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TMI Blog2015 (3) TMI 955X X X X Extracts X X X X X X X X Extracts X X X X ..... ivalent to 10% of the transaction value on the goods cleared to SEZ developers/Co-developers, for the period involving June, 2008 to December, 2008. It has been alleged that the appellants have not maintained separate accounts in terms of Rule 6(2) of Cenvat Credit Rules, and used common inputs in the manufacture of dutiable and exempted finished goods cleared to non-SEZ buyers (i.e. SEZ developers). The adjudicating authority confirmed an amount of Rs. 71,94,674/- along with interest. Aggrieved by this order, the appellants filed the present appeal. 2. The Ld. Advocate on behalf of the appellants submits that they have followed the procedures prescribed under Central Excise Rules for clearance of goods without payment of duty. The SEZ developers were duly approved by the Development Commissioner of SEZs for import/procurement of indigenous goods with duty exemption. He further submits that they have submitted Letter of Undertaking (LUT) dated 11.01.2008 before the Dy. Commissioner of Central Excise, Chennai-II Division, in terms of Rule 19 of CER, 2002 before effecting clearance of excisable goods to SEZ developers without payment of duty. The said LUT has been duly accepted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Vs. UOI 2012 (286) ELT 535 (Mad.) 4. We have carefully considered the written submissions and the grounds of appeal and perused the records. The issue in this case relates to demand of an amount equivalent to 10% of the transaction value of the goods cleared to SEZ developers during the period from January to December, 2008. There is no dispute on the fact that the appellants cleared the goods to DTA on payment of excise duty and also cleared to SEZ developers/Co-developers without payment of duty. The adjudicating authority held that though the appellants not availed any Cenvat credit on the main inputs ie., panels and glasses used in the manufacture of goods cleared to SEZ developers, they availed contain common inputs which are used in the final products cleared to both DTA and SEZ developers. The adjudicating authority held that since the appellants had not maintained separate accounts of inputs as per Rule 6(2), they are liable to pay 10% of the value of the goods cleared to SEZ developers as there is no exclusion provided under Rule 6(6) for clearance to SEZ developers. Rule 6 (6) of CCR as it stood prior to December 2008 is reproduced as under:- "Rule 6 (6) The provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture of goods and rendering services. They were to be net foreign exchange earner and were not to be subjected to any pre-determined value addition or minimum export performance requirements. 33. Initially, in order to implement the aforesaid policy, the Customs Act was amended and Chapter XA with Sections 76A to 76H was inserted. Subsequently, the SEZ-Act was enacted and Chapter XA of the Customs Act was deleted. 34. Section 2 of the SEZ Act is titled definitions . It provides as follows "Sub-section (g) of Section 2 [sub-section 2(g)] of the SEZ-Act defines developer . It means a person or a State, which is granted a letter of approval under sub-section(10) of section 3 [Section 3(10)] of the SEZ Act by the Central Government and includes an authority and a co-developer; Sub-section (m) of Section 2 [sub-section 2(m)] defines the word export . It means supplying goods, or providing services, from the domestic tariff area to a unit or developer. Sub-section (zc) of Section 2 [sub-section 2(zc)] defines the words existing unit and unit . It means, a unit which has been set up by an entrepreneur in a SEZ and includes an existing unit. 35. Section 51 of the SEZ-Act is ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposited 10% as mentioned in sub-rule 6(3) of the 2004-Rules. 42. Initially, sub-rule 6(6)(i) of the 2004-Rules (see Appendix 1) was as follows : Rule 6. Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services. - (6) The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the excisable goods removed without payment of duty are either- (i) cleared to a unit in a special economic zone; 43. Initially, sub-rule 6(6)(i) provided that the provisions of sub-rules 6(1) to 6(4) of the 2004-Rules will not be applicable in case the excisable products are removed without payment of duty and cleared to a unit in a SEZ. 44. The relevant point to note is that the 2004-Rules as initially envisaged provided benefit to the goods cleared to a unit in SEZ only and not to the developer though under the SEZ Act the position of the developer as well as the unit was one and the same; they were in the same class, entitled to the same treatment. This appears to be an inadvertent omission. 45. It appears that the aforesaid mistake was realized by the Government and rule 6(6)(i) of the 2004-Rules was substituted by the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion, the rule is clarificatory, corrects an obvious mistake, removes discrimination, and provides correct legal principle. Its prospective enforcement would leave it to be suspect at the touchstone of Article 14 of the Constitution. Considering this aspect it is proper to hold that the substituted sub-rule 6(6)(i) came into force from the date the 2004-Rules were enforced. 6. The above decisions of the Hon ble High Court is squarely applicable to the facts of the present case, as the appellants cleared the finished goods to SEZ developers by following ARE-I procedure prescribed under Rule (19) of CER, which is duly approved by the jurisdictional Central Excise authority and also accepted LUT executed by the appellants for this purpose. The Hon ble High Court in the above decision also held that the amendment introduced in Rule 6(6) on 31.12.2008, substituting clause (i) by adding both the units of SEZ and developers is retrospective in nature. The Hon ble High Court of Andhra Pradesh has upheld the Tribunal Order in the case of Sujana Metals (supra) vide High Court Order (in appeal No. 40 of 2012) dated 02.07.2013, dismissed the Revenue appeal. 7. Respectfully following the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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