2016 (11) TMI 914 - AT - Central Excise

Demand was made under Rule 6(3) (1) at the rate of 10% of the value of the goods - M/s. Bajaj Holding & Investment Ltd. is not a SEZ Developers but it is a contractor, - Held that - From the letter of the Department of Commerce, it is clear that the M/s. Bajaj Holding & Investment Ltd. is an SEZ Developer. Moreover, while making an allegation in the show cause notice that the appellant is contractor, no material evidence was adduced by the department that whether the M/s. Bajaj Holding & Investment Ltd. is contractor or SEZ Developer. This Tribunal in the case of Ultratech Cement Ltd. 2014 (8) TMI 655 - CESTAT MUMBAI held that even if the buyer is contractor of SEZ unit or developer. Rule 6 of Cenvat Credit Rules cannot be made applicable for demanding 10% of the value of the goods supplied to SEZ. As per the above discussion, I am of the considered view that demand of 10% confirmed and upheld by the lower authorities is not sustainable. The impugned order is set aside and appeal is allowed.

Summary

Issues:
- Appeal against Order-in-Appeal upholding Order-in-Original and penalty imposition.
- Determination of SEZ status of buyer affecting demand under Rule 6.
- Applicability of Rule 6 regarding payment of 10% for goods supplied to SEZ contractor.

Analysis:
1. The appeal was filed against Order-in-Appeal upholding the Order-in-Original and the penalty imposed. The Commissioner (Appeals) had rejected the appeal while reducing the penalty to Rs. 2000. The appellant challenged this decision before the Tribunal.

2. The case revolved around the demand made under Rule 6(3)(1) at a 10% rate of the goods supplied to M/s. Bajaj Holding & Investment Ltd., SEZ. The adjudicating authority confirmed the demand and imposed a penalty, which was partially upheld by the Commissioner (Appeals), leading to the appellant's appeal before the Tribunal.

3. The appellant argued that M/s. Bajaj Holding & Investment Ltd. was an SEZ Developer, not a contractor, supported by a letter from the Department of Commerce. The appellant contended that even if they were considered a contractor, the goods supplied remained for SEZ purposes. Citing a relevant case, the appellant claimed that Rule 6 should not apply in such circumstances.

4. The Revenue, represented by the Assistant Commissioner, supported the findings of the impugned order, maintaining the demand and penalty imposition.

5. After considering both sides' submissions, the Tribunal found that the Department of Commerce confirmed M/s. Bajaj Holding & Investment Ltd.'s status as an SEZ Developer. The Tribunal noted the lack of evidence proving the buyer's contractor status and referenced a precedent where Rule 6 was deemed inapplicable for demanding 10% for goods supplied to SEZ contractors. Consequently, the Tribunal held the demand unsustainable, set aside the impugned order, and allowed the appeal in favor of the appellant.