2018 (6) TMI 186 - AT - Central Excise

Refund of unutilized CENVAT credit - clearances made to SEZ - Exports - rejection of refund on the ground that clearances made to SEZ cannot be treated as exports - Held that - In the case of Hon ble High Court of Chattisgarh in Union of India Vs. Steel Authority of India Ltd. 2013 (5) TMI 460 - CHATTISGARH HIGH COURT it has been unequivocally held that goods supplied from DTA to developer of SEZ are to be treated as exports in view of Section 2M of the SEZ Act - refund to be allowed - appeal dismissed - Decided against Revenue.

Summary

Issues:
- Refund claim under Rule 5 of CENVAT Credit Rules, 2004 for unutilized credit related to clearances to SEZ.
- Interpretation of legal fiction created under SEZ Act, 2005.
- Applicability of Board Circular No. 29/2006 dated 27.12.2006.
- Impact of judicial precedents on the issue.

Analysis:
1. The case involved a refund claim under Rule 5 of CENVAT Credit Rules, 2004 for unutilized credit against clearances made to SEZ. The original authority rejected the claim, stating that clearances to SEZ cannot be treated as exports. However, the Commissioner (Appeals) allowed the appeal based on Board Circular No. 29/2006 dated 27.12.2006, leading to the department's appeal.

2. During the hearing, the department's representative reiterated the grounds of appeal, highlighting the judgment of the High Court of Gujarat in Essar Steel Ltd. The representative argued that this judgment would negate the Board Circular No. 29/2006 dated 27.12.2006, raising concerns about the legal implications.

3. On the other side, the respondent's counsel contended that the issue had been settled in various decisions, including Tribunal rulings, affirming that there is no bar to claiming a refund under Rule 5 for unutilized CENVAT credit on clearances to SEZ. Reference was made to Board Circular No. 1001/8/2015-CX8 dated 28.4.2015, emphasizing the entitlement to rebate and refund benefits for goods cleared from DTA to SEZ.

4. The Tribunal analyzed the arguments and reviewed relevant case records. The Revenue based its appeal on the Essar Steel Ltd. judgment, but the Tribunal noted distinctions in the facts and legal context. Citing the Sai Wardha Power Ltd. case, the Tribunal clarified that DTA supplies to SEZ should be treated as "export," emphasizing the need for a contextual analysis in legal interpretations.

5. The Tribunal referred to judgments by different High Courts and the Tribunal itself, establishing that clearances to SEZ or developers should be treated as exports. Notably, the legal fiction created under the SEZ Act was deemed applicable for determining the nature of such transactions. The Tribunal found ample precedent supporting the respondent's position.

6. Ultimately, the Tribunal concluded that the issue was settled in favor of the respondent. The department's appeal lacked merit, leading to its dismissal. The impugned order was upheld, affirming the respondent's entitlement to the refund claim under Rule 5 for unutilized CENVAT credit related to clearances made to SEZ.