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2018 (3) TMI 742 - AT - Central ExciseCENVAT credit - supply of goods to developer of special economic zone - maintenance of separate records u/r 6 of CCR - Held that - The exclusion provision in rule 6 of CENVAT Credit Rules 2004 is restricted to goods that are cleared for export or such as are deemed to have been exported under the Foreign Trade Policy or any other enactment. In so far as Special Economic Zone Act 2005 is concerned there is no distinction between supply of the goods to a unit or to a developer. Penalty u/s 11AC - Held that - The decision of the Hon ble High Court of Andhra Pradesh in the case of Sujana Metals Products Ltd. 2015 (3) TMI 781 - ANDHRA PRADESH HIGH COURT has held that the scope of amendment to rule 6 of CENVAT Credit Rules, 2004 and its applicability being subject to interpretation precluded the invoking of the extended period of limitation. The ingredients for the extended period of limitation are the same as that justifying the invoking of section 11AC of Central Excise Act, 1944 - penalty set aside. Appeal dismissed - decided against Revenue.
Issues: Appeal against dropping of demand for recovery of 10% of goods value for non-maintenance of separate records under CENVAT Credit Rules, 2004.
Analysis: 1. The appeal was filed by the Revenue against the dropping of demand for recovery of 10% of the value of goods by a company cleared to a developer of a Special Economic Zone due to non-maintenance of separate records of input/input services. The Revenue argued that the obligation to maintain separate books was not waived until an amendment in 2008 and that the payment of 10% of the value of exempted goods was a consequence of non-compliance with the rules. 2. The respondent contended that the liability to pay duty was imposed based on the assumption that the supplies were exempt as export goods, but were not covered under the waiver provision of the rules. The respondent argued that the requirement to maintain separate records for input/input services used in common for supplies to Special Economic Zones was mandatory. The respondent also pointed out that the Special Economic Zone Act did not differentiate between supplies to units or developers, and therefore, they were entitled to exemption from the penalty as per section 26 of the Act. 3. The decision of the High Court of Andhra Pradesh in a similar case held that the amendment to the rules and its applicability were subject to interpretation, which prevented the invocation of the extended period of limitation. The court found that the appellate authority was justified in setting aside the penalty as the ingredients for the extended period of limitation were not met. Consequently, the appeal of the Revenue was deemed without merit and dismissed. In conclusion, the appellate tribunal upheld the decision of the lower authorities to drop the demand for recovery of 10% of the goods' value due to non-maintenance of separate records under the CENVAT Credit Rules, 2004. The tribunal found that the respondent was entitled to exemption from the penalty based on the interpretation of the rules and the provisions of the Special Economic Zone Act.
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