CESTAT Hyderabad Upholds Denial of CENVAT Credit on Clean Energy Cess, Deletes Penalty: Penna Cement Industries Ltd vs Commissioner of Central Tax

Case Overview

Background and Facts of the Case

CESTAT Hyderabad delivered a significant ruling in the matter of Penna Cement Industries Ltd Vs Commissioner of Central Tax, partially allowing the appeal filed by the assessee against an Order-in-Original dated 25.01.2018 passed by the Commissioner of Central Tax.

The genesis of this dispute lay in a Show Cause Notice dated 09.11.2017, pursuant to which the Commissioner examined whether the assessee — M/s Penna Cement Industries Ltd — was legitimately entitled to avail CENVAT credit in respect of Clean Energy Cess that it had paid during the relevant period. After adjudicating the proposals contained in the SCN, the Commissioner held against the assessee and confirmed the denial and recovery of CENVAT credit amounting to ₹8,37,49,447/-.

Notably, the assessee had already reversed the said amount upon being pointed out by the department, albeit under protest. The Commissioner accordingly:

• Appropriated the amount so reversed by the assessee
• Vacated the protest recorded against such reversal
• Imposed a penalty of ₹5,000/- under Rule 15(1) of the CENVAT Credit Rules, 2004

Aggrieved by this order, the assessee preferred an appeal before the Tribunal.

The Core Legal Question

The central issue before CESTAT Hyderabad was narrow and specific:

Whether Clean Energy Cess paid by the assessee was available as CENVAT credit under Rule 3 of the CENVAT Credit Rules, 2004?

This question had direct implications for the treatment of Clean Energy Cess — a levy that various cement and other manufacturing companies had paid — and whether the same could be set off against their output duty liability through the CENVAT credit mechanism.

Prior Tribunal Ruling on the Same Issue

Both the assessee's counsel and the departmental representative acknowledged before the Tribunal that this very issue had been considered and decided in an earlier Final Order. In Final Order No. A/30684-30692/2019 dated 16.07.2019, this same Bench of CESTAT Hyderabad had disposed of nine appeals filed by different assessees — including the present appellant — all of which involved the identical legal question.

After a detailed hearing, the Tribunal had, in that earlier order, concluded that: