MADA Market Fee on Coal: Whether Includible in Assessable Value Under Central Excise Act – CESTAT Kolkata Ruling in Bharat Coking Coal Ltd. vs Commr. CGST & CX
Background and Context
The CESTAT Kolkata examined a significant question of Central Excise law in the matter of Bharat Coking Coal Ltd. Vs Commr. CGST & CX (CESTAT Kolkata), arising from an Order-in-Original dated 08.02.2017 passed by the Commissioner of Central Excise & Service Tax, Dhanbad. The core dispute revolved around whether the Market Fee levied under Section 90A of the Bihar Mineral Area Development Authority Act, 1986 — as adopted in Jharkhand — was required to be included in the assessable/transaction value of coal for the purpose of computing Central Excise duty liability.
The appellant, M/s. Bharat Coking Coal Ltd., a Government of India undertaking and a wholly-owned subsidiary of M/s. Coal India Ltd., is engaged in mining and selling coal in the state of Jharkhand. Central Excise duty on coal at 5% ad valorem had been made operative with effect from 01.03.2011, and the assessable value was generally determined with reference to the basic price fixed by M/s. Coal India Ltd. (for regulated sales) or the agreed sale price inclusive of certain additional charges such as surface transportation (for auction sales). Taxes and levies separately charged in invoices were excluded from this calculation.
The Revenue's Allegation and the Show Cause Notice
A show cause notice dated 01/03.02.2016 was issued to the appellant by the jurisdictional authority, alleging that the appellant had been collecting a Market Area Development Authority (MADA) Market Fee — described on sales invoices as "Bazaar Fee/Tax" — from its customers during the period March 2011 to October 2015, but had not included this amount in the assessable/transaction value of coal for Central Excise duty purposes. The alleged short-payment of Central Excise duty and cess on this account was quantified at Rs. 2,49,46,326/- (comprising Basic Excise Duty of Rs. 2,43,28,850/-, Education Cess of Rs. 4,11,651/-, and Secondary and Higher Education Cess of Rs. 2,05,825/-).
The department had first detected this discrepancy during an audit undertaken in October 2013 for the period February–September 2013. Subsequent communications from the Range Officer led the appellant to furnish month-wise details, which revealed that the total amount collected from customers under the head "Bazaar Fee/Tax" during the relevant period was Rs. 41,78,32,279/-.
The Market Fee was charged at 1% of the invoice value of coal, and the fact of its collection was openly disclosed on the invoices. However, it was not reflected in the ER-1 returns filed by the appellant.
The Statutory Framework: Section 89 vs. Section 90A
A central analytical issue before the Tribunal was the distinction between two separate provisions introduced into the Bihar Mineral Area Development Authority Act, 1986 by the Amendment Act, 1992 (24 of 1992):
Section 89 – Tax on Land Use
Section 89 of the Bihar Mineral Area Development Authority Act, 1986 provided for the levy of a tax on land being used for mining, commercial, or industrial purposes. The rate was capped at Rs. 1.50 per square meter annually.
Section 90A – Market Fee on Commodity Transactions
Section 90A, introduced by a separate section of the same Amendment Act, provided for:
- Declaration of a Market Area where sale or transaction of commodities takes place
- Levy of a Market Fee on sale or transaction of any commodity at a rate not exceeding one per centum of the sale value
- Requirement for persons engaged in such trade to obtain a licence from the Authority
- Deposit of collected Market Fee into the State fund, with prescribed allocations for civic amenities, infrastructure, and marketing facilities within the declared area
The Tribunal emphasized that Section 89 and Section 90A were inserted by two separate amending provisions — Sections 8 and 10 of the Amendment Act respectively — and operated in entirely distinct spheres. The subject levy in the present case was under Section 90A, not Section 89.