2012 (5) TMI 545 - AT - Central Excise

CENVAT Credit - Non maintenance of separate accounts - Whether an assessee is required to maintain separate account when goods are supplied to SEZ developers and no duty is paid - Held that - in the case of SEZ developers also, an assessee need not maintain separate accounts and is covered by the provisions of Rule 6(6)(i) of CENVAT Credit Rules, 2002 - Following decision of Sujana Metal Products Ltd. Vs CCE Hyderabad 2011 (9) TMI 724 - CESTAT, BANGALORE and in the case of Sobha Developers Ltd. Vs. CCE Bangalore 2011 (6) TMI 394 - CESTAT, BANGALORE - Decided against Revenue.

Summary

Issues:
1. Whether the appellant is liable to pay duty equivalent to 10% of the value of exempted goods cleared to SEZ developers without maintaining separate accounts for inputs used.
2. Denial of CENVAT Credit and penalty imposed on the appellant.

Analysis:
1. The appellant, engaged in manufacturing steel products, cleared CR sheets to an SEZ developer without paying duty under ARE-1 and availed CENVAT Credit on the inputs used. The issue arose regarding the requirement to maintain separate accounts for inputs used in exempted goods. Rule 6(1) of CENVAT Credit Rules, 2004, mandates either separate accounts or payment of 10% of the value of exempted goods. The appellant did not maintain separate accounts and cleared goods to an SEZ developer not specified in Rule 6(6). The Tribunal noted the case law of Sujana Metal Products Ltd. and Sobha Developers Ltd., where it was held that separate accounts are not necessary for goods supplied to SEZ developers under Rule 6(6)(i) of the Rules. Thus, the appellant was not required to maintain separate accounts, and the duty equivalent to 10% was not applicable.

2. Proceedings were initiated resulting in the denial of CENVAT Credit and imposition of a penalty equal to the credit amount. However, the Tribunal, relying on precedents, found that the appellant's actions were in accordance with Rule 6(6)(i) of the CENVAT Credit Rules, 2004. As the law did not mandate separate accounts for goods supplied to SEZ developers, the denial of credit and penalty were unjustified. The appeal filed by the Revenue was deemed to lack merit and was consequently rejected by the Tribunal.

This judgment clarifies the applicability of CENVAT Credit Rules to goods cleared to SEZ developers and emphasizes the importance of understanding the specific provisions governing such transactions to determine the obligations of manufacturers.