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TMI Blog2015 (10) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... used in the said notification, it only means ‘final products exempted under the Central Excise Act read with Central Excise Rules or any notification issued there under'. Appellants had duly followed the procedures set out in the above Rules, and executed bond before the excise authorities and cleared the goods without payment of duty. If the goods are fully exempted, the question of following the procedure under ARE-1 and execution of bond does not arise. Accordingly, we hold that the cement cleared to SEZ unit/developers are not exempted goods but cleared without payment of duty by following the procedures and conditions stipulated in both SEZ and Rule 19 of CER Rules and the clinkers used captively for manufacture of cement cleared to SEZ is covered under Notification 67/95 from exemption of excise duty. - Tribunal in the case of Thermo Cable (2012 (12) TMI 942 - CESTAT BANGALORE) on identical issue held the benefit of Notification No.67/95-CE is eligible for the goods captively consumed for manufacture of final products cleared against the international competitive bidding under Notification No.6/2006. Ratio of Tribunal decision squarely applicable to the present case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S Gokarnesan, Adv., at S. No. 21 For the Respondent : Mr M Rammohan Rao, JC (AR) at S.Nos.10,12 13 ORDER Per R Periasami The assessees (at S.Nos.1 to 9, 11 and 14 to 22) and the Revenue (at S.Nos.12, 12 13) in today's supplementary cause list filed appeals against the impugned orders. All these batch of appeals are taken up together as the issues are common and relates to denial of exemption on clinkers manufactured and captively consumed in the manufacture of cement. 2. The assessees are manufacturers of cement falling under Chapter Heading 2523 29 10 and 2523 29 39. In the course of manufacture of cement the assessees also manufacture Clinker falling under Heading 2523 10 00 which is further used in the same factory captively in the manufacture of cement. The appellants cleared cement to SEZ units/developers without payment of duty. Revenue issued show-cause notice denying Exemption Notification No.67/95-CE, dated 16.03.1995 on the clinker manufactured and consumed in the manufacture of cement and cleared to SEZ units/developers and demanded excise duty on the clinker manufactured and consumed within the factory. Adjudicating authorities confirmed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise Act. Therefore, they are not hit by the proviso to the Notification 67/95-CE. He referred to the Supreme Court judgment in the case of Commissioner of Sales Tax, Jammu Kashmir Ors. Vs Pine Chemicals Ltd. Ors. [1995] 96 STC 355 (SC). 4. He further submits that cements cleared to SEZ is not exempted goods. He refers to the Rule 2(d) of Cenvat Credit Rules, where the exempted goods are defined. In this case cement is neither exempted by any notification nor is it chargeable to nil rate of duty. Therefore, cement is not an exempted goods but merely cleared without payment of duty under Rule 19 of the Central Excise Rules, by following the procedure set out for clearance of the goods for exports. They have followed all the procedures set out for exports like filing ARE-1 return and clearing the goods for export under bond. He further submits that clearance to SEZ is treated as exports and the duty is not required to be paid on the cement cleared to SEZ as it is treated on par with physical exports. He referred to Section 2 (m) and Section 51 of the SEZ Act and mentioned that any supplies by DTA units to SEZ are treated as exports and they are entitled for the benefits lik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed by Cenvat Credit Rules, 2004, all references to the provisions of Cenvat Credit Rules, 2001 in any other statute shall be read as a reference to the provisions of Cenvat Credit Rules, 2004. He further submits that irrespective of whether the reference to Cenvat Credit Rules, 2001 in Notification 67/95-CE is treated as legislation by way of incorporation or legislation by way of reference the result will be the same as they have fulfilled the obligations under both 2001 Rules and 2004 Rules. He also refers to this Tribunals decision in the case of Rajshree Sugars and Chemicals Ltd. Ors. Vs Commissioner of Central Excise, Puducherry Ors. reported in 2014 (11) TMI 919 CESTAT CHENNAI. 6. He also submits that once the final products are cleared without payment of duty to SEZ, it is treated on par with physical exports. The clinker, which is also a part of the cement exported to SEZ unit on that count also benefit cannot be denied. He relied on the Tribunals decision in the case of Toyota Kirloskar Motor Ltd. Vs Commissioner of Central Excise (LTU), Bangalore reported in 2009 (237) E.L.T.176 (Tri.