TMI Blog2011 (6) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... is an exemption Notification, it cannot be equated with other exemptions and accordingly, it was held that when finished goods were cleared under Notification No. 217/86, it would not lead to application of rule 57C of Central Excise Rules which is similar to the provisions of Cenvat Credit Rules. Further, case of Sterlite Industries (I) Ltd. v. CCE (2004 (12) TMI 108 - CESTAT, MUMBAI) upheld by the Hon'ble High Court of Bombay (2008 (8) TMI 783 - BOMBAY HIGH COURT) - Decided in favor of assessee. - ST/569 & ST/140, 141, 511 & 569 OF 2008, 831 TO 833 AND 840 OF 2009 AND 261 TO 263 OF 2010 - 435 TO 445 OF 2011 - Dated:- 28-6-2011 - M.V. RAVINDRAN, B.S.V. MURTHY, JJ. G. Shivadass for the Appellant. R.K. Singla for the Respondent. ORDER B.S.V. Murthy, Technical Member. M/s. Sobha Developers Ltd. (hereinafter referred to as 'Sobha') is engaged in the activities of construction of commercial or industrial buildings, construction of residential buildings and maintenance and repairs of those building and architectural service. The dispute has arisen in respect of three units/developers of Sobha namely, Bangalore unit, Bommasandra unit and Pune unit. The dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is equivalent to amount of Cenvat credit utilized to the extent of more than 20 per cent of the service tax payable. This is in view of the provisions in rule 6, prior to April 2008 requiring assessees not to pay service tax to the extent of more than 20 per cent of the amount of service tax payable where the assessee is engaged in providing exempted as well as dutiable services. For the subsequent period, the assessee was required to pay 8 per cent value of the services if there is no separate account maintained in respect of input/inputs service utilized in providing exempted/dutiable services. 2. As submitted by the learned Counsel for Sobha, the following two issues arise for consideration in these cases : (a) Whether the service provided by the appellant to the SEZ units would amount to export of service and would hence qualify for the exclusion of rule 6(1) of the Cenvat Credit Rules, 2004; (b) Whether the exemption Notification No. 4/2004-ST, dated 31-3-2004 applicable to the services provided is in the nature of a conditional Notification which does not attract the provisions of rule 6(1) of the Cenvat Credit Rules, 2004. 3. Both sides were heard at length and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemptions, drawbacks and concessions, namely: (a) exemption from any duty of customs, under the Customs Act, 1962 or the Custom Tariff Act, 1975 or any other law for the time being in force, on goods imported into, or service provided in, a Special Economic Zone or a Unit, to carry on the authorised operations by the Developer or entrepreneur; (b) exemption from any duty of customs, under the Customs Act, 1962 or the Customs Tariff Act, 1975 or any other law for the time being in force, on goods exported from, or services provided, from a Special Economic Zone or from a Unit, to any place outside India; (c) exemption from any duty of excise, under the Central Excise Act, 1944 or the Central Excise Tariff Act, 1985 or any other law for the time being in force, on goods brought from Domestic Tariff Area to a Special Economic Zone or Unit, to carry on the authorised operations by the Developer or entrepreneur; (d) 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 a Special Economic Zone or Unit or services provided in a Special Economic Zone or Unit by the service providers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liers as on par with exporters is clear from the following: (a) Definition of 'Export' under section 2(m)(ii) of the SEZ Act, 2005; (b) The pattern of the procedure laid down in rule 22 of the SEZ Rules, 2006; (c) The provision of rule 23 of the SEZ Rules, 2006 which clearly indicates that suppliers from the DTA to a SEZ unit or their Developer for their authorized operation shall be eligible for export benefit under the Foreign Trade Policy; (d) Rule 27 of the SEZ Rules, 2006 which indicates that the procurement is done by the unit or developer for DTA without payment of taxes after availing export the entitlements; (e) Rule 30 of the SEZ Rules, 2006 which indicates that the DTA supplier shall clear the goods to a unit or Developer as in the case of exports under bond; (f) The Instruction No. 6/2006, dated 3-8-2006 which indicates that the services providing units shall be eligible for export benefits; and (g) Circular No. 29/2006-CUS., dated 27-12-2006 which indicates that the provision relating to exports under the Central Excise Act, 1944 may be applied mutatis mutandis to procurements by SEZ Units and SEZ Developers from DTA for their authorized op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit only on that quantity which is intended for use in providing output service on which service tax is payable. Sub-rule (3)(c) of rule 6 provides that the provider of output service shall utilize credit only to extent of an amount not exceeding 20 per cent of the amount of service tax payable on taxable output service. 7.2 After 1-4-2008, sub-rule (3)(c) was amended to provide that service provider will pay 8 per cent of the value of the exempted service. 7.3 According to Explanation to rule 3(2) of the Export of Service Rules, 2005 - "Rule 3(2) ** ** ** Explanation: For the purpose of this rule "India" includes the designated areas in the Continental Shelf and Exclusive Economic Zone of India as declared by the notifications of the Government of India in the Ministry of External Affairs numbers S.O. 429(E), dated the 18th July, 1986 and S.O. 643(E), dated the 19th September, 1996." 7.4 According to sub-rule (6) of rule 6, the provisions relate to availment of Cenvat credit in respect of excisable goods cleared to a unit or a developer in SEZ for their authorized operations (developer included w.e.f. 31-12-2008). 7.5 The study of all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been made under relevant Act and Rules. The very fact that the Notification No. 4/2004 issued clearly shows that wherever the notification to exempt goods or provides specific concessions, provisions have been made in the relevant enactment. The fact that the rule 6 covers export of goods to SEZ also supports this view. 8. Both sides relied upon some decisions to support their submissions. 