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2018 (1) TMI 1166 - AT - Central ExciseBenefit of N/N. 67/1995 - clearance to SEZ - deemed exports - The department was of the view that as the final products are cleared without payment of duty, the appellants are not eligible for the benefit of exemption of duty under N/N. 67/1995 for the reason that the said notification does not specify clearances made to SEZ - whether the appellants are eligible for exemption under N/N. 67/1995, when the final products are cleared to SEZ? - Held that - The clause (1) in the above notification has been amended by N/N. 25/2016-CE dated 14.06.2016, whereby the words Free Trade Zone has been substituted by the words Special Economic Zone. The amendment has been made by way of substitution - The decision in the case of Lotus Power Gears Pvt. Ltd. 2016 (6) TMI 998 - KARNATAKA HIGH COURT has held that the amendment brought by way substitution would take effect retrospectively. The Tribunal in the case of Ultratech Cements Ltd. 2015 (10) TMI 1058 - CESTAT CHENNAI had occasion to consider the very same issue and observed that the benefit of notification cannot be denied for the reason that the finished goods are cleared to SEZ. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Eligibility for exemption under Notification No. 67/1995 when final products are cleared to SEZ. 2. Retrospective application of amendments made by way of substitution. Detailed Analysis: 1. Eligibility for exemption under Notification No. 67/1995 when final products are cleared to SEZ: The primary issue for consideration was whether the appellants were eligible for exemption under Notification No. 67/1995 when their final products were cleared to Special Economic Zones (SEZ). The appellants argued that clearances made to SEZ should be treated as exports, and thus, they should be eligible for the exemption. They cited the amendment to Notification No. 67/1995 by Notification No. 25/2016-CE, which substituted the term "Free Trade Zone" with "Special Economic Zone," arguing that such amendments should have retrospective effect. The relevant part of Notification No. 67/1995, as it stood during the material time, stated that the exemption would not apply to inputs used in the manufacture of final products exempt from duty, except for goods cleared to specified zones like Free Trade Zones, which was later amended to include SEZs. The Tribunal referred to the case of Ultratech Cements Ltd. Vs. CCE & ST, Trichy, where it was held that the benefit of the notification could not be denied for goods cleared to SEZ. The Tribunal also referenced the decision in CCE, Bangalore Vs. Lotus Power Gears (P) Ltd., which held that amendments made by way of substitution have retrospective application. The Tribunal concluded that the final products cleared to SEZs are not exempted goods under any notification issued under Section 5A of the Central Excise Act. The goods cleared to SEZs are treated as exports, and hence, the provisions of sub-rules (1), (2), and (3) of Rule 6 of the Cenvat Credit Rules, 2004, would not be applicable. This interpretation aligns with the overriding provisions of Section 51 of the SEZ Act, which states that the provisions of the SEZ Act shall prevail over any inconsistent laws. 2. Retrospective application of amendments made by way of substitution: The appellants contended that the amendment to Notification No. 67/1995 by Notification No. 25/2016-CE, which substituted "Free Trade Zone" with "Special Economic Zone," should be applied retrospectively. They relied on the decision in CCE, Bangalore Vs. Lotus Power Gears (P) Ltd., where it was held that amendments made by way of substitution have retrospective effect. The Tribunal agreed with this argument, noting that the amendment brought by way of substitution should take effect retrospectively. This interpretation was supported by the Tribunal's decision in the case of Ultratech Cements Ltd., which dealt with a similar issue and concluded that the benefit of the notification could not be denied for goods cleared to SEZs. Conclusion: The Tribunal set aside the impugned orders, concluding that the demand could not sustain. The appeals were allowed with consequential reliefs, and it was held that the appellants were eligible for exemption under Notification No. 67/1995 for the disputed period, given the retrospective application of the amendment and the treatment of SEZ clearances as exports.
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