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2019 (3) TMI 1698 - KERALA HIGH COURTCENVAT credit - inputs removed as such to a unit situated in the Special Economic Zone (SEZ) by using Form No. ARE-I - Rule 3(5) of the CENVAT Credit Rules, 2004 - HELD THAT:- Rule 3(5) of the CENVAT Credit Rules, 2004 provides that, when the inputs on which CENVAT Credit has been taken are removed as such from the factory, the manufacturer of the final product shall pay an amount equal to the credit availed in respect of such inputs and such removal shall be made under the cover of an invoice referred to in Rule 9 - In the case at hand, it is not in dispute that the inputs were removed as such from the factory of the appellant. It is also not in dispute that the inputs were removed to a unit situated in the SEZ. The term 'export' is defined under Section 2(m) of the SEZ Act which includes supply of goods from the Domestic Tariff Area (DTA) to a unit in the SEZ. Section 26 of the SEZ Act provides about the exemptions, drawbacks and concessions to an entrepreneur within the SEZ. Under It is not in dispute that the inputs in this case were removed from the factory of the appellant to a unit in the SEZ under the cover of ARE-1 Form and therefore the appellant is entitled to the exemption permitting retention of the credit availed on the duty paid on inputs. In terms of Rule 6(6) of CENVAT Credit Rules it is contended that, the liability for reversal of the credit, envisaged under Rule 3(5) of the CENVAT Credit Rules, will not apply in this case because the inputs have been cleared to a unit in the SEZ through the bond executed. Therefore the demand for reversal cannot be sustained, is the contention. In this regard, Circulars issued by the Central Board of Excise & Customs assumes importance. In Circular No. 29/2006-Cus., dated 27-12-2006, which pertains to implementation of the SEZ Act, 2005, it is provided that, in the light of provisions contained under Sections 2(m) and 51 of the Act, the supplies from DTA to a unit in the SEZ for authorized operations inside the SEZ, may be treated as in the nature of exports - It is mentioned that the provisions under Rule 30(1) of the SEZ Rules was framed in line with those provisions and it provides that a DTA supplier supplying goods to the SEZ shall clear the goods either under bond or as duty paid goods under the claim of rebate on the cover of ARE-1. It is further clarified that, since the SEZ is deemed to be outside the customs territory of India, any licit clearance of goods to the SEZ from DTA will continue to be exported and therefore be entitled to the benefit of rebate under Rule 18 of Central Excise Rules and for refund of the accumulated CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2004. Since there is no dispute that the inputs were removed as such to a unit in the SEZ under cover of ARE-1, the above said provisions will apply and the appellant has to be exempted from reversal of credit availed on the duty paid on inputs. Hence, the position remains clarified through the circular issued by the Central Board of Excise and Customs (Circular No. 1001/8/2015-CX.8, dated 28-4-2015) - the appellant need to be held as entitled for the CENVAT Credit and the demand for reversal of the credit availed along with interest and penalty with respect to the inputs removed as such to a unit situated in the Special Economic Zone, cannot be sustained - appeal allowed - decided in favor of appellant.
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