M/s. Tiger Steel Engineer (India) Private Limited vs. Union of India & Ors. and M/s. Tiger Steel Engineer (India) Private Limited vs. Commissioner of Central Excise (Bombay High Court)
The Bombay High Court disposed of two writ petitions and one Central Excise Appeal involving the common issue of whether supplies of goods from the Domestic Tariff Area (DTA) to a Special Economic Zone (SEZ), which are treated as “export” under the Special Economic Zones Act, 2005 (SEZ Act), can also be treated as “export” for the purposes of refund of accumulated CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 and the Central Excise Rules, 2002.
The writ petitions challenged orders-in-appeal and orders-in-original passed by the departmental authorities, while the Central Excise Appeal challenged the order of the Customs, Excise and Service Tax Appellate Tribunal. The appeal had been admitted on questions of law relating to whether supplies to SEZ developers or units constitute exports under Rule 5 of the CENVAT Credit Rules, whether the definition of “export” in Section 2(m) of the SEZ Act applies to the CENVAT Credit Rules, and whether, in the absence of a definition in the CENVAT Credit Rules or Central Excise Act, the term “export” includes supplies from DTA to SEZ, which is deemed to be outside the customs territory of India under Section 53 of the SEZ Act.
During the hearing, both parties agreed that after institution of the proceedings, the Central Board of Excise and Customs issued Circular No. 1001/8/2015-CX.8 dated 28 April 2015 clarifying that, for the purposes of Rule 18 of the Central Excise Rules, 2002 and Rule 5 of the CENVAT Credit Rules, 2004, supplies treated as “export” under the SEZ Act would also be treated as exports for rebate of duty and refund of accumulated CENVAT credit. The Circular referred to Section 2(m)(ii), Section 26(1)(d), Section 51 and Section 53 of the SEZ Act, as well as Rule 30(1) of the SEZ Rules, 2006. It further clarified that supplies from DTA to SEZ continue to qualify as exports for these purposes notwithstanding the amendments made through Notifications No. 6/2015-C.E. (N.T.) and 8/2015-C.E. (N.T.), both dated 1 March 2015.
The petitioner also relied upon various judicial decisions, while the respondents relied upon the decision in Essay Steel Limited Vs. Union of India. Both parties agreed that these authorities could be considered upon remand.
The High Court observed that the impugned orders had been passed prior to issuance of the Circular dated 28 April 2015. Consequently, the original adjudicating authorities, appellate authorities and the Tribunal did not have the benefit of the clarification issued by the Board. Considering this subsequent development and with the consent of both parties, the Court held that the matters should be reconsidered in light of the Circular and the judicial precedents relied upon by the parties.
Accordingly, the Court allowed Writ Petition No. 2469 of 2010, quashed the impugned appellate orders dated 20 September 2010 and 27 September 2010 and the Order-in-Original dated 11 October 2010, and remanded the matter to the concerned authorities for fresh adjudication. Similarly, Writ Petition No. 9075 of 2010 was allowed by quashing the impugned orders dated 18 August 2010 and remanding the matter for fresh consideration. In Central Excise Appeal No. 140 of 2010, the Court quashed the Tribunal’s order dated 8 July 2010 and restored the appeal to the Tribunal for fresh decision.
The High Court directed the concerned authorities to pass reasoned orders after providing an opportunity of personal hearing. It kept all contentions of the parties open and disposed of the writ petitions and appeal without any order as to costs.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
All three matters relate to the common issue of whether, for the purpose of refund of Cenvat Credit under the Cenvat Credit Rules, 2004 supply of goods treated as “export” under the The Special Economic Zones Act of 2005 (SEZ Act) can also be treated as export for the purposes of the Cenvat Credit Rules and Central Excise Rules, 2002.
2. In Writ Petition No. 2469 of 2010, the petitioner has challenged the order in appeal dated 20 September 2010 and 27 September 2010 and Order-in-Original dated 11 October 2010 passed by respondent Nos.3 and 4 therein respectively. Similarly, in Writ Petition No. 9075 of 2010, the petitioner has challenged the Order-in-Original dated 18 August 2010 and order in appeal dated 18 August 2010 passed by the respondent Nos. 2 and 3 respectively. In Central Excise Appeal No. 140 of 2010, challenging the order of the Tribunal dated 8 July 2010, the petitioner/appellant’s appeal was admitted on the following questions of law;
A. Whether supplies to Special Economic Zone (SEZ) (to developer or the unit) constitute “export” for the purpose of Rule 5 of the Cenvat Credit Rules, 2004?
B. Whether the definition of the word “export” appearing in section 2(m) of the Special Economic Zone Act, 2005 applies to Rule 5 of the Cenvat Rules?
C. Whether in the absence of definition of the word “export” in the said Act or the Cenvat Rules, the word “export” appearing in Rule 5 of the Cenvat Rules covers only physical exports outside the territory of India or also covers, supplies from Domestic Tariff Area (DTA) to SEZ which is deemed to be a territory outside India under Section 53 of the SEZ Act?
3. Since the issues involved in all the three matters are identical, we propose to dispose of the same by common order.
4. Counsel for the petitioner/appellant and the respondent agreed that post the filing of the above matters, Central Board of Excise and Customs have issued a Circular No.1001/8/2015-CX.8 dated 28 April 2015 wherein it is clarified that for the purposes of Rule 18 of the Cenvat Rules, 2002 and for refund of accumulated Cenvat Credit under Rule 5 of the Cenvat Credit Rules 2004, the supply treated as “export” under the SEZ Act would be treated as “export” for the purposes of the Said Rules. This circular was issued on apprehension expressed by the trade as to whether the benefits under the Cenvat Credit Rules and Cenvat Excise Rules would be available to the supply treated as export under the SEZ Act. For the sake of convenience the said circular is re-produced as under:
SEZ Rebate of duty on goods cleared from DTA to SEZ
Clarification
Circular No. 1001/8/2015-CX.8, dated 28-4-2015
F. No. 267/18/2015-CX. 8
Government of India
Ministry of Finance (Department of Revenue)
Central Board of Excise & Customs, New Delhi
Subject: Clarification on rebate of duty on goods cleared from DTA to SEZ – Regarding.
