Order date – 20 September 2022

Key Pointers -

• The Appellant, M/s. Punjab State Power Corporation Limited is Punjab Government undertaking engaged in generation, transmission and distribution of electricity which exempt under Notification No.1/2017 dated 28 June 2017.
• For generation of electricity an essential raw material is Coal which is procured from Coal India Ltd. Appellant has engaged some washeries in private sector on job work basis for the job of raw coal beneficiation who in turn supply washed coal to the appellant. Certain law quality coals are also generated during the process which is commonly referred as coal rejects are disposed of /sold by the washery.
• The issue here is whether the Coal rejects whose invoice is raised by the applicant upon washery is taxable under GST Act and Compensation cess Act in the hand of Appellant?
• The Punjab AAR observed that the coal rejects generated during the process of coal washing are nothing but coal with higher percentage of ash content. HSN 2701 covers Coal; Briquettes,Ovoids and similar solid fuels manufactured from coal. Therefore coal rejects are classifiable under HSN 2701 and as per notification No.01/2017Central Tax (Rate) dated 28.06.2017. Also 2.5 %central GST is also leviable for the same heading under schedule-I of the Rate Notification.
• It is pertain to mention that vide Notification No.02/2018 compensation cess (Rate) dated 20.07.2018 Nil rate of GST compensation cess on coal rejects supplied by a coal washery arising out of coal on which compensation cess has been paid and no input tax credit there for has been availed by person as notified vide Notification No.02/2018 dated 28.07.2018. As the appellant is not covered under the definition of coal washery the appellant is not admissible for any exemption from compensation cess. Also no other exemption notification has been issued in this regard.
• As per Section 16(2) where the goods are being received in lots or installments the registered person shall be entitled to take credit upon receipt of last installment. Thus if the appellant fulfill the condition under section 16(2) of CGST Act 2017 and if the type of ITC do not fall under the categories prescribed under section 17 of CGST Act 2017 the applicant is eligible to avail input tax credit of GST and compensation cess of raw coal brought from its supplier and transferred to washery for cleaning.