2020 (1) TMI 1052 - AT - Central Excise

CENVAT credit - goods cleared to SEZ unit - Rule 6(6) of CENVAT Credit Rules, 2004 - recovery in terms of the provisions of Rule 14 of the CENVAT Credit Rules, 2004 read with proviso to Section 11A of the Central Excise Act, 1944 - period from 04/12/2007 to 31/03/2008 and August, 2008, September 2008 respectively - HELD THAT - The appellant have made supplies to SEZ developer and not a unit in SEZ but his contention is that supplies made to SEZ developer is also considered as export because the appellant has cleared the goods to the SEZ developer under Rule 19 of CCR 2002 by filing ARE1 form and necessary proof of exports were being filed with the Department. Further, prior to the amendment in Rule 6(6)(i) by way of N/N. 50/2008, it is only the SEZ unit which was mentioned in the Rule 6(6) for exclusion and not SEZ developer. Subsequently vide the said N/N. 50/2008, the said notification has amended the Rule 6(6)(i) of CCR by substituting the word cleared to unit in a Special Economic Zone or a developer in SEZ for their authorized operations. As per the appellant, this amendment within the Rule 6(6)(i) is applicable retrospectively whereas as per the Department, it is applicable prospectively. This issue is now no more res integra in view of the decision of the Karnataka High Court in the case of THE COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX AND THE COMMISSIONER OF CENTRAL EXCISE VERSUS M/S FOSROC CHEMICALS (INDIA) PVT LTD AND OTHERS 2014 (9) TMI 633 - KARNATAKA HIGH COURT wherein it has been held that the amendment carried out in Rule 6(6) by way of Notification No.50/2008 was retrospective. The impugned order is not sustainable in law - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Demand of 10% value of goods cleared to SEZ developer.
2. Demand for interest.
3. Imposition of penalty.
4. Retrospective applicability of Notification No. 50/2008-CE(NT).

Issue-wise Detailed Analysis:

1. Demand of 10% value of goods cleared to SEZ developer:
The Commissioner confirmed the demand of ?58,41,780/- under Rule 14 of the CENVAT Credit Rules, 2004, asserting that the appellant cleared goods to a SEZ developer without payment of duty, considering such supplies as exempted. The appellant argued that supplies to SEZ developers are exports and thus should not be treated as exempted goods. The Tribunal referred to the Karnataka High Court's decision in the case of CCE&ST, Bangalore Vs. Fosroc Chemicals (India) Pvt. Ltd., which held that the amendment in Rule 6(6) by Notification No. 50/2008-CE is retrospective. Consequently, the Tribunal concluded that the demand for 10% of the value of goods cleared to the SEZ developer was not sustainable.

2. Demand for interest:
The Commissioner demanded interest under Section 11AB of the Central Excise Act, 1944, but did not quantify the amount. The appellant contended that since the supplies to SEZ developers are considered exports, the demand for interest is unwarranted. The Tribunal, aligning with the retrospective applicability of the amendment, found the demand for interest unsustainable.

3. Imposition of penalty:
The Commissioner imposed an equal penalty under Rule 15(2) of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. The appellant argued against the penalty, citing that supplies to SEZ developers are exports. The Tribunal, considering the retrospective amendment and the High Court's decision, set aside the penalty imposed on the appellant.

4. Retrospective applicability of Notification No. 50/2008-CE(NT):
The core issue was whether the amendment by Notification No. 50/2008-CE(NT), which included SEZ developers in Rule 6(6)(i) of the CENVAT Credit Rules, 2004, was retrospective. The Tribunal referred to the Karnataka High Court's ruling, which clarified that the amendment is retrospective. This decision was pivotal in setting aside the demands and penalties imposed on the appellant.

Conclusion:
The Tribunal, following the High Court's interpretation, concluded that the supplies to SEZ developers are to be treated as exports retrospectively due to the amendment. Therefore, the demands for 10% of the value of goods, interest, and penalties were set aside, and the appeal was allowed with consequential relief.