2014 (3) TMI 597 - AT - Central Excise

Cenvat Credit - Supply of SEZ unit without payment of duty - Challenge on the strength of certain provisions of the Special Economic Zones Act, 2005 and the Special Economic Zones Rules, 2006 - Held that - necessity of considering the question whether Rule 6(6)(i) as amended by Notification No.50/2008 dated 31.12.2008 can be applied retrospectively does not arise in this case. The issue stands decided against the Revenue by a decision of this Tribunal in SUJANA METAL PRODUCTS LTD 2011 (9) TMI 724 - CESTAT, BANGALORE which pertains to a period prior to 31.12.2008. The period of dispute in this case is also prior to the said date - Decided in favour of assessee.

Summary

Issues:
1. Demand raised under Rule 6(3)(b) of the CENVAT Credit Rules, 2004.
2. Applicability of Rule 6(3) to goods cleared to SEZ developers.
3. Retrospective application of the amendment to Rule 6 by Notification No.50/2008.

Analysis:

Issue 1: The appeal was filed against a demand raised on the assessee under Rule 6(3)(b) of the CENVAT Credit Rules, 2004. The department alleged that goods cleared to SEZ developers without payment of duty should be treated as "exempted goods," and the appellant failed to maintain separate accounts for common inputs used in the manufacture of dutiable products and exempted products. The original authority upheld the demand, which was also affirmed by the appellate authority.

Issue 2: The appellant contended that the provisions of Rule 6 of the CCR, 2004 were not applicable to them during the period of dispute, citing the Special Economic Zones Act, 2005, and the Special Economic Zones Rules, 2006. The appellant argued that the amendment to Rule 6 by Notification No.50/2008 was retrospective. However, the impugned order held that the amendment had only prospective effect, making Rule 6(3) applicable to the appellant for the period before 31.12.2008.

Issue 3: The Additional Commissioner acknowledged a previous Tribunal judgment in the case of M/s. Sujana Metal Products Ltd. vs. CCE, Hyderabad, where it was held that clearances to SEZ developers should be considered as exports and not as clearances of exempted goods, thus ruling out the applicability of Rule 6(3) to such cases. Despite the Tribunal's decision being under appeal, no stay order was produced. The Tribunal in the present case found that the issue had already been decided against the Revenue by a previous decision, and as the period of dispute was prior to the amendment date, the impugned order was set aside, and the appeal was allowed.

This judgment highlights the importance of maintaining separate accounts for dutiable and exempted goods and clarifies the applicability of Rule 6 of the CCR, 2004 to goods cleared to SEZ developers. The retrospective application of amendments to rules was also a key point of contention in this case.