2018 (4) TMI 468 - AT - Central Excise

CENVAT credit - input/input service used for manufacture of exempted goods - non-maintenance of separate records - developer of Special Economic Zone - rule 6(3)((i) of CCR 2004 - Held that - The continuing existence of supplies to units in Special Economic Zones and the addition of supplies to developers of Special Economic Zones under rule 6(6)(i) does not detract from the eligibility for coverage as exports. Therefore, by no stretch can such supply be deemed to be exempted - credit allowed - appeal dismissed - decided against Revenue.

Summary

Issues:
Determination of liability under rule 6(3)(i) of CENVAT Credit Rules, 2004 on goods supplied to developers in Special Economic Zone between January 2008 and December 2008.

Analysis:
The issue in this appeal revolves around the requirement to discharge liability under rule 6(3)(i) of CENVAT Credit Rules, 2004 on the value of goods supplied to developers in a Special Economic Zone. The central excise authority contended that CENVAT credit had been availed on inputs used for manufacturing exempted goods supplied to the developers, without separate records being maintained for inputs used for dutiable and exempted goods. The lower authorities initially ruled in favor of the respondent, citing circulars and legal provisions supporting the exemption of supplies to developers in Special Economic Zones. However, the Revenue appealed against this decision, arguing that the respondent should have maintained separate accounts for input services and failed to discharge its obligation under rule 6(3) of the CENVAT Credit Rules.

The appellate tribunal delved into the background of Special Economic Zones and the evolution of relevant laws governing them. Initially, these zones were not exempt from central excise or customs duty, but with the enactment of the Special Economic Zones Act, 2005, supplies to units and developers in these zones were considered exports. The tribunal emphasized that the supplies to developers were included in the definition of exports under the Special Economic Zones Act, 2005, and therefore, the exemption under rule 6(6) of the CENVAT Credit Rules applied to such supplies. The argument that the absence of specific enumeration of supplies to developers in rule 6(6) precluded the exemption was deemed untenable.

Furthermore, the tribunal highlighted that the pendency of appeals before the Supreme Court did not diminish the applicability of judgments from High Courts regarding the retrospective nature of notifications incorporating supplies to developers in Special Economic Zones under the CENVAT Credit Rules. Ultimately, the tribunal found no merit in the grounds of appeal by the Revenue and dismissed the appeal, affirming the decision of the lower authorities.

In conclusion, the tribunal's detailed analysis focused on the legal provisions, circulars, and the legislative intent behind the exemption of supplies to Special Economic Zones. The judgment underscored the retrospective nature of the notifications and the overriding effect of the Special Economic Zones Act, 2005 in considering supplies to developers as exports, leading to the dismissal of the Revenue's appeal.