2017 (6) TMI 1066 - AT - Central Excise

Reversal of CENVAT credit - Rule 6(3) (b) of CENVAT Credit Rules 2004 - demand on the premise that in terms of Section 2(m) of SEZ Act clearance of goods or providing service from DTA to SEZ unit or SEZ developer constitutes export and the appellants had not reversed an amount equal to 10% of value of the finished goods from the cenvat account, at the time of clearance from the factory in respect of the goods cleared to SEZ Developers and SEZ Co-Developers - whether supplies made to SEZ developer is export and consequently whether the appellant is liable to pay 10% value of the goods supplied to SEZ developer? Held that - much water was flown on the issue and it was consistently held that the supplies made to SEZ developer is indeed export , consequently no payment is required i.e. equal to 10% value of the goods in terms of Rule 6(3) (b) of CENVAT Credit Rules - reliance was placed in the case of SUJANA METAL PRODUCTS LTD. Versus COMMISSIONER OF C. EX., HYDERABAD 2011 (9) TMI 724 - CESTAT, BANGALORE , where it was held that the definition of the term export under the SEZ Act shall prevail over the definition of term export under the Customs Act. Therefore, supplies made to SEZ from DTA units shall be treated as export, supplies made to SEZ are held to be export provisions of Rule 6 of CCR does not arise at all. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Whether supplies made to SEZ developers constitute "export" under the SEZ Act.
2. Whether the appellant is liable to pay 10% value of the goods supplied to SEZ developers under Rule 6(3)(b) of the Cenvat Credit Rules, 2004.
3. The applicability of Rule 6 of the Cenvat Credit Rules, 2002/2004 to supplies made to SEZ developers.
4. The retrospective application of Notification No. 50/2008-C.E. (N.T.), dated 31-12-2008.
5. The invocation of the extended period of limitation for demand and imposition of penalties.

Issue-wise Detailed Analysis:

1. Whether supplies made to SEZ developers constitute "export" under the SEZ Act:
The appellant argued that supplies to SEZ developers are considered "export" and do not attract the payment stipulated under Rule 6(3)(b) of the Cenvat Credit Rules, 2004. This position was supported by multiple judicial decisions, including Sujana Metal Products Ltd. v. Commissioner of C. Ex., Hyderabad, which was upheld by the Andhra Pradesh High Court, Commissioner of C. Ex., Bangalore-III v. Lotus Power Gears (P) Ltd., and Commissioner of C. Ex. v. Dee Development Engineers Pvt. Ltd. These cases consistently held that supplies to SEZ developers are indeed "export."

2. Whether the appellant is liable to pay 10% value of the goods supplied to SEZ developers under Rule 6(3)(b) of the Cenvat Credit Rules, 2004:
The Tribunal found that the supplies made to SEZ developers are considered "export," and consequently, no payment equal to 10% of the value of the goods is required under Rule 6(3)(b) of the Cenvat Credit Rules, 2004. This conclusion was based on the consistent judicial interpretation that supplies to SEZ developers are treated as exports, thereby exempting them from the provisions of Rule 6(3)(b).

3. The applicability of Rule 6 of the Cenvat Credit Rules, 2002/2004 to supplies made to SEZ developers:
Rule 6 of the Cenvat Credit Rules, both 2002 and 2004, stipulates that CENVAT credit shall not be allowed on inputs used in the manufacture of exempted goods unless separate accounts are maintained. However, sub-rule (5) of Rule 6 of CCR, 2002 and sub-rule (6) of Rule 6 of CCR, 2004 provide exceptions for goods cleared to SEZ units. The Tribunal observed that if supplies to SEZ are treated as dutiable goods, the provisions of Rule 6 are not attracted. Hence, the supplies to SEZ developers are exempt from the provisions of Rule 6.

4. The retrospective application of Notification No. 50/2008-C.E. (N.T.), dated 31-12-2008:
The Tribunal held that the amendment to Rule 6(1) of the CCR, 2004 by Notification No. 50/2008-C.E. (N.T.) is applicable retrospectively from 10-9-2004, when the CCR, 2004 came into existence. This amendment provided exceptions for supplies to SEZ developers, aligning with the consistent policy of the Central Government to grant concessions to SEZ units and developers. The Tribunal cited Supreme Court judgments to support the retrospective application of amendments made by substitution.

5. The invocation of the extended period of limitation for demand and imposition of penalties:
Given the complex interpretation of SEZ provisions under the Customs Act, SEZ Act, and Central Excise Rules, the Tribunal found no grounds for suppression by the assessees. Consequently, the extended period of limitation and the imposition of penalties were deemed inapplicable.

Conclusion:
The Tribunal set aside the impugned order, holding that the demand for payment under Rule 6(3)(b) of the Cenvat Credit Rules, 2004 is not sustainable. The appeals of the assessees were allowed with consequential relief, and the appeals of the Department were rejected. The cross-objection was also disposed of accordingly.

← Previous Next →