
(l) Until 26th July, 2018, the Applicant availed ITC of the Compensation Cess and utilized the same for payment of Compensation Cess on the sale of coal rejects, without collecting the same from the buyer, by issuing a credit note in favour of the buyer for the same.
(m) The above position continued until Notification No. 2/2018-Compensation Cess dated 26th July, 2018 was issued, whereby a new Entry 41A was inserted, which reads as under:
Coal rejects supplied by coal washery, arising out of coal on which compensation cess has been paid and no(#) input fax credit thereof has not been availed by any person
(l) # (the word “no” has been removed vide Corrigendum F. No. 354/255/2018-TRU (Pt-11), dated 2-8-2018) Two conditions are imposed by the aforesaid Notification. They are (i) Compensation Cess is paid on coal and (ii) ITC is not availed of the Compensation Cess so paid. These two conditions are satisfied in this case.
(m) After the said Notification dated 26th July 2018, while the Applicant continued to deposit Rs. 400/- per ton or the total quantity of the coal in the electronic cash ledger of RVUNL, which is a sum of total of washed coal and coal rejects, the Applicant did not avail of ITC of the Compensation Cess paid by RVUNL and shown in the taxable invoice issued by RVUNL in relation to coal rejects. The Applicant in fact, did not charge or collect Compensation Cess from its customer to whom coal rejects were sold.
(p) While the Applicant showed the payment of Compensation Cess, which was paid after availing ITC of the Compensation Cess paid by RVUNL, the Applicant issued a Credit Note to the customer for the same. The Applicant, in other words, did not collect the Compensation Cess on coal rejects from its customer prior to 26th July, 2018 also.
3. It is in this context that the Applicant is seeking ruling on the following issues:-
I. Whether Compensation Cess is leviable on total quantity of raw coal or washed coal?
II. Whether coal rejects supplied by Coal Washery are exempt from levy of Compensation Cess once Compensation Cess on raw coal or, washed coal and coal rejects, as the case may be, is discharged?
III. If the answer to Question (11) above is in the affirmative, whether subsequent supply (or sale) of coal rejects attracts Compensation Cess?
4. Personal Hearing:-
Keeping with the established principles of natural justice, personal hearing in the matter was extended to the Applicant through virtual mode and accordingly their authorized representative Shri Vishal Agrawal (Tax Practitioner), Shri Manish Saxena (Chief Financial officer) & Shri Haresh Nikam (Manager, Corporate Accounts and tax dept) of the applicant appeared for the online hearing before the authority on 31-03-2021 and reiterated their contention.
5. The legal position, Analysis and Discussion:-
AT the very outset, we would like to make it clear that the provisions for implementing the CGST Act, 2017 and the Chhatt:sgarh GST Act, 2017 [hereinafter referrer to as “the CGST Act and the CGGST Act”] are similar and thus, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the CGGST Act, 2017. Now we sequentially proceed to discuss the issues involved seriatim in the ruling so sought by the applicant and the law as applicable in the present case.
5.1 Section 96 of CGST Acts, 2017: Authority for advance ruling, stipulates as under:-
Subject to the provisions of this Chapter, for The purposes of this Act, the Authority for advance ruling constituted under the provisions of a State Goods and Services Tax Act or Union Territory Goods and Services Tax Act shall be deemed to be the Authority for advance ruling in respect of that State or Union territory.
Section 97(2) of CGST Act, 2017 stipulates that:-
The question, on which the advance ruling is sought under this Act, shall be in respect of—
(a) classification of any goods or services or both;
(b) applicability of a notification issued under the provisions of this Act;
(c) determination of time and value of supply of goods or services or both;
(d) admissibility of input tax credit of tax pad or deemed to have been paid;
(e) determination of the liability to pay tax on any goods or services or both;
(f) whether applicant is required to be registered;
(g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.
Further 103 of CGST Act, 2017 stipulates about the ruling pronounced as under: The advance ruling pronounced by the Authority or the Appellate Authority under this Chapter shall be binding only –
a. On the applicant who had sought it in respect of any matter referred to in sub-section (2) of section 97 for advance ruling;
b. On the concerned officer or the jurisdictional officer in respect of the applicant.
Thus in view of the above section 103 of CGST Act, 2017, the ruling so sought by the Applicant would be binding only on the Applicant and on the concerned officer or the jurisdictional officer as above.
5.2 Now coming to the merits of the case it is seen that Notification No. 01/2017-compensation cess (Rate) dated 28.06.2017 prescribes rate of Compensation cess to be levied on the intro-state or inter-state supplies of certain goods mentioned in said notification. Serial No. 39 of the Notification No. 01/2017-compensation cess (Rate) dated 28.06.2017 prescribes the following rates of compensation cess:-
Thus, as per Notification No. 01/2017-compensation cess (Rate) dated 28.06.2017, Rs. 400 per tone is leviable as compensation cess under Chapter Heading / Sub-heading 2701. Further as per Notification No. 01/2017- Central Tax (Rate) doted 28.06.2017, 2.5% Central GST is also leviable for the same heading i.e. 2701 under schedule I.
5.3 Notification No.02/2018-Compensation Cess (Rate)dated 26/07/2018, read with corrigendum issued under F.No. 354/255/2018-TRU (Pt-II) dated 2/8/2018 stioulates as under:-
[TO BE PUBLISHED IN PART II, SECTION 3, SUB-SECTION (1) OF THE GAZETTE OF INDIA, EXTRAORDINARY]
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(Department of Revenue)
Notification No. 2/2018-Compensation Cess (Rate)
New Delhi, the 26th July, 2018
G.S.R. (E).- In exercise of the powers conferred by sub-section (2) of section 8 of the Goods and Services Tax (Compensation to States) Act, 2017 (15 of 2017), the Central Government, on the recommendations of the Council, hereby makes the following further amendments in the notification of the Government of India, in the Ministry of Finance (Department of Revenue), No. 1/2017-Compensation Cess (Rate), dated the 28th June, 2017, published in the Gazette of India, Extraordinary, Part Il, Section 3, Sub-section (i), vide number G.S.R. 720 (E), dated the 28th June, 2017, namely:-
In the said notification, in the Schedule, –
(i) after S. No. 41 and the entries relating thereto, the following serial numbers and the entries shall be inserted, namely:-
