2015 (10) TMI 766 - AT - Central Excise

Waiver of pre deposit - whether the Cenvat credit of duty paid on inputs used in the manufacture of finished goods, which were supplied to SEZ developers would be admissible or not - held that - Amendment to Rule 6 (6) of Cenvat Credit Rules, 2004 w.e.f. 31/12/08 has to be treated as retrospective amendment and for the period prior to 31/12/08 also the supplies to SEZ developers have to be treated as exports and the Cenvat credit in respect of inputs used in the manufacture of finished goods supplied to SEZ developers would be admissible. - Stay granted.

Summary

Issues:
Admissibility of Cenvat credit on inputs supplied to SEZ developers prior to December 2008.

Analysis:
The appellant, a plywood manufacturer, supplied final products to SEZ developers during 2007-2008 to 2008-2009 without duty payment as SEZ supplies are treated as exports. The dispute arose regarding the admissibility of Cenvat credit on duty paid inputs used in the finished goods supplied to SEZ developers. The Department issued a show cause notice for Cenvat credit demand, which was initially set aside by the Additional Commissioner but later reversed by the Commissioner (Appeals). The appellant appealed against this decision along with a stay application.

The appellant argued that previous Tribunal judgments and a High Court ruling supported their case, emphasizing that supplies to SEZ developers before December 2008 should be treated as exports, making Cenvat credit admissible. They requested a waiver of pre-deposit for the appeal and stay on recovery. The Department opposed the stay application, relying on different Tribunal and Apex Court judgments and highlighting the amendment to Rule 6 (6) of the Cenvat Credit Rules in 2008.

Upon review, the Tribunal found that previous judgments favored the appellant's position, emphasizing the retrospective nature of the Rule 6 (6) amendment and the treatment of supplies to SEZ developers as exports even before December 2008. The Tribunal distinguished the cited judgments by the Department, stating they were not directly applicable to the current case. Consequently, the Tribunal concluded that the appellant had a prima facie case in their favor, waived the pre-deposit requirement for the appeal, and stayed the recovery of Cenvat credit demand, interest, and penalty.

In summary, the Tribunal ruled in favor of the appellant, allowing the appeal and granting a stay on the recovery of Cenvat credit demand, interest, and penalty. The decision was based on the retrospective nature of the Rule 6 (6) amendment and the treatment of supplies to SEZ developers as exports even before December 2008, as supported by previous judgments.