-Bang.). Once the duty is levied on the intermediate product i.e., clinker, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be made. He relied on the FTP and also the Handbook of Procedures issued under the FTP. He drew our attention to para 7.0 of the FTP policy and para 7.10.3 of Handbook of Procedures and submitted that they have complied with the procedure and cleared the goods under-bond. He also relied on SEZ regulation 10.2. He submitted that Notification No.58/2003 is only procedural and not an Exemption Notification. He referred to para-1 of the Circular dated 13.01.2006 and contended that excisable goods are allowed to be exported without payment of duty under-bond. He also drew our attention to the fact that the Board has clarified that Rule 19 of Central Excise Rules, 2002 and Rule 13 are similar provisions. He relied on the following decision:- Hindustan Petroleum Corporation Ltd. Vs Collector of Central Excise reported in 1995 (77) E.L.T. 256 (S.C.) 9. As regards the Revenue appeal, he submitted that the lower appellate authority has rightly allowed the exemption. 10. Learned Shri R. Parthasarathy, Consultant appeared for the appellants at S.Nos.4,6,7,16,19,21 22 in seven cases and for the respondents in two cases at S. Nos.14 15, in all the nine cases for M/s. Madras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. and M/s. Dalmia Cement Bharat Ltd. respectively and reiterated the written submissions. He concurred with the arguments put forth by other counsels. 14. On the other hand, Shri Rammohan Rao, Joint Commissioner the learned Authorised Representative submitted the written synopsis. The Authorised Representative for the Revenue countered the appellants' arguments. He submits that the background of the present Notification No.67/95 is based on the earlier Notification No.217/86, which allows exemption on the intermediate goods manufactured within the factory for manufacture of final products. He further submits the exemption to be examined in the context of which it was issued. He also reiterated the grounds of appeal filed by the Revenue in respect of the three appeals of the Revenue. He submits that the benefit of Notification No.67/95 is not available to clinker used in the manufacture of cement and supplied to SEZ. On the first ground, he submits that SEZ is not mentioned as category of exception under the proviso to the notification. He elaborately discussed the provisions of SEZ Act. He drew attention to the Section 26 (1)(c) and Section 51 of SEZ Act and submitted as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Excise Rules, 1944 was inserted. Subsequently, Rule 6 of CENVAT Credit Rules, 2001 was inserted vide Notification No.35/2001 C.Ex dated 29.06.2001. There was no further amendment to the above. Therefore, he submits that exception is available in the case of compliance with Rule 6 of Cenvat Credit Rules, 2001 only. The period in dispute relates to Cenvat Credit Rules 2004 and Rule 6 of Rules 2004 is not mentioned under said clause (vi).Further, appellants cannot say that they complied with Rule 6 of Cenvat Credit Rules, 2001. 17. Regarding the appellants claim that exemption relating to clearance to FTZ also covers clearances to SEZ he submits that SEZ is different from FTZ. SEZ comes into existence by a different enactment. The wording of notification is clear and unambiguous. He relied on the paragraphs 3 and 18 of the following decision:- M/s. Shri Ganesh Jute Mills Ltd. Vs The Commercial Tax Officer Ors. reported in (1955) 2 SCR 1076. Wherein it was held that sales to Indian Stores Department would not be automatically treated as sale to Department of Supply. The same is applicable to the facts of the present case. As such, clearance to FTZ could not treated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to exemption qua person or transaction. He further submits that Section 26 of the SEZ Act cannot be read to deny exemption or to introduce a levy as the SEZ Act is only for granting benefit for promotion of exports. He submits that as per the objectives of SEZ Act, the preamble and Statement of Objects and Reasons set out in the SEZ Act clearly states the very purpose of enacting this Act is to promote exports. Therefore, all provisions of the SEZ should be read in the context of only promotion of exports and not for creating levies under the Central Excise. 20. He also relied on para 41.3.2 of Essar case (supra) which was also relied by the Revenue. The High Court has held that the fiction created under SEZ Act is for allowing the benefit and not for imposing a levy. In the same ratio, the Section 26 exempting goods under SEZ Act cannot be imported to deny the exemption under Notification No.67/95-CE. He said that the Authorised Representative relying on the circular dated 19.3.2010 is only in favour of the appellants and in no way against them. He also submits that as per the General Clauses Act, Cenvat Credit Rules, 2001 mentioned in the Notification No.67/95 should be read a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fulfillment of the obligations by the manufacturer of both dutiable and exempted products under Rule 6 of Central Excise Rules, 2001. Therefore, the issues before this Tribunal are: 1. Whether clinker manufactured by the appellants used in the manufacture of cement cleared to SEZ without payment of duty are eligible for benefit under Notification No.67/95-CE or not? 2. Whether cement supplied to SEZ are exempted goods or not? 3. Whether sub-clause (vi) in the proviso to the notification referring to Cenvat Credit Rules, 2001 is to be read as applicable to Cenvat Credit Rules, 2001 or Cenvat Credit Rules, 2004? 