Supplies made to SEZ from DTA units shall be treated as export

M/s. Ravin Cable Ltd. Vs Commissioner of Central Excise (CESTAT Mumbai)

a. For the period upto 9-2-2005, the supplies made to SEZ units are to be treated as export both for extending export benefits and for levy of duty in terms of SEZ provisions contained in Chapter XA of the Customs Act.

b. For the period from 10-2-2006, the definition of the term “export” under the Customs Act is not consistent with the definition of the term “export” under the SEZ Act. However, the definition of the term “export” under the SEZ Act shall prevail over the definition of term “export” under the Customs Act. Therefore, supplies made to SEZ from DTA units shall be treated as export.

c. Since both during the period prior to and w.e.f. 10-2-2006, the supplies made to SEZ are held to be “export”, the application of provisions of Cenvat Credit Rules for recovery of amounts on goods supplied to SEZ units in terms of Rule 6 of CCR, 2002/CCR, 2004 does not arise.

d. The amendment to Rule 6(1) of the CCR, 2004 by the amending Notification No. 50/2008-C.E. (N.T.), dated 31-12- 2008 shall be applicable w.e.f. 10-9-2004 when the CCR, 2004 came into existence and, therefore, exception provided under Rule 6(6) of Cenvat Credit Rules, 2004 shall be applicable to supply of exempted goods both to SEZ units and SEZ developers/promoters.

e. Appeals of the assessees deserve to be allowed and the appeals of the Department deserve to be rejected.

f. Incidentally, in the facts and circumstances of the case, the question of invoking extended period of limitation for demand of amounts and imposition of penalties does not arise.

FULL TEXT OF THE CESTAT JUDGMENT

This is an appeal filed against order-in-original No. 02/CEX/2010 dated 12.07.2010 passed by Commissioner of Central Excise, Pune-III.

2. Briefly stated the facts of the case are that during the relevant period i.e. from 31st January 2007 to 26th August 2008, the appellant had manufactured and cleared insulated wires and cables to SEZ Developers without payment of duty. Alleging that such clearances are hit by Rule 6 of the Cenvat Credit Rules, 2004, being exempted goods, accordingly, the appellant were required to reverse 10% of the value of such clearances. Show cause notice was issued to them for recovery of a total of Rs.69,69,918/- with interest and penalty. On adjudication, the demand was confirmed with interest and penalty. Hence, the present appeal.

3. Learned Advocate, Shri S.A. Gundecha for the appellant, submits that the clearances made by the appellant during the relevant period, without payment of duty, to SEZ Developers covered under the scope of Rule 6(6)(v) of the Cenvat Credit Rules, 2004, being considered as export, hence, the appellant are not required to reverse 10% of the value of such clearances to SEZ Developers. It is his contention that the issue is no more res integra and covered by the judgment of this Tribunal in the case of Sujana Metal Products Ltd. vs. CCE, Hyderabad – 2011 (273) ELT 112 (Tri.-Bang.) later upheld by the Hon’ble Andhra Pradesh High Court reported at 2016 (342) ELT A115 (A.P.), in the case of S.P. Fabricators Pvt. Ltd. vs. CCE, Belapur – 2016 (334) ELT 105 (Tri.-Mumbai), in the case of Blue Star Ltd. vs. CCE, Thane – 2019 (366) ELT 919 (Tri.-Mumbai) and the judgment of Hon’ble Karnataka High Court in the case of CCE, Bangalore-III vs. Lotus Power Gears (P) Ltd. – 2017 (346) ELT 347 (Kar.).

4. Learned AR for the Revenue reiterated the findings of the learned Commissioner.

5. We have carefully considered the submissions advanced by both sides and perused the records. We find that this Tribunal in Sujana Metal Products Ltd.’s case (supra) considered the issue at length and summarized the findings as follows:-

“13. From the above, the following emerges.

a. For the period upto 9-2-2005, the supplies made to SEZ units are to be treated as export both for extending export benefits and for levy of duty in terms of SEZ provisions contained in Chapter XA of the Customs Act.

b. For the period from 10-2-2006, the definition of the term “export” under the Customs Act is not consistent with the definition of the term “export” under the SEZ Act. However, the definition of the term “export” under the SEZ Act shall prevail over the definition of term “export” under the Customs Act. Therefore, supplies made to SEZ from DTA units shall be treated as export.

c. Since both during the period prior to and w.e.f. 10-2-2006, the supplies made to SEZ are held to be “export”, the application of provisions of Cenvat Credit Rules for recovery of amounts on goods supplied to SEZ units in terms of Rule 6 of CCR, 2002/CCR, 2004 does not arise.

d. The amendment to Rule 6(1) of the CCR, 2004 by the amending Notification No. 50/2008-C.E. (N.T.), dated 31-12- 2008 shall be applicable w.e.f. 10-9-2004 when the CCR, 2004 came into existence and, therefore, exception provided under Rule 6(6) of Cenvat Credit Rules, 2004 shall be applicable to supply of exempted goods both to SEZ units and SEZ developers/promoters.

e. Appeals of the assessees deserve to be allowed and the appeals of the Department deserve to be rejected.

f. Incidentally, in the facts and circumstances of the case, the question of invoking extended period of limitation for demand of amounts and imposition of penalties does not arise.”

This judgment has been upheld by the Hon’ble Andhra Pradesh High Court subsequently. Also, consistently, the principle laid down has been followed by the Tribunal in S.P. Fabricators Pvt. Ltd. (supra) and MITC Rolling Mills vs. CCE, Nashik – 2019 (366) ELT 882 (Tri.-Mumbai). Besides, the Hon’ble Karnataka High Court in Lotus Power Gears (P) Ltd.’s case (supra) also expressed a similar opinion.

6. In the result, the impugned order is set aside and the appeal is allowed with consequential relief, if any, as per law.