No GST payable on washed/rejected coal from washery on which Compensation Cess is paid and ITC is not availed
The AAR, Chhattisgarh in the matter of M/s Parsakente Collieries Limited [Advance Ruling No. STC/AAR/08/2021 dated December 17, 2021] has ruled that nil rate of Compensation Cess is applicable on supply of coal rejects by the coal washery, as long as it arise from the raw coal on which appropriate Compensation Cess has been paid during the supply and where no Input Tax Credit (“ITC”) of the Compensation Cess so paid is availed, in terms of Sl. 41A of Notification No. 1/2017- Compensation Cess dated June 28, 2017 (“the Compensation Cess Rate Notification”)
M/s Parsakente Collieries Limited (“the Applicant”) is a Mine Development Operator engaged in rendering mining services entered into a Coal Mining and Development Agreement (“CMDA”) with Rajasthan Rajya Vidyut Utpadan Nigam Limited (“RVUNL”) which has been allotted a coal block by the Central Government. The Applicant also operates a Coal washery, for washing the raw coal as extracted from the mine and the coal rejects after washing the coal is the property of the Applicant.
Further, the Applicant as per its contractual obligations under CMDA, deposits the Compensation Cess attributable to the entire quantity of raw coal in the electronic cash ledger of RVUNL. Then, RVUNL debits the applicable Compensation Cess in its electronic cash ledger at the time of supply of washed coal from RVUNL Chhattisgarh to RVUNL Rajasthan and also at the time of supply of coal rejects to the Applicant. The sum total of the Compensation Cess paid by RVUNL on the quantity of washed coal and the quantity of coal rejects is equal to the Compensation Cess payable on the entire quantity of raw coal.
The Applicant contended that vide Final order dated May 25, 2021 in Application No. STC/AAR/04/2021 (“the Impugned Order”), it was held that since the Applicant is a coal washery, the coal rejects supplied by it will attract Nil rate of Compensation Cess when due Compensation Cess on the total quantity of the raw coal stands discharged and also when no ITC has been availed. The Applicant submitted that this application has been filed as the Impugned Order did not explicitly states that the stipulation in entry at Sl. No. 41A of the Compensation Cess Rate Notification would stand satisfied as long as compensation Cess on the entire quantity of raw coal was discharged though such an interpretation is evident from a holistic reading of the Impugned Order.
Whether the Applicant, being a coal washery is entitled to the benefit of Nil rate of Compensation Cess in terms of Entry 41A of the Compensation Cess Rate Notification on coal rejects supplied by it, if such coal rejects arise from the raw coal on which applicable Compensation Cess has been paid by the RVUNL and no ITC has been availed on it?
The AAR, Chhattisgarh in the matter of Advance Ruling No. STC/AAR/08/2021 held as under:
Sl. 41A of the Compensation Cess Rate Notification:
|Chapter / Heading / Sub-heading / Tariff item
|Description of Goods
|Rate of goods and services tax compensation cess
|Coal rejects supplied by a coal washery, arising out of coal on which compensation cess has been paid and input tax credit thereof has not been availed by any person.
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