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2014 (8) TMI 655 - AT - Central ExciseCENVAT Credit - Rule 6 of CCR, 2004 - Common inputs/input services for manufacture of dutiable and exempted goods Cement cleared to contractors of the developers of SEZ without payment of duty Held that - The finished goods cleared by the appellants to contractors of SEZ units/developers without payment of duty during the period in dispute are not exempted goods within the meaning of Rule 2(d) of the Cenvat Credit Rules, 2004. Finished goods manufactured and cleared by the appellants to the contractors of SEZ units/ SEZ developers are subject to a rate of duty under the First Schedule to the Central Excise Tariff Act, 1985 and are not wholly exempt from payment of duty. Further, there is no notification issued under Section 5A(1) of the Central Excise Act, which grants exemption excise duty to good manufactured and cleared by a DTA unit to the contractors of SEZ units/SEZ developers. Therefore, it is submitted that both the conditions required to be fulfilled for the goods in question to qualify as exempted goods under Rule 2 (d) of the Cenvat Credit Rules, are not satisfied in the present case. Hence, the finished goods cleared by the appellants to the contractors of SEZ units/SEZ developers are not exempted goods. Accordingly, the provisions of Rule 6(1), 6(2) and 6 (3) of Cenvat Credit Rules, 2004 are not attracted in the present case. amendment under Rule 6(6)(i) made on 31.12.2008 is clarificatory in nature and is applicable retrospective from the date when the 2004 Rules were implemented. Accordingly, the impugned orders are set aside - Following decision of UOI Vs. Steel Authority of India Ltd. 2013 (5) TMI 460 - CHATTISGARH HIGH COURT - Decided in favour of assessee.
Issues Involved:
1. Legality and validity of tax demand on supplies of cement to contractors of SEZ developers without payment of duty. 2. Applicability of Rule 6(6) of CENVAT Credit Rules, 2004 to such supplies. 3. Whether the amendment to Rule 6(6) effective from 31.12.2008 is retrospective. 4. Classification of goods supplied to SEZ contractors as 'exempted goods' under Rule 2(d) of CENVAT Credit Rules, 2004. 5. Reliance on SEZ Act and Rules for claiming exemption and treatment of supplies as exports. Detailed Analysis: 1. Legality and Validity of Tax Demand: The core issue is whether the supplies of cement to contractors of SEZ developers under ARE-1 without payment of duty are legally valid. The adjudicating authority and the appellate order upheld the tax demand, asserting that these supplies were not covered under Rule 6(6) of CENVAT Credit Rules, 2004. The appellant argued that these supplies should be treated as exports and hence exempt from duty. 2. Applicability of Rule 6(6) of CENVAT Credit Rules, 2004: The appellant cleared cement without payment of duty to contractors who were not SEZ units or developers, invoking Rule 6(6). The department contended that since these contractors were not covered under Rule 6(6) at the relevant time, the appellant was required to pay an amount equal to 10% of the value of exempted goods under Rule 6(3)(i). The Commissioner (Appeals) upheld the demand, stating that the benefit of duty-free clearances was extended to SEZ developers only from 31.12.2008 and not retrospectively. 3. Retrospective Applicability of Rule 6(6) Amendment: The appellant argued that the amendment to Rule 6(6) effective from 31.12.2008, which included SEZ developers, was clarificatory and hence retrospective. They cited the ruling of the Hon'ble High Court of Chhattisgarh in the case of UOI vs. Steel Authority of India Ltd., which held that the amendment was clarificatory and applicable retrospectively. The Tribunal agreed with this reasoning, setting aside the impugned orders. 4. Classification of Goods as 'Exempted Goods': The appellant contended that the cement supplied to SEZ contractors was not 'exempted goods' under Rule 2(d) of CENVAT Credit Rules, 2004, as the goods were subject to a rate of duty and not wholly exempt. The Tribunal noted that for goods to qualify as 'exempted goods,' they must either be subject to nil rate of duty or exempted from the whole duty under a notification. Since the goods in question did not meet these criteria, they were not 'exempted goods,' and the provisions of Rule 6(1), 6(2), and 6(3) were not applicable. 5. Reliance on SEZ Act and Rules: The appellant relied on Section 26 of the SEZ Act, 2005, and Rule 30 of SEZ Rules, 2006, which provide for exemptions and concessions for SEZ developers and units. They argued that supplies to SEZ contractors should be treated at par with supplies to SEZ units/developers. The Tribunal acknowledged the overriding effect of SEZ Act over other laws, as per Section 51 of SEZ Act, and treated the supplies as exports, granting the appellant the claimed exemptions. Conclusion: The Tribunal concluded that the amendment to Rule 6(6) was clarificatory and retrospective, and the supplies to SEZ contractors were not 'exempted goods.' Consequently, the impugned orders were set aside, and the appeals were allowed with consequential relief as per law.
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