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TMI Blog2010 (7) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tariff Act. They were also availing the benefit of Cenvat Credit on inputs under the relevant provisions of the Cenvat Credit Rules, 2004. During the period of dispute, which comprises six quarters specified in the Table given below, the respondent supplied their product viz., "Pre-fabricated Steel Buildings" to Nokia India (P.) Ltd., a unit in Nokia Telecom Special Economic Zone ('SEZ' for short) Chennai. These clearances were effected under Letter of Undertaking without payment of duty in terms of rule 19 of the Central Excise Rules, 2002 :- Period Date of filing refund claim Amount of refund claim (in Rs.) January 2007 to March 2007 10-6-2008 39,13,832/- April 2007 to June 2007 2-6-2008 84,32,797/- July 2007 to September 2007 17-6-2008 60,52,189/- October 2007 to December 2007 23-6-2008 16,31,142/- January 2008 to March 2008 21-7-2008 2,95,34,954/- 3. The respondent filed the above refund claims under rule 5 of the Cenvat Credit Rules, 2004 on the premise that their clearances of finished goods to the SEZ units were "exports" for the purpose of the said Rules. Show-cause notices were issued proposing to reject these refund claims on the ground that the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the legal and procedural requirements as per rule 5 of Cenvat Credit Rules, 2004 read with Notification No. 5/06-CE, dated 14-3-2006." The appellate authority also relied on the Tribunal's decision in CCE v. Self Knitting Works 2007 (220) ELT 926 (Trib. - Delhi), wherein a learned Single Member of the Tribunal, following a Division Bench's decision viz., Amitex Silk Mills (P.) Ltd. v. CCE 2006 (194) ELT 344 (Trib. - Delhi) held that deemed exports were to be treated as 'exports' for all purposes. Some of these findings of the lower appellate authority are presently under challenge. 4. In these appeals, it is the submission of the department that, for purposes of rule 5 of the Cenvat Credit Rules, 2004, the meaning of "export" has to be derived from the Central Excise Act, 1944 and the Customs Act, 1962 and, accordingly, "exports" would not be anything other than "taking goods out of India". In this context, the appellant has relied on the Tribunal's decision in Quality Screens' case (supra). It is submitted by the appellant that the learned Commissioner (Appeals) did not consider the Tribunal's decision in Quality Screens's case (supra). The learned Consultant for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning of this expression as expounded by the Hon'ble Madras High Court in the case of BAPL Industries Ltd. v. Union of India 2007 (211) ELT 23 (Mad.). On the above grounds, the learned Consultant prays for setting aside the order of the lower appellate authority and upholding the orders-in-original. 5. The learned Counsel for the respondent has contested the above submissions of the learned Consultant. His arguments are summarized below :- (a) Rule 5 of the Cenvat Credit Rules, 2004 allows refund of Cenvat Credit in respect of inputs and input services used in the manufacture of final product which is cleared for export under Bond or Letter of Undertaking. The term "export" used in this rule has not been defined under the Central Excise Act or any Rules framed thereunder. Therefore, in respect of goods supplied to SEZ unit, it should be understood as defined under the SEZ Act; (b) According to the definition of "export" given under section 2(1)(ii) of the SEZ Act, supply of goods from the Domestic Tariff Area to a unit in SEZ is 'export'. This deeming fiction under section 2(1)(ii) of the SEZ Act read with section 53 of the Act needs to be given full effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is exported, the Cenvat credit in respect of the input or input service so used shall be allowed to be utilized by the manufacturer or provider of output service towards payment of, (i) duty of excise on any final product cleared for home consumption or for export on payment of duty; or (ii) service tax on output service, and where for any reason such adjustment is not possible, the manufacturer or the provider of output service shall be allowed refund of such amount subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification." 7. Admittedly, this claim was made in respect of the duty paid on the inputs used in the finished goods (Pre-fabricated Buildings) cleared by the party to SEZ units. Whether the finished goods so cleared to the SEZ units were to be used by them as capital goods or inputs in their factory is not material. What matters is whether the clearance of the finished goods under Letter of Undertaking to the SEZ units amounted to "export" by the respondent for the purposes of rule 5. We shall, therefore, address this question first. 