2016 (6) TMI 1314 - AT - Central Excise

CENVAT Credit - whether the appellant is required to reverse 10% of the value of the exempted goods cleared to SEZ Developers in terms of the provisions of Rule 6 of the Cenvat Credit Rules 2004? - Held that - Identical issue decided in the case of THE COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX AND THE COMMISSIONER OF CENTRAL EXCISE VERSUS M/S FOSROC CHEMICALS (INDIA) PVT LTD AND OTHERS 2014 (9) TMI 633 - KARNATAKA HIGH COURT , where it was held that 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 - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Whether the appellant is required to reverse 10% of the value of the exempted goods cleared to SEZ Developers in terms of Rule 6 of the Cenvat Credit Rules 2004.

Analysis:

Issue 1: Reversal of 10% value of exempted goods
The appeal challenged the denial of cenvat credit to the appellant by the Commissioner (Appeals) due to clearing final products to SEZ Developers without payment of duty. The appellant failed to maintain separate accounts for inputs used in these products and did not exercise options under Rule 6(3)(2) or Rule 6(3)(1) of the Cenvat Credit Rules 2004. The issue was whether the appellant should reverse 10% of the value of exempted goods. The appellant cited various decisions favoring their stance, including M/s. Sujana Metal Products Ltd. and M/s. Siemens Ltd. The appellant also referred to previous cases where similar demands were allowed, indicating consistency in decisions. The judgments of the Karnataka High Court and Mumbai Bench supported the retrospective nature of Rule 6(6)(i) and the treatment of goods supplied to SEZ Developers as exports. The Chennai Bench also held that goods supplied to SEZ Developers are to be treated as exports under the SEZ Act. The learned AR supported the impugned order, but after considering the arguments and case laws, the Tribunal found in favor of the appellant, allowing the appeal and setting aside the impugned order with consequential relief.

This detailed analysis of the judgment highlights the key issue of whether the appellant was required to reverse 10% of the value of exempted goods cleared to SEZ Developers under Rule 6 of the Cenvat Credit Rules 2004. The Tribunal's decision was based on the appellant's arguments supported by various decisions and the retrospective nature of Rule 6 amendments.