2015 (10) TMI 1058 - AT - Central Excise

Denial of exemption claim - Captive consumption - Notification No.67/95-CE, dated 16.03.1995 - SEZ clearances - whether the goods supplies to SEZ Developers without payment of duty are to be treated as exempted goods within the meaning of this term as defined in Rule 2(d) of the Cenvat Credit Rules, 2004 and whether in respect of these supplies, the provision of sub-rule (2) and (3) of Rule 6 ibid would be applicable - Held that - sub-clause (vi) of the proviso to Notification N0.67/95-CE is an exception clause where a manufacturer of dutiable and exempted goods is eligible if he discharges the obligation prescribed in Rule 6 of Cenvat Credit Rules, 2001. As rightly submitted by both Revenue and the appellants, there is no definition of exempted goods in Central Excise Act except Rule 2 (d) of Cenvat Credit Rules. The Tribunals decision in the case of Surya Roshni (2013 (1) TMI 500 - CESTAT, NEW DELHI) discussed above clearly answers the above question. When the words exempted goods used in the said notification, it only means final products exempted under the Central Excise Act read with Central Excise Rules or any notification issued there under . Appellants had duly followed the procedures set out in the above Rules, and executed bond before the excise authorities and cleared the goods without payment of duty. If the goods are fully exempted, the question of following the procedure under ARE-1 and execution of bond does not arise. Accordingly, we hold that the cement cleared to SEZ unit/developers are not exempted goods but cleared without payment of duty by following the procedures and conditions stipulated in both SEZ and Rule 19 of CER Rules and the clinkers used captively for manufacture of cement cleared to SEZ is covered under Notification 67/95 from exemption of excise duty. - Tribunal in the case of Thermo Cable (2012 (12) TMI 942 - CESTAT BANGALORE) on identical issue held the benefit of Notification No.67/95-CE is eligible for the goods captively consumed for manufacture of final products cleared against the international competitive bidding under Notification No.6/2006. Ratio of Tribunal decision squarely applicable to the present case, the appellants are eligible for the benefit of the exemption under Notification No.67/95. As final resort demanding duty on the intermediate product is otherwise also hit by Revenue neutrality, as the appellants are otherwise entitled to avail the Cenvat credit of the duty, if any paid on clinker. Alternatively, if a manufacturer avails exemption on intermediate product under Notification 67/95-CE and chooses to pay duty on the cement when cleared to SEZ unit/developer, the duty paid on final product will be fully available to him as refund/rebate. Thus, on both counts the issue is purely revenue neutral. It is not the intention of the government to demand duty on the intermediate product having considered that the supplies to SEZ are exports. Therefore, the demand of duty on the intermediate product clinker used in manufacture of cement supplied to SEZ units/developers is clearly revenue neutral as the appellants could have claimed refund or availed Cenvat credit. In this regard, as rightly held by the Tribunal in the case of Reliance (2007 (12) TMI 69 - CESTAT, AHMEDABAD) demand of duty on intermediate products will only increase scriptory work with no benefit to the revenue. - appellants are eligible for exemption under Notification 67/95-CE on clinker captively consumed for manufacture of cement cleared to SEZ units/developers without payment of duty for both the periods prior to and after the amendment of SEZ Act. Accordingly, the impugned orders in all the assessees appeals are set aside - decided in favour of assessee.

Issues Involved:
1. Eligibility for benefit under Exemption Notification No.67/95-CE for clinker used in the manufacture of cement cleared to SEZ units/developers.
2. Whether cement supplied to SEZ units is considered exempted goods.
3. Applicability of sub-clause (vi) of the proviso to Notification No.67/95-CE in relation to Cenvat Credit Rules, 2001 or 2004.
4. Whether the term FTZ in the proviso to Notification No.67/95-CE includes SEZ.

Detailed Analysis:

1. Eligibility for Benefit under Exemption Notification No.67/95-CE:
The Tribunal examined whether the clinker manufactured and captively consumed for producing cement, which was then cleared to SEZ units/developers without payment of duty, is eligible for the benefit under Notification No.67/95-CE. The notification exempts goods used within the factory for the manufacture of final products listed in its table. Both clinker and cement fall under the specified tariff headings in the notification. The Tribunal found that the appellants had followed the required procedures under Rule 19 of the Central Excise Rules, 2002, and SEZ regulations, thus making them eligible for the exemption.

2. Whether Cement Supplied to SEZ Units is Considered Exempted Goods:
The Tribunal referred to the definition of "exempted goods" under Rule 2(d) of the Cenvat Credit Rules, 2004, and concluded that cement supplied to SEZ units does not fall under this category as it is not exempted by any notification under Section 5A of the Central Excise Act. The Tribunal cited the Principal Bench decision in Surya Roshni Ltd., which held that supplies to SEZ are treated as exports and not as exempted goods. Therefore, the clinker used in the manufacture of cement cleared to SEZ units is not subject to excise duty.

3. Applicability of Sub-Clause (vi) of the Proviso to Notification No.67/95-CE:
The Tribunal addressed whether the reference to Cenvat Credit Rules, 2001, in the proviso to Notification No.67/95-CE should be read as applicable to the Cenvat Credit Rules, 2004. It was determined that the General Clauses Act allows for such interpretation, meaning the obligations under Rule 6 of the Cenvat Credit Rules, 2004, are relevant. The Tribunal found that the appellants had complied with these obligations, thus qualifying for the exemption under Notification No.67/95-CE.

4. Whether the Term FTZ Includes SEZ:
The Tribunal considered whether the term FTZ (Free Trade Zone) in the proviso to Notification No.67/95-CE includes SEZ (Special Economic Zone). It was noted that after the enactment of the SEZ Act, FTZs were converted into SEZs. The Tribunal referred to the Finance Bill, 2007, which amended the Central Excise Act to replace FTZ with SEZ. Consequently, it was held that the term FTZ in the notification should be interpreted to include SEZ, making the appellants eligible for the exemption.

Conclusion:
The Tribunal concluded that the appellants are eligible for the exemption under Notification No.67/95-CE for the clinker used in the manufacture of cement cleared to SEZ units/developers. The cement supplied to SEZ units is not considered exempted goods, and the appellants have complied with the relevant Cenvat Credit Rules. The term FTZ in the notification includes SEZ, supporting the appellants' eligibility for the exemption. The Tribunal set aside the impugned orders against the assessees and upheld the orders in favor of the Revenue, allowing the appeals of the assessees and rejecting the appeals of the Revenue.

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