2016 (3) TMI 343 - AT - Central Excise

Eligibility for refund of the unutilized CENVAT Credit - Credit lying in balance as they had cleared the goods under CT-3 to a unit situated in SEZ or otherwise under Rule 5 of the Cenvat Credit Rules,2004, read with Notification No. 5/2006-CE(NT) dated 14.03.2006 as amended - Held that - Undisputed facts are the appellant is eligible to avail CENVAT credit of the inputs which are used for manufacturing of cables and wires, discharges appropriate duty on the final products and also clear the final product to a unit situated in SEZ. It is also undisputed that the appellant has, during the material period in these appeals, was unable to utilise the CENVAT Credit lying in balance as there were no home clearances and all the clearances were made to unit in SEZ without payment of duty but under bond. In our considered view, the first appellate authority as well as the adjudicating authority were in error in rejecting the refund claims and confirmation of demands initiated by show-cause notices for erroneous refund sanction for more than one reason as there is no dispute as to the fact that the finished goods were cleared to an unit situated in SEZ which would amount to export as per the provisions of SEZ Act, more specifically Section 2(m) of the SEZ Act which states that any supply of goods or provisions of services from DTA to SEZ unit or SEZ developer has been defined to be as an export; Section 51 of the SEZ Act provides that this Act shall have over riding effect any other law for the time being in force, which would mean that the provisions of SEZ Act needs to be referred to as to whether clearance of amount to export. If that be so on plain reading any clearances made by appellant to an SEZ unit during the material period in this appeal have to be considered as export . - Decided in favour of assessee

Summary

Issues:
1. Eligibility for refund of unutilized CENVAT Credit for clearances made to SEZ.
2. Interpretation of SEZ Act provisions regarding clearances to SEZ.
3. Comparison of SEZ clearances with physical exports.
4. Applicability of previous judgments to the current case.

Analysis:

1. The primary issue in this case is whether the appellant is entitled to a refund of the unutilized CENVAT Credit for clearing goods to a unit in SEZ. The appellant had availed CENVAT Credit on inputs used for manufacturing cables and wires but was unable to utilize the credit due to clearances made to SEZ without payment of duty. The lower authorities rejected the refund claims, leading to appeals.

2. The Tribunal examined the provisions of the SEZ Act to determine if clearances to SEZ amount to exports. Section 2(m) of the SEZ Act defines supply of goods to SEZ units as exports. The Tribunal noted that the SEZ Act's overriding effect on other laws implies that clearances to SEZ should be considered exports. Therefore, the Tribunal concluded that clearances made by the appellant to SEZ units should be treated as exports.

3. The Tribunal compared the issue at hand with a previous judgment involving clearances to 100% EOUs. The Tribunal referenced a case where the Hon'ble High Court held that clearances to 100% EOUs should be treated as exports. The Tribunal noted that the issue was settled in favor of the appellant based on previous judgments equating deemed exports to physical exports.

4. The Tribunal addressed the argument that clearances to SEZ cannot be equated with physical exports. The Tribunal distinguished a judgment cited by the Department, stating that the issue in this case pertained to physical clearances of finished goods to an SEZ unit, not deemed exports. Based on the foregoing analysis, the Tribunal held that the impugned order was unsustainable and allowed the appeal with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal for refund of unutilized CENVAT Credit for clearances made to SEZ units.