4. Whether the term FTZ used in the proviso to the Notification 67/95-CE will include SEZ also? 23. Before detailed discussion, it is relevant to reproduce the Notification NO.67/95-CE dated 16.03.1995:- Captive consumption (Goods used within factory of production) GENERAL EXEMPTION NO.6 Exemption to all capital goods and specified inputs if captively consumed within factory of production.- In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excises and Salt Act, 1944 (1 of 1944), read with sub-section (3) of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Table as input and cement classifiable under Chapter Heading 2502 09 is covered under Column 2 of the Table as final product. Therefore, there is no dispute that both inputs and final products are specified in the table of the notification and the appellants manufactured clinker and captively consumed for manufacture of cement and cleared the cement on payment of duty to DTA and without payment of duty to SEZ units/developers. We also find in some of the appellants cases, the demand relates to the period prior to the enactment of SEZ Act i.e.,10.02.2006 where the finished goods were cleared without payment of duty to SEZ under Notification No.58/2003-CE, dated 22.07.2003.The period involved in all these cases relates from 2004 to 2011. The appellants main contention is that the goods cleared to the SEZ unit/developers are not exempted from excise duty but cleared without payment of duty by following the requisite procedures set out in SEZ Act and SEZ Rules read with Central Excise Rules. The Revenue contended that goods supplied to SEZ are exempted and demanded duty on the clinkers used in the manufacture of cement which are cleared to SEZ units/developers. We find this very issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal in the case of Sujana Metal Products Ltd. v. CCE, Hyderabad (Supra), wherein the Tribunal held that during the period prior to 31-12-2008, supplies to SEZ Developers made without payment of duty are to be treated as exports and would be covered by sub-rule (6) of Rule 6 and accordingly the provision of sub-rule (1) (2) (3) of Rule 6 would not be applicable. 24. From the above decision, we find that the issue relates to availment of Cenvat credit, where the appellants have supplied both dutiable and exempted goods. While allowing the appeal, the Tribunal has categorically discussed the meaning of exempted goods defined in Rule 2(d) of Cenvat Credit Rules and held that the goods supplied to the SEZ units/developers are neither chargeable to nilrate of duty nor the goods are exempted from payment of duty by any Exemption Notification issued under Rule 5A. The Principal Bench's above decision is squarely applicable to the facts of the present case. In the present case, we find the sub-clause (vi) of the proviso to Notification N0.67/95-CE is an exception clause where a manufacturer of dutiable and exempted goods is eligible if he discharges the obligation presc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be. Any material may be removed(2) without payment of duty from a factory of the producer or the manufacturer or the warehouse or any other premises, for use in the manufacture or processing of goods which are exported, as may be approved by the Principal Commissioner or Commissioner, as the case may be. (3) The export under sub-rule (1) or sub-rule (2) shall be subject to such conditions, safeguards and procedure as may be specified by notification by the Board. There is no dispute that the appellants had duly followed the procedures set out in the above Rules, and executed bond before the excise authorities and cleared the goods without payment of duty. If the goods are fully exempted, the question of following the procedure under ARE-1 and execution of bond does not arise. Accordingly, we hold that the cement cleared to SEZ unit/developers are not exempted goods but cleared without payment of duty by following the procedures and conditions stipulated in both SEZ and Rule 19 of CER Rules and the clinkers used captively for manufacture of cement cleared to SEZ is covered under Notification 67/95 from exemption of excise duty. 27.Having discussed the main issue, we now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 . iv. Section 53 (1) of the SEZ Act mentions that A Special Economic Zone shall, on and from the appointed day, be deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorized operations . v. Rule 30 (1) of the SEZ Rules, 2006 reads as under- The Domestic Tariff Area supplier supplying goods to a Unit or Developer shall clear the goods, as in the case of exports, either under bond or as duty paid goods under claim of rebate on the cover of ARE-1 referred to in Notification number 42/2001-Central Excise (NT) dated the 26th June, 2001 in quintuplicate bearing running serial number beginning from the first day of the financial year . 