Dear Sir,

Please find the trailing mail from PWC giving clarification on valuation of goods
i.e. coal on which the levy of new central excise duty as effected by budget
2011 should be based upon. This is for your kind information and needful

Regards
Samiran Dutta
Sr. Manager (Finance)
Coal India Limited

From: rajeev.kumar.agarwal@in.pwc.com [rajeev.kumar.agarwal@in.pwc.com]

Sent: Tuesday, March 01, 2011 7:37 PM
To: Samiran Dutta
Cc: grctax@gmail.com; GM FINANCE MCL - Sri Sampath Lyyenger Kannan;
gmfinmcl@yahoo.co.in; kurian.modisseril@gmail.com; gm_bharatpur12@rediffmail.com;
asokedey09@yahoo.co.in; sudhirk122333@gmail.com; ghoshbikram@indiatimes.com;
ghoshbikram@hotmail.com; hqfinance@yahoo.com; mailbimal2009@gmail.com;
gahoi52@yahoo.co.in; tridib sengupta; cmd_sectt@yahoo.com;
siladitya.sarkar@in.pwc.com; sudhir.sahu19@gmail.com; manish.jalan@in.pwc.com;
anilk_pandey62@rediffmail.com; shankarray34@gmail.com; GM FINANCE MCL - Sri
Sampath Lyyenger Kannan; babla175@gmail.com
Subject: Fw: Coal India - Central Excise Duty on Coal

Dear Mr. Samiran Dutta,

This has reference to the discussions we had with you with regard to the valuation of goods (i.e. coal)
for the purpose of levy of central excise duty pursuant to the amendments made in the Union Budget
2011. It is understood that Coal India (CIL) as well as subsidiary companies are recovering basic
price, surface transportation charges (STC), silo charges, cutting & sizing charges, stowing excise
duty, clean energy cess, royalty, VAT/CST and other local taxes, if any.

The valuation for the purpose of levy of central excise duty on excisable goods cleared to unrelated
person would be 'transaction value' in terms of Section 4 of the Central Excise Act, 1944. The term
'transaction value' has been defined to mean the price actually paid or payable for the goods, when
sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to
pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at
the time of the sale or at any other time, including, but not limited to, any amount charged for, or to
make provision for, advertising or publicity, marketing and selling organization expenses, storage,
outward handling, servicing, warranty, commission or any other matter; but does not include the
amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such
goods.

In view of the above definition, the value for the purpose of levy of central excise duty would include
the basic price of coal, STC, silo charges, cutting and sizing charges, since the said charges are
recovered in connection with the sale. However, any amount charged towards excise duty, sales tax
and other taxes at actuals would not form part of the transaction value since specifically excluded
from the definition. The term 'other taxes' has not been defined in the central excise statute. The
Hon'ble Supreme Court in the case of CCE vs. Kisan Sahkari Chinni Mills Ltd. [2001 (132) ELT
523 (SC)] while upholding the decision of the Tribunal has held that the expression “tax” has to be
understood in the widest sense and would include all money raised by taxation including taxes levied
by the Union and State Legislatures and rates and other charges levied by local authorities under
statutory powers. Based on the said observation, the Hon'ble Supreme Court in the referred case held
that the Administration Charges required to be paid by sugar factory under the Uttar Pradesh Sheera
Niyantran Adhiniyam, 1964 being a compulsory exaction made under an enactment and therefore, is
a duty or impost in the nature of tax and hence excludible for arriving at the assessable value for levy
of excise duty.

Following the ratio enunciated by the Apex Court, any amount of duty/tax charged under a statute
towards compulsory exaction would not form part of the assessable value for levy of central excise
duty. In view thereof, CIL would not be required to charge central excise duty on royalty, clean energy
cess and other statutory levies. In other words, the assessable value for the purpose of levy of central
excise duty on coal would include basic coal price, STC, sizing and cutting charges, silo charges but
would exclude royalty, VAT and other taxes, etc. in the nature of statutory levy.

For any clarification, please revert.

Our opinion is based on the understanding of the legal provisions as well as the facts, if any, as
understood by us. Should the facts relied upon by us above be otherwise, it is imperative that we be
informed so that we can examine the legal implications in the background of the correct factual
perspective. Our opinion is based on the law as on date. Tax laws are subject to change from time to
time and any such change may affect the advice contained in our opinion. We have no responsibility
to update our advice for the events and circumstances occurring after the date of this opinion unless
specifically requested by you.

