2014 (9) TMI 633 - HC - Central Excise

Cenvat Credit - Applicability of Amendment - supply of goods to SEZ - Whether the amendment to the Cenvat Credit Rules 2004, by substituting clause(i) of sub-rule (6) of Rule 6 of Cenvat Credit Rules 2004 by way of notification No.50/2008-C.E (N.T.) dated 31.12.2008 is prospective in operation or retrospective - Held that - benefit of non-reversal/maintenance of separate inventory was extended when the excisable goods were cleared to a unit in a special economic zone. The said benefit was not extended when the excisable goods removed without payment of duty or cleared to a developer of a special economic zone for their authorized operation. However, in exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944) and section 94 of the Finance Act, 1994 (32 of 1994), the Central Government amended the Cenvat Credit Rules, 2004 by issue of a notification - amendment has to be construed as retrospective in nature and the benefit of Rule 6(6)(1) as amended in 2008 has to be extended to the goods cleared to a developer of a Special Economic Zone for their authorized operations. Therefore, we do no see any merit in these appeals - Decided against Revenue.

Summary

Issues:
1. Whether the amendment to the Cenvat Credit Rules 2004 is prospective or retrospective?
2. Whether the Third amendment of 2008 to the Cenvat Credit Rules, 2004, is prospective or retrospective?

Analysis:

Issue 1:
The common question of law in these appeals was whether the amendment to the Cenvat Credit Rules 2004, specifically the substitution of clause(i) of sub-rule (6) of Rule 6, is prospective or retrospective. The assessee, a chemical manufacturer, availed Cenvat Credit without maintaining separate accounts for inputs used in dutiable and exempted products. The dispute arose concerning the duty payment on goods cleared to SEZ developers. The Tribunal allowed the appeal, deeming the amendment as clarificatory and retrospective, granting benefit to the assessee. The revenue contended that the amendment was prospective from 31.12.2008. The court referred to legal precedents and held that the substitution of a provision makes it part of the law from inception, thus, ruling in favor of the assessee.

Issue 2:
The second issue involved the interpretation of the Third amendment of 2008 to the Cenvat Credit Rules, 2004. The amendment extended the benefit of exemption from reversal of Cenvat credit on inputs used for manufacturing goods cleared to SEZ units or developers. The amendment, effective from 31.12.2008, included developers of SEZs for authorized operations. The court analyzed the SEZ Act 2005, which deems SEZs outside India's customs territory for authorized operations. The court emphasized that the amendment was clarificatory, aiming to remove doubts, and should be construed retrospectively. Referring to legal principles and circulars, the court concluded that the amendment's benefit should apply to goods cleared to SEZ developers. Consequently, the appeals were dismissed in favor of the assessee, upholding the retrospective nature of the amendment and the benefit extended to SEZ developers.

In conclusion, the judgments clarified the retrospective application of the amendments to the Cenvat Credit Rules 2004, providing insights into the legal interpretation of statutory provisions and amendments affecting duty payments on goods cleared to SEZ units and developers.