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TMI Blog2011 (6) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices and not export of services. Several Show-Cause Notices were issued for different periods and after adjudication process, tax demands have been confirmed in all these cases. The details of which are tabulated below :- BANGALORE UNIT-SEZ No. Appeal No. Period SCN date OIO No./Date Demand (Rs.) 1. ST/569/08 04/2006 to 03/2007 SCN dated 12-10-2007 63/2008 dated 12-8-2008 1,66,78,662 2. ST/140/08 04/2007 to 03/2008 SCN dated 16-9-2008 126/2008 dated 25-11-2008 5,29,70,508 3. ST/831/09 04/2008 to 09/2008 SCN dated 8-12-2008 61/2009 dated 16-7-2009 4,19,44,094 4. ST/261/10 10/2008 to 03/2009 SCN dated 11-6-2009 103/2009 dated 29-9-2009 1,58,45,592 BOMMASANDRA UNIT-SEZ No. Appeal No. Period SCN date OIO No./Date Demand (Rs.) 1. ST/511/08 04/2006 to 03/2007 SCN dated 12-10-2007 62/2008 dated 15-7-2008 1,20,47,240 2. ST/141/08 04/2007 to 03/2008 SCN dated 16-9-2008 127/2008 dated 25-11-2008 1,09,28,979 3. ST/832/09 04/2008 to 09/2008 SCN dated 8-12-2008 62/2009 dated 16-7-2009 1,04,93,868 4. ST/262/10 10/2008 to 03/2009 SCN dated 11-6-2009 104/2009 dated 29-9-2009 62,93,549 PUNE UNIT - SEZ No. Appeal No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd under rule 6 of the Cenvat Credit Rules, 2004 as the case may be during the relevant period as detailed in table above. The following submissions as regards the provisions of SEZ Act, 2005 were made by the learned Counsel :- (i) The Government of India, enacted Special Economic Zone Act, 2005 (No. 28 of 2005) (SEZ Act) on 23-6-2005 which came into force w.e.f. 10-2-2006. (ii) By virtue of section 2(m)(ii) of the SEZ Act, 2005, the services rendered to an unit of the SEZ by a unit in the Domestic Tariff Area are treated as an export transaction. Section 2(m)(ii) is reproduced herein under: "2. In this Act, unless the context otherwise requires,-(m) "export" means - (i) taking goods, or providing services, out of India, from a Special Economic Zone, by land, sea or air or by any other mode, whether physical or otherwise; or (ii) supplying goods, or providing services, from the Domestic Tariff Area to a Unit or Developer; or (iii) supplying goods, or providing services, from one Unit to another Unit or Developer, in the same or different Special Economic Zone; (iii) The expression Domestic Tariff Area is defined i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arry on the authorised operations by the Developer or entrepreneur. (2) The Central Government may prescribe the manner in which, and the terms and conditions subject to which, the exemptions, concessions, drawback or other benefits shall be granted to the Developer or entrepreneur under sub-section (1)." (v) The Rules framed under the SEZ Act, 2005 provide for procedures to be followed for supplying goods/services to SEZ units and to ensure that such goods and services are indeed used for or in relation to authorized operations. (vi) For instance rule 10 of the SEZ Rules, 2006 provides inter alia that the Developer or the Co-developer who has received the goods shall be responsible and liable for proper utilization of the goods. (vii) Similarly, rule 22 lays down detailed conditions based on which the exemption, drawbacks and concessions would be granted. (viii)Rule 25 in fact specifically states that if the entrepreneur or developer does not utilize the goods or services for the authorized operations he would liable to refund the amounts equal to the concession availed. (ix) The appellants submit that as could be seen from the provision of the SEZ Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; Such service is provided from India and used outside India; and (b) Payment for such service is received by the service provider in convertible foreign exchange. Both the above conditions are not satisfied in this case and hence the services provided cannot be termed as export of service. It is also to submit that under section 26 of the SEZ Act, the units/developers in SEZ are specifically given exemption in respect of services received from the DTA. The learned Jt. CDR also submitted that Notification No. 4/2004 is deemed to have been issued under SEZ Act is not correct since Notification No. 4/2004 - Service Tax had been issued under section 93 of the Finance Act, 1994 and superseded by Notification No. 9/2009, dated 3-3-2009. Thus the Notification No. 4/2004 continued to be in operation till 3-3-2009. Accordingly it is to submit that there is no concept of deemed issue of a Notification under a different Act. 7. Our observations and conclusions on these submissions are as under : 7.1 The demand in this case has arisen as a result of application of provisions of rule 6 of Cenvat Credit Rules, 2004. During the period prior to 1st April, 2008, rule 6(1) of Cenv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31-3-2004 exempted the taxable service provided in relation to various operations in SEZ and received by a developer or a unit of SEZ. If we see, the provisions of rule 6 of Cenvat Credit Rules, 2004; Export of Service Rules, 2005; and Exemption Notification No. 4/2004-S.T., it would be clear that for the purpose of Cenvat Credit Rules and for the purpose of levy of Service Tax what was provided to SEZ developer is an exemption. The Export of Service Rules clearly show that export for the purpose of service tax is export outside India. A submission was made that section 51 of SEZ Act overrides the provisions of all other acts wherever there is a conflict. In fact in these cases, there is no conflict at all since it is not a contention of the Department that service tax to be paid in respect of service exported to SEZ or provided to SEZ developer. In the absence of a specific provision in Cenvat Credit Rules providing for exemption to a service provider from the provisions relating to maintenance of separate accounts when service is provided to SEZ units or SEZ developer as in the case of excisable goods, the provisions of Cenvat Credit Rules, 2004 have to be applied. What