Regards,
____________________________________________________________________________________________
Rajeev Kumar Agarwal | Manager – Indirect Tax – Tax and Regulatory Services | PricewaterhouseCoopers
South City Pinnacle – 4th Floor, Plot X1/1, Block-EP, Sector-V, Salt Lake | Kolkata – 700 091 | India
Tel +91 33 4404 6171 | Mobile +91 9831143988 | Board +91 33 4404 6000 | Fax +91 33 4404 6166
Email rajeev.kumar.agarwal@in.pwc.com

For PwC insights visit :

• Direct Taxes Code 2009 – Uncoded
• GST in India

----- Forwarded by Rajeev Kumar Agarwal/IN/TLS/PwC on 03/01/2011 07:24 PM -----

Rajeev Kumar Agarwal/IN/TLS/PwC To sdutta@coalindia.in

02/28/2011 07:59 PM cc grctax@gmail.com, gmf.mcl@coalindia.in, gmfinmcl@yahoo.co.in,
9831143988 kurian.modisseril@gmail.com, gm_bharatpur12@rediffmail.com,
Kolkata asokedey09@yahoo.co.in, sudhirk122333@gmail.com,
IN ghoshbikram@indiatimes.com, ghoshbikram@hotmail.com,
hqfinance@yahoo.com, bimal jha <mailbimal2009@gmail.com>@INTL,
gahoi52@yahoo.co.in, tridib sengupta <babla175@gmail.com>,
 cmd_sectt@yahoo.com, Siladitya Sarkar/IN/TLS/PwC@AMERICAS-IN,
sudhir.sahu19@gmail.com, Manish Jalan/IN/TLS/PwC@AMERICAS-
IN, anilk_pandey62@rediffmail.com, shankarray34@gmail.com,
gmf.mcl@coalindia.in

Subjec Coal India - Central Excise Duty on Coal

t

This document is classified as : Business Email - DC1 - PwC Internal Use

Dear Mr. Samiran Dutta,

The Union Finance Budget 2011 has been tabled today in the Parliament by the Hon'ble Finance
Minister. Amongst other proposals, Central Excise duty @ 5% would be leviable onCoal (chapter
27.01), in terms of the Tenth Schedule to the Finance Bill, 2011. The said amendment would be
effective from the midnight of 28th February, 2011. In view of the said amendment, goods (coal)
cleared from the mines w.e.f. 1st March, 2011 would attract central excise duty @ 5% plus cess. The
effective duty would be 5.15%.

However, the goods would be subject to central excise duty @ 1% provided that no CENVAT credit is
availed under the provisions of CENVAT Credit Rules, 2004. (Notification no. 1/2011-CE dtd
01.03.2011). In that case the effective rate of duty would be 1.03%. However, if this exemption is
availed by you and coal is cleared on 1%, no CENVAT credit would be available to your customer.

In case you require any guidance in the matter, please let us know.

Our opinion is based on the understanding of the legal provisions as well as the facts, if any, as
understood by us. Should the facts relied upon by us above be otherwise, it is imperative that we be
informed so that we can examine the legal implications in the background of the correct factual
perspective. Our opinion is based on the law as on date. Tax laws are subject to change from time to
time and any such change may affect the advice contained in our opinion. We have no responsibility
to update our advice for the events and circumstances occurring after the date of this opinion unless
specifically requested by you.

Regards,
____________________________________________________________________________________________
Rajeev Kumar Agarwal | Manager – Indirect Tax – Tax and Regulatory Services | PricewaterhouseCoopers
South City Pinnacle – 4th Floor, Plot X1/1, Block-EP, Sector-V, Salt Lake | Kolkata – 700 091 | India
Tel +91 33 4404 6171 | Mobile +91 9831143988 | Board +91 33 4404 6000 | Fax +91 33 4404 6166
Email rajeev.kumar.agarwal@in.pwc.com

The information transmitted, including any attachments, is intended only for the person or entity to
which it is addressed and may contain confidential and/or privileged material. Any review,
retransmission, dissemination or other use of, or taking of any action in reliance upon, this information
by persons or entities other than the intended recipient is prohibited, and all liability arising therefrom
is disclaimed. If you received this in error, please contact the sender and delete the material from any
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