8. The learned Counsel for the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been admitted in full in the SEZ shall be treated as proof of export. The remaining sub-rules deal with various aspects which are not of relevance to the issue at hand. The learned Counsel for the respondent has submitted that they followed the above procedure in respect of the goods supplied to SEZ units and, therefore, such goods should be deemed to have been exported for purposes of rule 5 of the Central Excise Rules, 2004. Yet another provision referred to by the learned Counsel is section 51 of the SEZ Act which gives overriding effect to the provisions of the Act vis-a-vis any other law for the time being in force. It has laid down that the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act. The learned Counsel has also referred to section 53 of the SEZ Act, which provides that a Special Economic Zone shall be deemed to be a "territory outside the customs territory of India" for the purposes of undertaking the authorized operations and that it shall also be deemed to be a port, airport, inland container dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h an endorsement of the authorized officer that the goods have been admitted in the SEZ shall be treated as proof of export. Although, prima facie, it may appear that the DTA unit is the exporter, it has to be discerned from the SEZ Scheme that it is only an illusion created by the deeming provisions. We reiterate that any "export" as defined under section 2 of the SEZ Act purports to be an export by that unit just as an "import" as defined under the Act purports to be an import by the same unit. One should not be misled by the deeming provisions. It has to be borne in mind that if the supply of goods by DTA unit to SEZ unit is considered to be an export by the DTA unit, then it should be an import by the SEZ unit. But the definition of "import" under section 2(o) of the SEZ Act does not recognize the transaction to be an import for the SEZ unit. On the other hand, the transaction squarely falls within the definition of "export" under section 2(m). It is an export for the SEZ unit. All the deeming provisions of the SEZ Act and the Rules framed thereunder cumulatively aim at granting benefits to SEZ units. None of these provisions can be construed as having been enacted to confer be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d are benefits available "to SEZ Unit/Developer inasmuch as supplies from the DTA to SEZ Unit/Developer are deemed to be exports made by the latter. We reject the contention of the learned Counsel that the respondent as DTA supplier was exporting goods to the SEZ unit. The filing of Bill of Exports by the DTA unit would not ipso facto make them exporter. Such filing of Bill of Exports by the DTA supplier is only a convenient procedure and the same cannot detract from the deeming provisions taking effect to the benefit of SEZ unit. Rules are subsidiary to sections of the parent Act and cannot be the basis of interpretation of the latter. In none of the cases cited by the learned Counsel did the Supreme Court grant the benefit of any deeming provision to a party other than the party for whose benefit the provision was made. The deeming provisions under the SEZ Act and/or the SEZ Rules are, as we have noted, exclusively for the benefit of SEZ units. The DTA unit, by the mere activity of supplying goods to SEZ unit, cannot claim any complementary benefit on the strength of the deeming provisions of the SEZ Act/Rules. It is also pertinent to note that it was not the policy of the Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ably, the learned Single Member chose to follow an earlier decision of the Tribunal which pertained to 100 per cent EOU. With reference to the provisions of the Exim Policy as applicable to 100 per cent EOU, the Tribunal had, in the earlier case, held that clearances made by the EOU to DTA against payment in foreign currency were also to be added to physical exports for the purpose of determining NFEP (Net Foreign Exchange earning as a Percentage of exports). The SEZ Scheme, undisputedly, is an entirely different self-contained scheme which is intended to benefit the SEZ units. The policy provisions relating to 100 per cent EOU cannot be applied to SEZ units, for which there is separate statute and a body of Rules framed thereunder. The Board's circular relied on by the learned Counsel did not offer any clarification on whether a DTA supplier who supplies goods to SEZ could be allowed to claim refund of accumulated Cenvat Credit on inputs used in the manufacture of such goods. The Board's clarification is in the context of applicability of rules 18 and 19 of the Central Excise Rules, 2002 to a DTA supplier who might claim duty-free clearance of goods under Bond/Letter of Undertakin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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