2017 (1) TMI 213 - AT - Central Excise

Captive consumption - Denial of exemption Notification No.67/95-CE - clinker used in the manufacture of cement within the unit. - Penalty - Held that - the same issue involving large number of cement units. We find that the denial of exemption by the Original Authority is not legally justifiable. A reference can also be made to the decision of the Hon ble Supreme Court in the case of Ambuja Cement Ltd. 2015 (11) TMI 1413 - SUPREME COURT. . The Hon ble Supreme Court allowed the appeal of the assessee for claim of exemption under the above mentioned notification by interpreting the said notification along with Rule 6 of the Cenvat Credit Rules, 2001 - Appeal allowed - decided in favor of the assessee.

Issues:
1. Exemption under Notification No.67/95-CE for captively consumed clinker used in the manufacture of cement cleared to SEZ units without payment of duty.
2. Interpretation of the proviso to Notification No.67/95-CE regarding the applicability of the exemption to SEZ units.
3. Revenue neutrality in demanding duty on intermediate products supplied to SEZ units.

Analysis:
1. The case involved a dispute regarding the denial of exemption under Notification No.67/95-CE for captively consumed clinker used in the production of cement cleared to SEZ units without payment of duty. The Original Authority had confirmed a demand for duty and imposed a penalty on the appellant based on this issue.

2. The appellant argued that the SEZ was not specifically mentioned in the list of categories of clearances under the proviso to Notification No.67/95-CE. They contended that since the SEZ Act came into effect after the issuance of the notification, the exemption should apply to supplies made to SEZ units. The Tribunal referred to previous decisions and legislative amendments to support the appellant's claim, emphasizing that the word "FTZ" in the notification was substituted with "SEZ" post the enactment of the SEZ Act. The Tribunal held that the appellant was eligible for the exemption under the notification.

3. The Tribunal further discussed the concept of revenue neutrality in demanding duty on intermediate products supplied to SEZ units. It highlighted that demanding duty on such intermediate products would result in unnecessary scriptory work without benefiting the revenue. The Tribunal cited previous judgments to support the argument that captive consumption notifications aim to avoid additional administrative burdens without causing revenue loss to the government. Ultimately, the Tribunal found no justification for confirming the demands on the grounds of revenue neutrality.

4. The Tribunal also referenced a decision of the Hon'ble Supreme Court in a similar case involving a cement manufacturer, where the court allowed the claim of exemption under the notification by interpreting it along with the Cenvat Credit Rules. Based on the discussions and the precedent set by previous judgments, the Tribunal set aside the original order, allowing the appeal in favor of the appellant.

5. The Tribunal concluded that the denial of exemption by the Original Authority was not legally justifiable, and the appellant was eligible for the exemption under Notification No.67/95-CE for captively consumed clinker used in the manufacture of cement cleared to SEZ units without payment of duty. The appeal was allowed, and the original order was set aside.

This detailed analysis of the judgment highlights the key issues, arguments presented by the parties, legal interpretations, and the ultimate decision reached by the Tribunal, providing a comprehensive understanding of the case.

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