TMI Blog2010 (7) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... d the same were allowed by the appellate authority. Hence, the present appeals of the revenue. 2. The respondent was engaged, during the material period, in the manufacture of excisable goods namely "Pre-fabricated Steel Buildings" falling under Chapter 94 of the First Schedule to the Central Excise Tariff Act. They were also availing the benefit of Cenvat Credit on inputs under the relevant provisions of the Cenvat Credit Rules, 2004. During the period of dispute, which comprises six quarters specified in the Table given below, the respondent supplied their product viz., "Pre-fabricated Steel Buildings" to Nokia India (P.) Ltd., a unit in Nokia Telecom Special Economic Zone ('SEZ' for short) Chennai. These clearances were effected under Letter of Undertaking without payment of duty in terms of rule 19 of the Central Excise Rules, 2002 : Period Date of filing refund claim Amount of refund claim (in Rs.) January 2007 to March 2007 10-6-2008 39,13,832/- April 2007 to June 2007 2-6-2008 84,32,797/- July 2007 to September 2007 17-6-2008 60,52,189/- October 2007 to December 2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the purpose of rule 5 of the Cenvat Credit Rules, 2004. The learned Commissioner (Appeals) took the view that Circular No. 29/06-Cus. ibid is, mutatis mutandis, applicable to such supply of goods by a DTA unit to SEZ unit. The learned Commissioner (Appeals) also found that the proof of export by the respondent had been accepted by the department and further that it was not in dispute that the respondent has "followed all the legal and procedural requirements as per rule 5 of Cenvat Credit Rules, 2004 read with Notification No. 5/06-CE, dated 14-3-2006." The appellate authority also relied on the Tribunal's decision in CCE v. Self Knitting Works 2007 (220) ELT 926 (Trib. - Delhi), wherein a learned Single Member of the Tribunal, following a Division Bench's decision viz., Amitex Silk Mills (P.) Ltd. v. CCE 2006 (194) ELT 344 (Trib. - Delhi) held that deemed exports were to be treated as 'exports' for all purposes. Some of these findings of the lower appellate authority are presently under challenge. 4. In these appeals, it is the submission of the department that, for purposes of rule 5 of the Cenvat Credit Rules, 2004, the meaning of "export" has to be derived from the Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter considering the various provisions of the SEZ Act and the SEZ Rules, held that export duty could not be levied under the Customs Act in respect of goods supplied by a DTA unit to SEZ unit. For purposes of levy of such duty, the export should be physical export out of the country. In the present case, the supply of goods by the respondent to SEZ units was only a 'deemed export' within the meaning of this expression as expounded by the Hon'ble Madras High Court in the case of BAPL Industries Ltd. v. Union of India 2007 (211) ELT 23 (Mad.). On the above grounds, the learned Consultant prays for setting aside the order of the lower appellate authority and upholding the orders-in-original. 5. The learned Counsel for the respondent has contested the above submissions of the learned Consultant. His arguments are summarized below : (a) Rule 5 of the Cenvat Credit Rules, 2004 allows refund of Cenvat Credit in respect of inputs and input services used in the manufacture of final product which is cleared for export under Bond or Letter of Undertaking. The term "export" used in this rule has not been defined under the Central Excise Act or any Rules framed thereunder. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Cenvat Credit Rules, 2004, which (without the provisos thereto) reads as under : "5. Refund of Cenvat credit. Where any input or input service is used in the manufacture of final product which is cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate product cleared for export, or used in providing output service which is exported, the Cenvat credit in respect of the input or input service so used shall be allowed to be utilized by the manufacturer or provider of output service towards payment of, (i) duty of excise on any final product cleared for home consumption or for export on payment of duty; or (ii) service tax on output service, and where for any reason such adjustment is not possible, the manufacturer or the provider of output service shall be allowed refund of such amount subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification." 