MARCH 2, 2010

Clean Energy Cess on Coals – FM puts 'Polluter Pays' Principle into practice

By J M Kishore

LESSER dependency on fossil fuels and an attempt to harness renewable energy sources is indeed a basic requirement for combating global warming now. Towards achieving this objective, Hon'ble Finance Minister proposed to establish a National Clean Energy Fund for funding research and innovative projects in clean energy technologies. To build the corpus of this National Clean Energy Fund , levy of “clean energy cess” on coal produced in India is proposed in the Finance Bill 2010 vide Clauses 82 and 83. Incidentally, this levy of cess will also apply to imported coal.

As per Clause 82(3), t here shall be levied and collected a cess to be called the Clean Energy Cess, as duty of excise, on goods specified in the Tenth Schedule, being goods produced in India, at the rates set forth in the said Schedule for the purposes of financing and promoting clean energy initiatives, funding research in the area of clean energy or for any other purpose relating thereto.

The said tenth schedule covered the following goods.

2701 Coal; briquettes, ovoids and similar solid fuels manufactured from coal

2702 Lignite, whether or not agglomerated, excluding jet

2703 Peat (including peat litter), whether or not agglomerated

As seen from the tariff, these three headings cover various coals.

2701 covers various Coals such as Anthracite Coal, Bituminous Coal, Coking Coal, Non-Coking Coal/Steam Coal , Briquettes ,Ovoids and similar fuels. This heading also covers Pulverised Coal dispersed in water (also called Slurry Coal) .

2702 covers Brown Coal (also called as Lignite and it is a fuel intermediate between Coal and Peat) .The heading does not cover and excludes Jet (which falls under 2530).

2703 covers Peat (formed of partly carbonized vegetable material). Other Coals such as Crushed Peat, Peat litter etc. (used in stables for soil improvement) .

What is the rate of cess ? Is it Rs. 100 PMT or Rs 50 PMT ?

Clause 82(3) of the Finance Bill specifies that “t here shall be levied and collected in accordance with the provisions of this Chapter, a cess to be called the Clean Energy Cess, as duty of excise, on goods specified in the Tenth Schedule, being goods produced in India, at the rates set forth in the said Schedule ….” The schedule specifies the rates as Rs.100 PMT for each of the category. However, interestingly, Hon'ble Finance Minister's speech indicated that the levy is only Rs.50 PMT.

Relevant date for levy of the Cess :

The date from which the levy comes into effect, the rules and procedure of collection shall be notified after the enactment of the Finance Bill, 2010. Similarly, It is possible that the rate of the cess may be separately notified at a later date as Rs.50 PMT after the enactment of the Finance Bill 2010.

Purpose of levy and method of utilization of Clean Energy Cess :

Clause 82(3) specifies that this Clean Energy Cess being levied would be used for the purposes of financing and promoting clean energy initiatives, funding research in the area of clean energy or for any other purpose. Initially, this cess amount would be credited to the Consolidated Fund of India and the Central Government may utilize the amount for the purposes specified in sub-section 83 (3). Further, the cess shall be for the purposes of the Union and the proceeds thereof shall not be distributed among the States and the manner of assessment, collection, utilization and any other matter relating to cess shall be such as may be prescribed by rules framed in this behalf as specified in Clause 83 of The Finance Bill 2010.

Central Government to make Rules :

As per Clause 83 (1), the Central Government is empowered to make rules by way of a Notification for carrying out the provisions of this levy. These Rules provide the manner of assessment, collection and utilisation of the cess.

Method of levy :

This Clean Cess Energy is to be levied as duty of excise . Further, the levy shall be in addition to any cess or duty leviable on the goods..The levy is also to be made at the time of import of these coals covered under Tariff Heading 2701. the Education Cess 3% is also to be collected on the portion of this Clean Energy Cess.