Reversal of Cenvat Credit, Central Excise

[S. Gokarnesan]

Reg: supplies to SEZ by Merchant Exporter under Rule 19 of CE Rule. As per SEZ Act, Rules, supplies to SEZ Deveopers are considered as "Export" and the procedure presribed under Notifiction issued under Rule 19 of CE 2002. to be followed. Consequent to circular dated 3.4.08 issued by Director General of Export Promotion, Ministry of Finance, The Excise Officers are insisting for reversal of cenvat credit used on the goods cleared and supplied to SEZ Developer. (Refer para 4(10) of the said circular). I am of the view that this is contrary to the SEZ Act / SEZ Rules and Cenvat Credit Rule. Rule 5 of Cenvat Credit Rule, 2004 allows to retain the credit, the demand of reversal in terms of Rule 6(6) of CCR, 2004 is not correct. The same rule allows the benefit if cleared for export under CE Rules. Please give your expert opinion.

regards

s. gokarnesan

Posts / Replies

[Surender Gupta]

I think DGEP has considered the provisions with applied the proper attention. A developer in a SEZ must be considered as a UNIT. Once an export is made under rule 19 of Central Excise Rules [moreover under bond - see rule 6(6)(v)], the same is eligible for Cenvat Credit benefit and the circular F.No DGEP/SEZ/473/2006/ 835 Dated: 03.04.2008 - SEZ, should be treated as illegal for this purpose.

[Balasubramanian Natarajan]

I am of the view that the said supplies will be covered under clause (i) of rule 6(6) of cenvat credit rules. 2004 . Since the supplies are to be treated as physical exports , the credit is allowable as per rule 5 of cenvat credit rules, 2004.