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2008 (10) TMI 222 - AT - Central ExciseCenvat Credit Supply to SEZ Reversal of 8% on exempted goods rule 6 Conversion of FTZ into SEZ Held that - It can be seen that during the relevant period though the status of KFTZ was changed in to KSEZ by ministry of Commerce and Industries, the provisions of Central Excise remained the same i.e. Section 3 of Central Excise Act, 1944 and rule 2(8) of Central Excise Rules, 1944 indicated the KSEZ as KFTZ only. It is undisputed that supplies were made to units located in the survey numbers as indicated in rule 2(8) of Central Excise Rules, 1944. - In the said position of law governing eligibility to retention of MODVAT credit on export goods, the said Notfn. No- 12/2001 can also construed as clarificatory Notfn. Issued to formalize the continuity of benefit contemplated in Notfn. No. 126/94 to units located in erstwhile Kandla Free Trade Zone and later Special Economic Zone, as the units continued to qualify as 100% EOU, irrespective whether these were referred as units in Free Trade Zone or Special Economic Zone . Reversal of 8% is not required.
Issues:
Interpretation of rules differentiating between Free Trade Zone (FTZ) and Special Economic Zone (SEZ) for excise duty exemption; Reversal of 8% value of goods supplied to units in Kandla Special Economic Zone (KSEZ); Applicability of Rule 57AD of Central Excise Rules, 1944; Impact of notification dated 27th March, 2001 on the duty liability for goods supplied to 100% Export Oriented Units (EOU) in the disputed period. Analysis: The case involved a dispute regarding the excise duty liability and the requirement to reverse 8% of the value of goods supplied to units in Kandla Special Economic Zone (KSEZ) during a specific period. The respondent, engaged in manufacturing and sales, was initially supplying goods to units in Kandla Free Trade Zone (KFTZ) under an exemption. However, following a change in the status of KFTZ to KSEZ, the excise duty exemption was questioned, leading to the duty liability, interest, and penalty imposed by the adjudicating authority. The Commissioner (Appeals) set aside the original order, prompting the revenue to appeal. The core issue revolved around the interpretation of Rule 57AD of Central Excise Rules, 1944, and whether the respondent was obligated to reverse 8% of the value of goods supplied to units in KSEZ. The Revenue contended that the respondent should reverse the said amount based on the rules, while the respondent argued against it, citing specific definitions and notifications. Upon detailed consideration of submissions and records, the Tribunal analyzed the legal provisions and notifications relevant to the case. The Tribunal noted the change in the status of KFTZ to KSEZ and the subsequent notification dated 27th March, 2001, which aligned the survey numbers of KFTZ with KSEZ. The Tribunal emphasized the importance of harmoniously interpreting the rules and provisions to determine the duty liability and exemption eligibility. The Tribunal extensively quoted the findings of the Commissioner (Appeals) to support its decision. The Tribunal highlighted the procedural requirements under Rule 57CC concerning the adjustment of credit on inputs for exempted final products. It emphasized that the law governing the retention of MODVAT credit on export goods supported the respondent's position, especially regarding supplies to 100% EOU units. Ultimately, the Tribunal upheld the Commissioner (Appeals)'s findings, emphasizing that despite the change in the status of KFTZ to KSEZ, the provisions of Central Excise remained consistent. The Tribunal concluded that the supplies made by the respondent to units in the specified survey numbers aligned with the rules, leading to the rejection of the appeal and upholding of the impugned order.
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