Clean Energy Cess | Meaning Cenvat Credit Rules |

Meaning of Clean Energy Cess, How Cenvat Credit can be claimed on Clean Energy Cess and Clean Energy Cess on Coal Notification are explained in detail below. ‘Clean Energy Cess’ was introduced in the year 2010 vide Finance Act, 2010 which imposed the ‘Clean Energy Cess’ on coal, lignite and peat produced from coal mines in India.

Clean Energy Cess is a kind of carbon tax and is levied in India as a duty of excise under Section 83 (3) of Finance Act, 2010 on Coal, Lignite and Peat (goods specified in the Tenth Schedule to the Finance Act, 2010) in order to finance and promote clean environment initiatives, funding research in the area of clean environment or for any such related purposes.

Clean Energy Cess Meaning Cenvat Credit Rules Coal Notification

The imposition of ‘clean energy cess’ is a step towards taking initiatives for ‘clean energy’ and demonstrates India’s commitment in tackling ‘climate change’

Introduction : Clean Energy Cess

It is relevant to note that in India carbon taxes are levied only on coal and its variants – lignite and peat. Even though many countries have had introduced the carbon taxes not only on coal but also on other fossil fuels like petroleum, natural gas etc., in recent years, number of countries have reduced the carbon taxes or postponed the imposition of such taxes. In any case, subsequent to the global financial crisis of 2008, many countries have either abolished or reduced or postponed their decisions on such carbon taxes.

It is relevant to note that the levy of ‘clean energy cess’ has been brought into effect from 1st July 2010 vide Notification No.1/2010-CEC dated 22.06.2010 issued under Section 83(2) of Finance Act, 2010.

It is also relevant to note that as Clean Energy Cess is levied as a duty of excise, it would also apply to imported coal, including washed coal under Section 3(1) of the Customs Tariff Act in the form of additional duty of customs (CVD).

As ‘Clean Energy Cess’ has been levied as a duty of excise, sub-section (7) of Section 83 of Finance Act, 2010 provides that the Central Government may, by notification in the Official Gazette, declare that any of the provisions of the Central Excise Act, 1944, relating to levy of, and exemption from duty of excise, refund, offences and penalties, confiscation and procedure relating to offences and appeals shall, with such modifications and alterations as it may consider necessary, be applicable in respect of clean energy cess. This has been notified vide Notification No.2/2010-CEC dated 22.06.2010.

Rates : Clean Energy Cess

The rate of ‘clean energy cess’ levied vide Section 83(3) of Finance Act, 2010 read with Tenth Schedule to Finance Act, 2010, shall be Rs.100 Per Tonne for following Goods:

Description of goods Chapter heading
Coal; briquettes, ovoids and similar solid fuels manufactured from coal 2701
Lignite, whether or not agglomerated, excluding jet 2702
Peat (including peat litter), whether or not agglomerated 2703

Government had granted partial exemption on ‘clean energy cess’ vide Notification No. 3/2010-CEC dated 22.06.2010 wherein the rate of ‘clean energy cess’ was reduced to Rs.50 per tonne.

However, the rate of cess was increased by the Government to Rs.200 per tonne vide Notification No. 1/2015-CEC dated 1.3.2015.

Further, it is relevant to note that Government has notified an exemption for all goods falling under tariff heading 2701, 2702 and 2703 other than raw coal, raw lignite and raw peat vide Notification No.4/2010-CEC dated 22.06.2010. Effectively, ‘clean energy cess’ is leviable only on raw coal, raw lignite and raw peat.

As regards the notified goods which are subject to ‘clean energy cess’, the Government has granted specific exemption to notified goods which are produced in the State of Meghalaya vide Notification No.5/2010-CEC dated 22.06.2010.

For the purpose of ‘collection and assessment’ of clean energy cess, the Government has notified Clean Energy Cess Rules, 2010 vide Notification No.6/2010-CEC dated 22.06.2010 which provides for registration, payment of cess, assessment of cess, manner of payment etc as regards levy of ‘clean energy cess’

Usage of Clean Energy Cess Collected

The amount collected by the Government by way of ‘clean energy cess’ is being used for the National Clean Energy Fund (NCEF) for funding research and innovative projects in clean energy technologies or renewable energy sources to reduce dependence on fossil fuels.

National Clean Energy Fund (NCEF) is a fund created in 2010-11 (announced in Union Budget 2010) for using the carbon tax. Thus, projects aiming at reduction of emissions with innovative technologies from different sectors get considered under this funding mechanism.

The usage of the fund collected as ‘clean energy cess’ is used for any project/scheme relating to Innovative methods to adopt to Clean Energy technology and Research & Development are eligible for funding under the NCEF.

An indicative list of such projects is as follows:

Projects supporting the development and demonstration of integrated community energy solutions, smart grid technology renewable applications with solar, wind, tidal and geothermal energy;

Projects in critical renewable energy infrastructure areas such as Silicon Manufacturing;

Projects which result in replacing existing technology in energy generation with more environmentally sustainable approach;

Projects related to environment management, particularly in the geographical areas surrounding the energy sector projects;

Renewable/Alternate Energy- includes advanced solar technologies, geothermal energy, biofuels from cellulosic biomass/algae/any waste, offshore Marine Technologies (Wind, Wave & Tidal) & Onshore wind energy technologies, Hydrogen & fuel cells.

Clean Fossil Energy- include power, oil, gas and coal technologies including coal gasification, shale oil/gas, lignite/Coal Bed Methane, advanced turbine and technology for IGCC power plants, methane hydrates, enhanced recovery from unconventional resources and fossil energy advanced research, carbon capture and sequestration as also carbon capture and reformation.

Basic Energy Sciences – include energy storage for hybrid and plug-in electric vehicles, solid state lighting, catalysis, biological and environmental research, advanced computing, high energy and nuclear physics etc.

The Fund may also support pilot & demonstration projects for commercialization in the relevant field.

Mission projects identified in the National Action Plan on Climate Change (NAPCC) and projects relating to R&D to replace existing technologies with more environment friendly ones under National Mission on Strategic Knowledge for Climate Change (NMSKCC).

The projects relating to creation of power evacuation infrastructure for renewables.