2011 (5) TMI 1 - AT - Central Excise

Non reversal of 10 per cent of the value of the goods in their CENVAT credit account for goods cleared to SEZ Developers/Co-Developers - Rule 6(6) of the Cenvat Credit Rules read with Notification No. 50/2008, CE(NT), dated 31-12-2008 - invoking period of limitation - Held that - Perusal of the show-cause notice discloses that the fact of non-maintenance of separate account of inputs used in dutiable goods and the goods supplied to SEZ was neither informed by the appellants to the department nor the said fact was disclosed in the statutory records filed by the appellants for the relevant period and this fact was admitted by Shri N.K. Nimkar, DGM (Excise) of the appellants in his statement dated 23-10-2008 - prima facie there was a case of suppression of relevant fact and hence it cannot be said that the department erred in invoking the extended period of limitation. Persuing the amendment which has been brought to Rule 6(6)(i), it is apparent that during the relevant period the benefit was essentially available only to the SEZ Units and not to the Developer of the Units. The same was sought to be extended to the Developer of the SEZ Unit and that too for their authorized operations and not for any other purpose, by way of amendment which came into force from 31-12-2008, which was much after the relevant period. Merely because the amending Notification stated that the clause was substituted for the original clause. It cannot be construed that it has come into operation retrospectively. Neither the Notification itself discloses the same nor any other material has been placed on record from which the intention of the Government could be disclosed that extension of the benefit to the Developer of SEZ was to be effective retrospectively. Mere word substitution cannot amount to extending the benefit retrospective. Regarding penalty - This issue need not be dealt with while dealing with the stay application and can be dealt with at the time of final hearing of the matter - directed the appellants to deposit 60 per cent of the amount demanded under the impugned order along with interest thereon within a period of ten weeks. On deposit of such amount, the balance amount shall stand waived including the penalty amount till the disposal of the appeal.

Issues Involved:
1. Stay of the order passed by the Commissioner (Appeals).
2. Retrospective application of Rule 6(6) of the CENVAT Credit Rules, 2004.
3. Definition of 'export' under the Special Economic Zones Act, 2005.
4. Limitation period for issuing the show-cause notice.
5. Imposition of penalty.

Issue-wise Detailed Analysis:

1. Stay of the Order Passed by the Commissioner (Appeals):
The appellants sought a stay on the order dated 22-2-2010 by the Commissioner (Appeals), which dismissed their appeal against the adjudicating authority's order dated 16-10-2009. The adjudicating authority had ordered recovery of Rs. 27,17,105 under Rule 14 of the CENVAT Credit Rules, 2004, read with Section 11A of the Central Excise Act, 1944, along with interest and an equal amount of penalty.

2. Retrospective Application of Rule 6(6) of the CENVAT Credit Rules, 2004:
The appellants argued that the amendment to Rule 6(6) by Notification No. 50/2008-CE(NT) dated 31-12-2008, which included "cleared to a unit in a special economic zone or to a developer of a special economic zone for their authorized operations," should be applied retrospectively. They relied on the Tribunal's decision in Sharman Fabrics v. CCE and the Supreme Court's decision in Government of India v. Indian Tobacco Association. However, the court noted that the Apex Court in the Indian Tobacco Association case did not lay down a general rule for retrospective application of substitutions. It emphasized that the intention and purport behind the notification must be considered, and in this case, there was no indication that the amendment was intended to be retrospective.

3. Definition of 'Export' under the Special Economic Zones Act, 2005:
The appellants contended that supply to SEZ Developers should be considered as 'export' under Section 2(m) of the SEZ Act, 2005, which defines 'export' to include supply to an SEZ Unit or Developer. However, the court noted that this definition applies specifically within the context of the SEZ Act and cannot be imported into the Central Excise Act or the Customs Act. The court referred to the Gujarat High Court's decision in Essar Steel Ltd. v. Union of India, which clarified that the term 'export' under the Customs Act, 1962, means taking goods out of India, and this definition cannot be replaced by the SEZ Act's definition.

4. Limitation Period for Issuing the Show-Cause Notice:
The appellants argued that the show-cause notice issued on 24-11-2008 for the period from June 2007 to September 2007 was barred by limitation. The court observed that the appellants had not informed the department about the non-maintenance of separate accounts for inputs used in dutiable goods and goods supplied to SEZ, which was admitted by their DGM (Excise) in his statement dated 23-10-2008. The court found that there was a prima facie case of suppression of facts, justifying the invocation of the extended period of limitation.

5. Imposition of Penalty:
The appellants contended that the matter related to the interpretation of law, and hence, the imposition of penalty was not justified. The court held that this issue would be addressed during the final hearing. However, it noted that if there was suppression of facts and a conscious decision by the assessee regarding duty liability, the imposition of penalty could not be ruled out, referencing the Supreme Court's decisions in Dharmendra Textile Processors and Rajasthan Spinning & Weaving Mills.

Conclusion:
The court did not find a prima facie case for a total waiver of the amount demanded. It directed the appellants to deposit 60% of the demanded amount along with interest within ten weeks, with the balance amount and penalty waived until the disposal of the appeal.

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