2010 (1) TMI 985 - AT - Central Excise

Summary

Issues:
Interpretation of provisions under SEZ Act regarding supplies to SEZ units, applicability of Cenvat Credit Rules, exemption notifications for supplies to SEZ, and imposition of penalties.

Analysis:
The judgment involves a dispute where the Department demanded 10% of the value of excisable goods supplied to SEZ Developers by an applicant with a unit in the Domestic Tariff Area, citing Rule 6(3)(b) of Cenvat Credit Rules due to the lack of separate accounts for inputs supplied to SEZ units. The appellant argued that the supplies made should be considered as exports under Section 2(m) of the SEZ Act and referenced a circular clarifying that supplies from DTA to SEZ units should be treated as exports. The appellant contended that since the goods were not supplied to SEZ units availing any exemption benefits, they should not be classified as exempted goods.

The respondent drew attention to an amendment in the Cenvat Credit Rules related to clearances made to SEZ units. After considering the submissions and records, the judge held that the supplies made to SEZ units by the applicant should not be treated as supply of exempted goods. Consequently, the provisions of Cenvat Credit Rules 6(3)(b) were deemed inapplicable, leading to the waiver of pre-deposit of dues and the stay of recovery until the disposal of the appeals.

This judgment clarifies the interpretation of the SEZ Act provisions regarding supplies to SEZ units, the application of Cenvat Credit Rules in such scenarios, and the impact of exemption notifications on supplies to SEZ units. It emphasizes the importance of maintaining separate accounts for inputs supplied to SEZ units and the implications of such practices on the classification of goods as exempted or non-exempted. The judgment provides guidance on how supplies from DTA to SEZ units should be treated and highlights the significance of relevant circulars and amendments in determining the tax implications of such transactions.