7. Admittedly, this claim was made in respect of the duty paid on the inputs used in the finished goods (Pre-fabricated Buildings) cleared by the party to SEZ units. Whether the finished goods so cleared to the SEZ units ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessed by the authorized officer before arrival of the goods in the normal course. The sub-rules (4) to (8) deal with various aspects such as assessment of Bill of Export, Grant of drawback or DEPB credit etc. Sub-rule (9) provides that a copy of the Bill of Export and ARE-1 with an endorsement of the authorized officer that the goods have been admitted in full in the SEZ shall be treated as proof of export. The remaining sub-rules deal with various aspects which are not of relevance to the issue at hand. The learned Counsel for the respondent has submitted that they followed the above procedure in respect of the goods supplied to SEZ units and, therefore, such goods should be deemed to have been exported for purposes of rule 5 of the Central Excise Rules, 2004. Yet another provision referred to by the learned Counsel is section 51 of the SEZ Act which gives overriding effect to the provisions of the Act vis-a-vis any other law for the time being in force. It has laid down 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 oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the SEZ Act must mean export by SEZ unit. The nitty-gritty of the procedure can be had from rule 30 of the SEZ Rules. According to this procedure, a Bill of Export will be filed by a DTA supplier or, on his behalf, by the SEZ unit itself. The provisions of rule 30 also indicate that a copy of the Bill of Export and ARE-1 with an endorsement of the authorized officer that the goods have been admitted in the SEZ shall be treated as proof of export. Although, prima facie, it may appear that the DTA unit is the exporter, it has to be discerned from the SEZ Scheme that it is only an illusion created by the deeming provisions. We reiterate that any "export" as defined under section 2 of the SEZ Act purports to be an export by that unit just as an "import" as defined under the Act purports to be an import by the same unit. One should not be misled by the deeming provisions. It has to be borne in mind that if the supply of goods by DTA unit to SEZ unit is considered to be an export by the DTA unit, then it should be an import by the SEZ unit. But the definition of "import" under section 2(o) of the SEZ Act does not recognize the transaction to be an import for the SEZ unit. On the other h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide Chapter-7 thereof) as amended with effect from 1-4-2006, laid down thus: The policy relating to Special Economic Zones is governed by SEZ Act, 2005 and the Rules framed thereunder. But the SEZ Act or the SEZ Rules did not confer any export benefits on DTA suppliers. The "export benefits" referred to under rule 23 ibid are benefits available "to SEZ Unit/Developer inasmuch as supplies from the DTA to SEZ Unit/Developer are deemed to be exports made by the latter. We reject the contention of the learned Counsel that the respondent as DTA supplier was exporting goods to the SEZ unit. The filing of Bill of Exports by the DTA unit would not ipso facto make them exporter. Such filing of Bill of Exports by the DTA supplier is only a convenient procedure and the same cannot detract from the deeming provisions taking effect to the benefit of SEZ unit. Rules are subsidiary to sections of the parent Act and cannot be the basis of interpretation of the latter. In none of the cases cited by the learned Counsel did the Supreme Court grant the benefit of any deeming provision to a party other than the party for whose benefit the provision was made. The deeming provisions under the SEZ Act an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the inputs used in or in relation to the manufacture of the 'pre-fabricated buildings" supplied by them to the SEZ units. 12. We are of the considered view that the decision taken by the learned Single Member in the case of Self Knitting Works (supra) is not in accordance with the purport of the law. Noticeably, the learned Single Member chose to follow an earlier decision of the Tribunal which pertained to 100 per cent EOU. With reference to the provisions of the Exim Policy as applicable to 100 per cent EOU, the Tribunal had, in the earlier case, held that clearances made by the EOU to DTA against payment in foreign currency were also to be added to physical exports for the purpose of determining NFEP (Net Foreign Exchange earning as a Percentage of exports). The SEZ Scheme, undisputedly, is an entirely different self-contained scheme which is intended to benefit the SEZ units. The policy provisions relating to 100 per cent EOU cannot be applied to SEZ units, for which there is separate statute and a body of Rules framed thereunder. The Board's circular relied on by the learned Counsel did not offer any clarification on whether a DTA supplier who supplies goods to SEZ coul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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