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2019 (12) TMI 51 - AT - Central ExciseCENVAT Credit - recovery pertaining to the clearance of goods effected to developers of special economic zones - exclsusions of availing CENVAT Credit - rule 6(3) of CENVAT Credit Rules, 2004 - HELD THAT - The functioning and privileges of special economic zones are governed by the Special Economic Zones Act, 2005 which, has defined exports in section 2(m) therein to include clearances by units in the domestic tariff area to developers and units . Section 51 of Special Economic Zones Act, 2005 provides that, in the event of any inconsistency with any other law, these would prevail. Accordingly, clearances to developers in special economic zone are export and, thereby, within the exclusions prescribed in rule 6(5) of CENVAT Credit Rules, 2004. Appeal allowed - decided in favor of appellant.
Issues:
Challenge against recovery pertaining to clearance of goods to developers of special economic zones under exemption afforded by section 26 of Special Economic Zones Act, 2005. Interpretation of rule 6 of CENVAT Credit Rules, 2004 regarding discharge of liability for availing CENVAT credit on inputs/input services used in clearances to developers of special economic zones. Analysis: The appeal by M/s Malmo Steels Pvt Ltd challenges the recovery related to the clearance of goods to developers of special economic zones between May 2008 and December 2008 under the exemption provided by section 26 of the Special Economic Zones Act, 2005. The central issue revolves around the eligibility of the appellant for availing CENVAT credit attributable to inputs/input services procured for such clearances, contingent upon the discharge of liability under rule 6(3) of CENVAT Credit Rules, 2004. The jurisdictional central excise authorities argued that since these clearances are exempt from duty, they are not included in the inclusions listed in rule 6(6) of CENVAT Credit Rules, 2004. The Tribunal noted that rule 6 of CENVAT Credit Rules, 2004 outlines procedures to ensure that duties/taxes on inputs/input services used for manufacturing excisable goods and exempt goods are availed in accordance with rule 3 of the said Rules. Compliance with these rules includes the discharge of liability as prescribed in rule 6(3) of CENVAT Credit Rules, 2004. However, clearances to special economic zones, including developers, are excluded from this liability under rule 6(6) of CENVAT Credit Rules, 2004, treating them akin to exports. The Special Economic Zones Act, 2005 defines exports to include clearances by units in the domestic tariff area to developers and units in special economic zones, thereby categorizing clearances to developers as exports and falling within the exclusions of rule 6(5) of CENVAT Credit Rules, 2004. This interpretation aligns with previous decisions by the Tribunal and the High Court, as cited in Sujako Interiors Pvt Ltd v. Commissioner of Central Excise, Ahmedabad and Principal Commissioner of Central Excise, Bangalore - I v. Power Control Equipments (Unit - II). Based on these precedents, the Tribunal set aside the impugned order and allowed the appeal, recognizing the clearances to developers of special economic zones as falling within the export category and exempt from the liability under rule 6 of CENVAT Credit Rules, 2004.
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