3. It can thus be seen that according to the SEZ Act, supply of goods from DTA to the SEZ constitutes export. Further, as per section 51 of the SEZ Act, the provisions of the SEZ Act shall have over riding effect over provisions of any other law in case of any inconsistency. Section 53 of the SEZ Act makes an SEZ a territory outsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for exports. The objectives of Special Economic Zones include making available goods and services free of taxes and duties supported by integrated infrastructure for export production, expeditious and single window approval mechanism and a package of incentives to attract foreign and domestic investments for promoting export-led growth. 2. .. 3. While the policy relating to the Special Economic Zones is contained in the Foreign Trade Policy, incentives and other facilities offered to the Special Economic Zone developer and units are implemented through various notifications and circulars issued by the concerned Ministries/Departments. The present system, therefore, does not lend enough confidence for investors to commit substantial funds for development of infrastructure and for setting up of the units in the Zones for export of goods and services. In order to give a long term and stable policy framework with minimum regulatory regime and to provide expeditious and single window clearance mechanism, a Central Act for Special Economic Zones has been found to be necessary in line with international practice. To achieve this purpose, a Special Economic Zones Bill, 2005 is p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nil rate of duty, other than those goods which are cleared, (i) to a unit in a Free Trade Zone, or (ii) to a hundred per cent Export Oriented Undertaking, or (iii) to a unit in an Electronic Hardware Technology Park, or (iv) to a unit in a Software Technology Park, or (v) under notification No. 108/95-Central Excise, dated the 28th August, 1995, or (vi) by a manufacturer of dutiable and exempted final products, after discharging the obligation prescribed in Rule 6 of the CENVAT Credit Rules, 2001. 6. From the above proviso to Notification No. 67/95-C.E. ibid, it appears that the bar created therein is not applicable to the inputs used in or in relation to the manufacture of exempted final products cleared by a manufacturer of such exempted final products as well as dutiable final products. In other words, where the manufacturer manufactures both dutiable and exempted final products and uses the inputs in question in the manufacture of the exempted final products, he is entitled to the benefit of exemption from payment of duty on such inputs in terms of the opening paragraph of the Notification. This right is not hit by the opening portion of the proviso to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e involved in the case relates to the period after amendment of Cenvat Credit Rules, 2004 automatically the Cenvat Credit Rules, 2004 will apply. Even if only 2001 Rules is applied, still the benefit under Clause (vi) of the proviso to the Notification cannot be denied as Rule 6(5) (ii) of the 2001 Rules covered supplies to SEZs. Hence the obligations under Rule 6 of the 2001 Rules would also stand discharged. 32. As regards the last issue, the Revenue contended that the clause (i) of proviso to Notification No. 67/95 provides exception only for clearance to FTZ and not for SEZ. It is contended that the very purpose of the non-inclusion of SEZ in Notification No.67/95 is to make it apply only to FTZ and not to SEZ. We are unable to accept departments the view for the reasons that during the relevant period under dispute there were no FTZ in operation and if the Revenues view is to be taken, no clearance would be made to FTZ after the enactment of SEZ Act with effect from 10.02.2006. Once the SEZ Act came into effect from 10.02.2006 all the units functioning as FTZ were declared as SEZ units. We find that the Notification No.4/2003-CE, dated 30.03.2003 was issued to convert vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants could have claimed refund or availed Cenvat credit. In this regard, as rightly held by the Tribunal in the case of Reliance (supra) demand of duty on intermediate products will only increase scriptory work with no benefit to the revenue. Relevant para is extracted below: 6. The Tribunal in the case of CCE, Surat v. Reliance Industries Ltd. - [2004 (167) E.L.T. 118 (Tri. - Mumbai)], while dealing with an identical captive consumption Notification No. 217/86-C.E., has followed the earlier decision of the Tribunal in the case of M/s. Bajaj Tempo Ltd. v. CCE - [1994 (69) E.L.T. 122] laying down that the object of the captive consumption notifications is to avoid unnecessary scriptory work, resulting in no benefit to the Revenue and to ensure the same result. The demand in the present case is admittedly available as credit to the appellant and the same would have added in more scriptory work to the assessee, in stead of resulting in any revenue earning to the Department or revenue loss to the assessees. The entire situation being revenue neutral, we find no justification for confirmation of demands in question on this ground. 35. In view of foregoing discussions, we hol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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