2012 (11) TMI 1007 - AT - Central Excise

Duty demand - Availment of CENVAT Credit - Clearance of products to the DTA on payment of duty - Held that - in respect of the demand raised on the appellant in relation to the clearances made to M/s. L & T Hi-tech City Ltd. (SEZ developer). Those clearances cannot be treated as clearances of exempted goods and must be considered as exports. Consequently the provisions of Rule 6 (3) of the CCR 2004 are inapplicable. In respect of the clearances made by the appellant to M/s. Wipro Ltd., the demand is liable to be set aside in view of the provisions of Rule 6 (6) (i) as it stood during the period of dispute. This provision clearly laid down that the provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in the case of excisable goods removed, without payment of duty, to a unit in SEZ. The appellant has established that, during the material period, M/s. Wipro Ltd. were maintaining a manufacturing unit in the SEZ. Apparently, the lower authorities erroneously considered them as SEZ developer - Decided in favour of assessee.

Summary

Issues:
Challenge against demand raised under Rule 6(3) of CENVAT Credit Rules 2004 for clearances to SEZ developers/units without separate accounts maintenance.

Analysis:
The appeal challenges a demand raised on the appellant for clearances made to SEZ developers/units without maintaining separate accounts, as required by Rule 6(1) of the CCR 2004. The department demanded 10% of the sale price of goods cleared to SEZ developers/units during the period in question. The demand was based on a show-cause notice considering clearances to 4 parties in the SEZ. The adjudicating authority dropped the demand for two parties classified as SEZ units but confirmed it for two SEZ developers, imposing a penalty and interest. The appeal contests this decision.

The appellant's counsel argued that the demand for clearances to SEZ developers should be set aside based on legal provisions and precedents. Specifically, the counsel referenced the Development Commissioner's permission for one company and a Tribunal decision for the other, along with several Tribunal decisions supporting their stance. The counsel prayed for the appeal to be allowed based on these arguments.

The Deputy Commissioner (AR) highlighted the department's appeal against a related Tribunal decision but noted that the High Court had not stayed the Tribunal's decision. After considering the submissions, the judge ruled in favor of the appellant. The judge found that clearances to one SEZ developer should be treated as exports, not exempted goods, making Rule 6(3) inapplicable. For clearances to the other company, the demand was set aside based on Rule 6(6)(i) provisions during the dispute period, as the company maintained a manufacturing unit in the SEZ. The judge concluded by setting aside the impugned order and allowing the appeal.

In conclusion, the judgment favored the appellant by setting aside the demand for clearances made to SEZ developers/units, citing legal provisions and precedents supporting the appellant's arguments.