2017 (12) TMI 1133 - AT - Central Excise

Intermediate goods - N/N. 67/95-CE dt. 16.03.95 - Department however took the view that duty is payable on intermediate products consumed captively in manufacture of the final products cleared without payment of duty to SEZ, since SEZ unit is not included in the condition for exemption - Held that - the issue at hand is squarely covered by the case of M/s Ultratech Cements Ltd And Others Versus Commissioner of Central Excise And Service Tax, Tiruchirapalli And Others 2015 (10) TMI 1058 - CESTAT CHENNAI , which have unequivocally held that supplies made to SEZ / Developers by DTA unit are neither chargeable to Nil rate of duty nor exempt from payment of duty under exemption notification, hence they are not exempt goods for the purpose of Rule 2 (d) of Cenvat Credit Rules, 2004. The appellants are very much entitled to the benefit of Notification No.67/95-CE in respect of intermediate goods used to manufacture final products which were supplied to a SEZ unit - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Duty exemption on intermediate products used captively in the production of final products supplied to SEZ without payment of duty.

Analysis:
The case involved the appellant, engaged in the manufacture of industrial alcohol and chemicals, who cleared certain products to a unit in the Special Economic Zone (SEZ) without payment of duty. The appellants were availing duty exemption on intermediate products used captively in the production of final products. The issue arose when the Department contended that duty was payable on intermediate products consumed captively in the manufacture of final products cleared to SEZ, as SEZ units were not included in the circumstances allowing duty exemption. The original authority demanded duty with interest and imposed a penalty, which was upheld by the Commissioner (Appeals), leading to the appeal.

During the hearing, the appellant's consultant cited precedents where similar issues were decided in favor of the appellant. The Revenue supported the impugned order. After considering the arguments and facts, the Tribunal found that the issue was covered by previous case laws. The Tribunal referred to the decision in Surya Roshni Ltd. where it was established that supplies to SEZ by a Domestic Tariff Area (DTA) unit are not chargeable to Nil rate of duty or exempt from payment of duty, thus not qualifying as exempt goods under the Cenvat Credit Rules. The Tribunal also highlighted the definition of exempted goods under the Cenvat Credit Rules and the treatment of supplies to SEZ as exports under the SEZ Act. Following the precedents, the Tribunal held that the appellants were entitled to the benefit of duty exemption for intermediate goods used to manufacture final products supplied to a SEZ unit. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief as per law.