2021 (7) TMI 1351 - AT - Central Excise

CENVAT Credit - common inputs for taxable as well as exempt goods - issuance of ARE-1s under self sealing and self certification with remarks Export to SEZ - non-maintenance of separate accounts for common inputs on which Cenvat credit was availed - clearance of goods in violation of provisions of Rule 6(3) of the Cenvat Credit Rules, 2004 without payment of duty in terms of Rule 30 of Special Economic Zones Rules, 2006 - Time Limitation - HELD THAT - Supplies into by DTA unit have to be treated as export in terms of Section 2(m) of Special Economic Zones Act, 2005. They are neither chargeable to nil rate of duty nor exempt from payment of duty under exemption notification. That anomaly under rule 6 (6)(i) of Cenvat Credit Rules, 2004 was duly removed when the said clause 6(6)(i) of Cenvat Credit Rules, 2004 was substituted and SEZ developers were also treated on the same footing as SEZ units. In various judgments which have been relied upon by the learned Advocate it has been clearly laid down that the said substituted rule is clarificatory in nature and, therefore, would have retrospective effect from the date when Cenvat Credit Rules, 2004 were brought into force - reliance can be placed in the case of SUJANA METAL PRODUCTS LTD. VERSUS COMMISSIONER OF C. EX., HYDERABAD 2011 (9) TMI 724 - CESTAT, BANGALORE . Time Limitation - HELD THAT - The findings of the Commissioner that invoking extended period is very much within the legal ambit of the department cannot be sustained as the Appellant was duly following procedure as laid down under CBEC circular No. 29/2006-Cus dated 27-12-2006, and such clearances were well within the knowledge of the department - In the case of Sujana Metal Products Ltd Vs. CCE, Hyderabad, which has been upheld by the Hon ble Andhra Pradesh High Court, this Tribunal apart from setting aside the duty demand on the very same issue on merits also set aside the duty demand on the ground of limitation. Thus, the duty demand, demand of interest and imposition of equal amount of penalty is neither sustainable on merits nor on the ground of limitation - appeal allowed - decided in favor of appellant.

Summary

Issues:
Violation of Rule 6(3) of Cenvat Credit Rules, 2004 for exporting goods to SEZ without payment of duty and not maintaining separate accounts for common inputs availed under Cenvat credit.

Analysis:
The appeal challenged an Order-in-Original passed by the Commissioner of Central Excise, Bolpur, regarding the export of Mild Steel Rounds and TMT Bar to SEZ developers without paying duty. The show cause notice alleged violations of Rule 6(3) of Cenvat Credit Rules, 2004 and failure to maintain separate accounts for common inputs. The Appellant argued they followed CBEC circular No. 29/2006-Cus, treating supplies to SEZ as exports. The Appellant also cited Rule 6(6) of Cenvat Credit Rules, 2004, which exempted excisable goods removed without duty payment to SEZ units. The Advocate contended that a substitution in Rule 6(6)(i) was clarificatory and retrospective, supported by various judgments. The Appellant also claimed the demand was time-barred, citing the Sujana Metal Products Ltd case, upheld by the Andhra Pradesh High Court.

The Tribunal examined the judgments cited and found that supplies to SEZ by DTA units qualify as exports under Section 2(m) of the SEZ Act. The anomaly in Rule 6(6)(i) was rectified by a substitution, treating SEZ developers equally with SEZ units. The Tribunal agreed that the substitution was clarificatory and retrospective. Regarding limitation, the Tribunal disagreed with the Commissioner's findings, noting that the Appellant followed the CBEC circular, and the clearances were known to the department. Citing the Sujana Metal Products Ltd case upheld by the Andhra Pradesh High Court, the Tribunal ruled the duty demand, interest, and penalty were unsustainable both on merits and limitation grounds.

Therefore, the Tribunal set aside the Order-in-Original, allowing the appeal with consequential relief as per law.