is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the definition in the concerned enactment has to be applied and not the definition in the SEZ Act. Further, it was also submitted that in this case export of service has been clearly defined in the Export of Service Rules itself. Further the learned Jt. CDR also submitted that export is a legal fiction created under SEZ Act and fiction cannot be read into to another enactment. If there is conflict between SEZ Act and other enactments relating to SEZ units or developer, the provisions of SEZ Act may be applicable. In this case, the dispute is regarding application of provisions of Cenvat Credit Rules to domestic unit/domestic service provider and the fact that the service has been provided to SEZ developer does not mean that SEZ Act becomes applicable and provisions of Finance Act, 1994, rules thereunder and Central Excise Act, 1944 and rules thereunder would not be applicable. We are in agreement with the learned Jt. CDR in this submission. This is further reinforced by similar view taken by the Hon'ble High Court of Gujarat in the case of Essar Steel Ltd. v. Union of India 2010 (249) ELT 3. In that case also levy of export duty was under consideration and the view of the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spute is the provisions of Cenvat Credit Rules and Export of Service Rules and as already held by us, there was no conflict. 11. Another submission was made that there is conflict in meaning of "export' as per SEZ Act, 2005 and Export of Service Rules, 2005 and therefore, the provisions of section 51 of SEZ Act which reads as under shall prevail. "Section 51. Act to have overriding effect.-(1) 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." In this regard, we find that the submission of Jt. CDR that there is absolutely no inconsistency between SEZ Act and Finance Act, 1994 and Cenvat Credit Rules, 2004 is correct. As submitted by him, section 26 of the SEZ Act has made provisions for exemption in respect of receipt of service by SEZ unit/developer from DTA and Notification No. 4/2004 issued under section 93 of Finance Act, 1994 has provided for exemption for the service provided by DTA to SEZ units/developers thereby removing any conflict between the two enactments and rules. Therefore, there is no incon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay as 2009 (244) ELT A89 (Bom.). We have considered the submissions. We find that the decisions of the Tribunal in the case of Bajaj Tempo Ltd. (supra) and Sterlite Industries (I) Ltd. (supra) are squarely applicable to the present case. In this case also, the services are allowed to be provided to SEZ units/developers subject to conditions which are required to be fulfilled by SEZ developer/unit. This is similar to erstwhile Chapter X Procedure in Central Excise Rules, 1944 which was a subject-matter in the case of Bajaj Tempo Ltd. (supra) which considered the Notification No. 217/86, dated 2-4-1986. In Sterlite Industries (I) Ltd.'s case (supra) the Tribunal was considering the provisions of Notification No. 214/86 in which the goods are allowed to be cleared without payment of duty by job worker subject to conditions which are required to be fulfilled by the raw material supplier. The relevant paragraphs of both the judgments are reproduced below for better appreciation : Paras 7.2 to 7.6 of judgment in Bajaj Tempo Ltd.'s case (supra) - "7.2 Under the Modvat scheme, credit of duty paid on notified inputs is to be given for payment of duty on the notified final produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scope of rule 57C in a situation like the present one, is to be construed in the context of the Modvat scheme and not to destroy that concept. Any interpretation in such a situation has to be to give effect to Notification 217/86 and not to take away the benefit of averting duty payment at each stage in the line of production. Hence, a mechanical application of rule 57C, is to be avoided, since it destroys the very benefit, which is otherwise available under the scheme right from stage one to the final stage. In the case of disintegrated production, credit is available from stage one by paying duty at each finished stage and taking credit of such duty in the other units down the line, whereas in the case of vertically integrated production units the same benefit is sought to be conferred by averting payment of duty at each stage and postponing the availment of credit to the final stage of manufacture. This is how, we could interpret the provisions of rule 57C in the context of Notification 217/86. Any other interpretation will frustrate the object of the scheme, apart from leading to discrimination between vertically integrated production line and laterally disintegrated produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vat credit of duty paid on the inputs used in the manufacture of the parts, which were cleared without payment of duty to, appellant's other unit under Chapter X procedure and utilised in the manufacture of tractor which were cleared on payment of duty by observing that since no duty was paid on the part at the time of clearance, rule 57C will apply and no Modvat credit would be admissible. However, the said decision was subsequently reversed by the Supreme Court as reported in Escort v. C.C.Ex. [2004 (171) ELT 145 (SC)]. For appreciation, we reproduce paragraphs 8 & 9 of the said decision. "8. It is to be seen that the whole purpose of the Notification and the Rules is to streamlines the process of payment of duty and to prevent the cascading effect if duty is levied both on the inputs and the finished goods. Rule 57D(2), which has been extracted hereinabove, shows that in the manufacture of a final product an intermediate product may also come into existence. Thus in cases where intermediate product may also come into existence. Thus in cases where intermediate product comes into existence, even though no duty has been chargeable to Nil rate of duty, credit would still be allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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