Kind attention is invited to Notifications No. 6/2015-C.E. (N. T.) and 8/2015-C.E.
(N. T.), both dated 1-3-2015, vide which the meaning of export has been elaborated in both Rule 5 of Cenvat Credit Rules, 2004 and Rule 18 of Central Excise Rules, 2002. Post these amendments, apprehensions have been expressed by the trade as to whether the following benefits would be available after these amendments:
i. Benefit of rebate of duty on goods cleared from DTA to SEZ.
ii. Refund of accumulated CENVAT credit when goods are cleared from DTA to SEZ.
2. It is seen that:
i. Section 2(m)(ii) of the SEZ Act, 2005 defines export to, inter alia, mean ‘Supplying goods, or providing services, from the Domestic Tariff Area to a Unit or Developer”.
ii. Section 26(1) (d) of SEZ Act, 2005 mentions that subject to the provisions of the sub-section (2), every Developer and entrepreneur shall be entitled to drawback or such other benefits as may be admissible from time to time on goods brought or services provided from the Domestic Tariff Area into Special Economic Zone or Unit or services provided in a Special Economic Zone or Unit by the service providers located outside India to carry on the authorized operations by the Developer or entrepreneur.
iii. Section 51(1) of the SEZ Act mandates 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’ .
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 dear 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 (N. T.), 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 outside the customs territory of India. It is in line of these provisions that Rule 30(1) of the SEZ Rules, 2006 provides that the DTA supplier supplying goods to the SEZ shall clear the goods either under bond or as duty paid goods under claim of rebate on the cover of ARE-1
4. It was in view of these provisions that the DGEP vide Circulars No. 29/2006- Customs, dated 27-12-2006 [2007 (207) E.L. T (T35)] and No. 6/2010, dated 19-3-2010 [2010 (251) E.T (T44)] clarified that rebate under rule 18 of the Central Excise Rules, 2002 is admissible for supply of goods made from DTA to SEZ. The position as explained in there circulars does not change after amendments made vide Notification No. 6/2015- C.E. (N. T.) and 8/2015-C.E. (N. T.) both dated 1-3-2015, since the definition of export, already given in Rule 18 of Central Excise Rules, 2002 has only been made more explicit by incorporating the definition of export as given in the Customs Act, 1962. Since SEZ is deemed to be outside the Customs territory of India, any licit clearances of goods to an SEZ from the DTA will continue to be export and therefore be entitled to the benefit of rebate under Rule 18 of CER, 2002 and of refund of accumulated CENVAT credit under rule 5 of CCR, 2004, as the case may be.
5. Any difficulty in the implementation of this circular may be brought to the notice of the Board. Hindi version will follow
5. Mr. Dharmadhikari, learned counsel for the petitioner/appellant also relied upon various decisions in support of his contentions. Mr. Mishra learned counsel for the respondent has relied upon the decision in the case of ‘Essay Steel Limited Vs. Union of India’ . However, both parties agree that on remand concerned authorities can examine these case laws.
6. After having considered the rival contentions and by consent of the parties, in our view since the orders under challenge were passed prior to 2015, the original adjudicating and the appellate authorities did not have the benefit of the circular dated 28 April 2015, wherein it is clarified that, rebate of duty on goods cleared from Domestic Tariff Area to SEZ would be treated as export for the purposes of Cenvat Credit Rules and Central Excise Rules. Therefore, in the interest of justice and by consent of both the parties we remand the matter back to the Appellate Authority to decide the issue afresh after considering the Circular dated 28 April 2015 and all the decisions which the parties wishes to rely upon.
7. In view of the above, we pass the following order:
(I) Order in Writ Petition No.2469 Of 2010 – The petition is allowed in terms of prayer clause (a) which reads as under :
a) That this Hon’ble Court be pleased to issue a Writ of Certiorari, or a Writ in the nature of Certiorari to quash and set aside both the impugned Orders dated 20th September 2010 (Exhibit-H1 hereto) and 27th September 2010 (Exhibit-H2 hereto) passed by the 3th Respondent and Order dated 11.10.2010 (Exhibit-C3 hereto) passed by the 411
b) The matters are remanded back to the respondent Nos.3 and 4 for afresh adjudication in terms of our above observation.
(II) Order in Writ Petition No.9075 of 2010 – The petition is allowed in terms of prayer clause (a) which reads as under :
a. That this Hon’ble Court be pleased to issue a Writ of Certiorari, or a Writ in the nature of Certiorari to quash and set aside both the impugned Orders dated 18th August 2010 (Exhibit-J hereto) passed by the 2nd Respondent and also the impugned order dated 18th August 2010 (Exhibit-K) passed by the .3rd
b. The matters are remanded back to the respondent Nos.2 and 3 for afresh adjudication in terms of our above observation.
(III) Order in Central Excise Appeal No.140 of 2010 — The order passed by the Tribunal dated 8 July 2010 is quashed and the appeal is restored to the file of the tribunal to decide the same afresh.
8. The concerned authorities to pass a reasoned orders after giving opportunity of personal hearing. All the parties contentions are left open.
9. Writ petitions and Appeal disposed of in above terms. No order as to cost.