9. The learned Counsel for the appellant relied upon the decision of the Hon'ble High Court of Karnataka in the case of Shyamaraju Co. (India) (P.) Ltd. v. Union of India 2010 (256) ELT 193. Relying upon paragraph 7 of the Hon'ble High Court, it was submitted that supplies of goods to SEZ by DTA units are to be treated as export transaction and benefit be granted accordingly. The decision of the Hon'ble High Court was rendered while examining the claim of the Revenue that export duty is leviable in respect of the goods supplied to SEZ. Taking note of the definition of export under Customs Act, the Hon'ble High Court took a view that export to SEZ cannot be considered as an export for levy of export duty. The Hon'ble High Court took the view that it was treated as an export by a legal fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Nowhere the department was contended that the service tax is required to be paid in respect of service provided to SEZ unit/developer. It is settled law that when the legal provisions are clear, the same have to be implemented without looking into equity and other considerations. In this case, there is no doubt that the provisions of rule 6 of the Cenvat Credit Rules and Export of Service Rules did not provide for any exemption to service provider or developer from restriction regarding utilization of Cenvat credit or payment of 8 per cent of value of the goods. In the absence of such provisions under the relevant provisions which are nothing to do with the SEZ Act and not in conflict with SEZ Act, the question that provisions are in conflict would not help the appellant at all. 10. It was also submitted that the transactions are in the nature of taxable transactions exported and therefore tax-free and therefore they cannot be equated to exempted service. We are unable to appreciate the view. We considered the provisions of Export of Service Rules which specifically provided that only when export is outside India, the same can be treated as export and in this case it was not o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Credit Rules does not differentiate between conditional exemption notification and exemption notification. It is the conclusion of the order that services provided by the appellant to SEZ unit/developer are exempted by Notification No. 4/2004-S.T., dated 31-3-2004 and therefore the said services are exempted service as per rule 2(e) of Cenvat Credit Rules, 2004, Therefore, restriction under rule 6 of Cenvat Credit Rules are applicable. 15. According to rule 2(e) of Cenvat Credit Rules, 2004, "exempted service" means taxable services which are exempted from the whole of the service tax leviable thereon and includes service on which no service tax is leviable under section 66 of the Finance Act. It was submitted on behalf of the appellant that exemption contemplated under rule 2(e) of Cenvat Credit Rules, 2004 is not an absolute and unconditional exemption and rule 6(1) does not cover exemptions which are subject to condition and tax is recoverable from the supplier or from the receiver if the conditions are not fulfilled. The learned Counsel relied upon the decision of the Tribunal in the case of Bajaj Tempo Ltd. v. CCE 1994 (69) ELT 122 (Trib.-Mum.) in which a view was taken th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the same manufacturer. In such cases Notification 217/86 can be availed. They also can take Modvat credit on primary inputs used in the manufacture of secondary inputs (M.V. parts, I.C. engines) so long as the final product namely Motor vehicle pays duty. Hence, we are to agree with the ld. counsel Shri Lodha that Notification 217/86 stands on a different footing, when it comes for consideration for purposes of applying rule 57C. It is not like any other exemption, where intention is to forego the levy on the products cleared from the factory. ** ** ** 7.4 Another argument of ld. JDR is that in the case of exemption applicable to products removed to 100 per cent EOU, a specific exception has been made in rule 57C and in the absence of any such exception being provided in the case of Notification 217/86, such products cleared under Chapter X procedure for further manufacture of final products in terms of the above Notification 217/86, are only to be construed as goods exempted, thereby attracting rule 57C. We have carefully considered this argument. But we find that in the case of exemption for goods removed to 100 per cent EOU, such products are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e final product should be exempted, which situation can arise only when there is an exemption notification issued under section 5A of the Central Excise Act or the final product is chargeable to nil rate of duty. Expression chargeable to nil rate of duty or exempted from whole of duty was considered by the Tribunal in the case of Orissa Synthetics Ltd. v. Collector of Central Ex. [1995 (77) ELT 350 (Trib.)] and after taking note of the Ministries clarifications issued vide Circular No. 10/75/CX. 6, it was held that clearance under goods under provision of rule 191BB for export without payment of duty would not get covered by the above expression. Reference was made to the advice received from the Ministry of Law dealt in the paragraph 9 in the said decision. It was opined in the said letter of the Law Ministry that the term 'exempted' has a definite connotation. The same as attributed to the notification issued by the Central Government. Similarly, the chargeable to nil rate of duty would refer to the tariff rate being nil and the goods cleared in terms of provision of rule 199BB would not be covered by the said expression inasmuch as the same are not chargeable to nil rate. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .E., dated 2nd April, 1986. As stated above, the Notification itself clarifies that the inputs can be used within the factory of production or in any other factory of the same manufacturer." By applying the ratio of the above decision, it becomes clear that Modvat credit of duty paid on the inputs used in the manufacture of final product cleared without payment of duty for further utilisation in the manufacture of final product, which are cleared on payment of duty by the principal manufacturer, would not be hit by provision of rule 57C. Inasmuch as, the matter stands decided by the Hon'able Supreme Court, we would hold in favour of assessee." In view of the above discussion, we hold that the Notification No. 4/2004-S.T., dated 31-3-2004 read with rule 25 of SEZ Act, 2005 is a conditional exemption and therefore, the above decision apply and demand/restriction under rule 6 of Cenvat Credit Rules, 2004 would not apply. 16. Another submission was made that sub-rule (6A) has been inserted to rule 6 of Cenvat Credit Rules, 2004 by Notification No. 3/2011-CE (NT), dated 1-3-2011 which reads as under :- "(6A) The provisions of sub-rules (1), (2), (3) and (4) shall not be applica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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