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TMI Blog2011 (9) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... tices dated 4-3-2009 and 23-10-2009. 1.4 Appeal No. E/1013/2009 is by the Department challenging the dropping of proceedings demanding an amount of Rs. 3,58,326/- relating to the period from June, 2007 to July, 2007. 1.5 Appeal No. E/1014/2009 is by the Department challenging the dropping of proceedings demanding an amount of Rs. 2,33,290/- relating to the period from May, 2007. 1.6 Appeal No. E/1022/2009 is by the Department challenging the dropping of proceedings demanding an amount of Rs. 4,06,524/- relating to the period from August, 2007 to October, 2007. 1.7 Appeal No. E/1023/2009 is by the Department challenging the dropping of proceedings demanding an amount of Rs. 1,29,100/- relating to the period from November, 2007 to January, 2008. 1.8 Appeal No. E/1099/2009 is by the Department challenging the dropping of proceedings demanding an amount of Rs. 71,722/- relating to the period from October, 2007 to March, 2008. E/CO/2/2010 is filed by the assessee, viz. M/s. Indian Timber Products Pvt. Ltd. in appeal No. E/1099/2009. 1.9 All these appeals involve common legal issues and accordingly are being disposed of by this common order. 2. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules, clearly specify that "Supplies from the Domestic Tariff Area to a Unit or Developer for their authorized operations shall be eligible for export benefits as admissible under the Foreign Trade Policy." d. The supplies have been made to the promoters/developers of SEZ without payment of central excise duty on the strength of ARE1s and a legal undertaking furnished to the Asst. Commissioner of Central Excise. Therefore, such clearances without payment of duty would come within the meaning of export. The provisions of sub-rule 1(1), (2), (3) and (4) of Rule 6 of CCR, 2004 are not attracted. e. Supplies of excisable goods made to the developers/promoters of SEZ could not be treated as exempted goods. In support of this submission, he relies on the following decisions :- CCE, Baroda v. Panchmahal Steel Ltd. [2002 (144) E.L.T. 573 (Tri. - Mumbai)] Alpha Drug India Ltd. v. CCE, Chandigarh [2000 (118) E.L.T. 783 (T)] ANZ International v. CC, Bangalore [2008 (224) E.L.T. 573 (Tri. Bang.)] CCE, Indore v. SRF Ltd. [2008 (223) E.L.T. 508 (Tri. Del.)] CCE, Vadodara v. STEELCO Gujarat Ltd. [2000 (121) E.L.T. 557 (T)] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of duty based on conditional exemption should not be treated as supply of exempted goods attracting provisions of Rule 6 of CCR, 2002/2004. d. From the date of introduction of provisions of SEZ under the Customs Act, the statutes, rules and regulations relating to SEZ, the supplies to SEZ have been treated as exports. He particularly draws our attention to the definition of exports as per the provisions of "Customs, Excise Duties and Service Tax Drawback Rules". e. The decision of the Tribunal in Shoba Developers case [Order No. 435-445/2011] holding that there is no retrospective effect to be seen to the Rule 6, is not applicable to the present issue as the said case dealt with provision of services to SEZ developers under a different scheme of exemption notification issued under the Finance Act, 1994. f. The demand relating to the period Feb. 2004 to Jan. 2008 amounting to Rs. 66,00,988/- is barred by limitation as the appellants have given necessary intimation to the Department about the fact of clearance without payment of duty before clearance. g. & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " w.e.f. 3-3-2003 to drawback rules is only for the limited purpose of granting drawback to such deemed exports. f. Demand of amount in terms of Rule 6 of the Cenvat Credit Rules cannot be equated as levy of tax. There is no ambiguity in this regard. g. Section 51 of the SEZ Act, no doubt provides for overriding effect but the same is only in cases of inconsistency. However, there is no inconsistency in the present case. He refers to para 11 of the decision of the Tribunal in the case of Sobha Developers Ltd. h. The claim of the assessees to not to treat conditionally exempted goods as not exempted amounts to reading the expression "exempted goods" in Rule 6 as "unconditionally exempted goods" and the same is not warranted. This will also be contrary to Rule 3(a)(vii) where conditionally exempted goods are also included. 6.1 We have carefully considered the submissions from both sides and perused the records. In all these cases, the assessees have supplied the excisable goods without payment of duty to developers/promoters of SEZ. There is no dispute that the SEZ developers/prom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise Duties and Service Tax was specifically amended to treat the supplies made to 100% EOU as exports. Further it was contended that various circulars of the CBEC issued when the SEZ provisions were under the Customs Act and after the enactment of SEZ Act, 2005 clearly treated such supplies as exports only. In this regard, Circular No. 24/2003-Cus., dated 1-4-2003 issued from F. No. 602/2/2002/DBK, Circular No. 2/2004-Cus., dated 8-1-2004 issued from F. No. 602/2/2002-DBK and Circular No. 29/2006-Cus., dated 27-12-2006 issued from F.No. DGEP/SEZ/331/2006 were referred to. Further, it was contended that if there was a conflict between the meaning of the term export under the SEZ Act and meaning of the term under other Acts like the Customs Act or the Central Excise Act, in view of Section 51 of the SEZ Act, 2005 the definition given under SEZ Act should be given preference and therefore the goods should be treated as export goods. 7.3 In the light of rival contentions as above, it is appropriate to consider whether supply of goods to SEZ should be treated as export both in terms of SEZ provisions under Chapter XA of the Customs Act and in terms of SEZ Act. The term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia, when the said goods are admitted to SEZ then export duty is also leviable. Similarly, any goods removed from a SEZ to DTA has been treated as import and held liable to import duties including anti-dumping, countervailing and safeguard duties. 7.6 The Section 76-I of erstwhile SEZ provisions dealing with drawback on goods admitted to a SEZ reads as under- "Any goods admitted to a special economic zone from the domestic tariff area for the purpose of authorized under this Chapter shall be eligible for drawback under Section 75 as if such goods are export goods for the purpose of that section." It is to be noted that goods admitted to SEZ are treated "as if such goods are export goods". The drawback rules also stands amended under the Customs Act by enlarging the scope of the term "export" to include "taking out from a place in DTA to a SEZ", making such supplies eligible for drawback under Section 75 of the Customs Act. 7.7 Viewed in this background, the SEZ provisions contained in Chapter XA of the Customs Act clearly treated goods admitted to SEZ as export not only for grant of export benefits but also for levying of export duties. In view of the above, the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns to Rule 6 of Cenvat Credit Rules, 2002/2004 : 9.1.1 Rule 6 of the CCR, 2002 reads as under :- Rule 6. Obligation of manufacturer of dutiable and exempted goods - (1) The CENVAT credit shall not be allowed on such quantity of inputs which is used in the manufacture of exempted goods, except in the circumstances mentioned in sub-rule (2). (2) Where a manufacturer avails of CENVAT credit in respect of any inputs, except inputs intended to be sued as fuel, and manufactures such final products which are chargeable to duty as well as exempted goods, then, the manufacturer shall maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the manufacture of dutiable final products and the quantity of inputs meant for use in the manufacture of exempted goods and take CENVAT credit only on that quantity of inputs which is intended for use in the manufacture of dutiable goods. (3) The manufacturer, opting not to maintain separate accounts shall follow either of the following conditions, as applicable to him, namely :- (a) if the exempted goods are - 1 to 8 ................................... the manufacturer shall pay an amount eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he circumstances mentioned in sub-rule (2). [Provided that...................] (2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services (****), and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for receipt, consumption and inventory of input and input service meant for use in the manufacture of dutiable final products or in providing output service an the quantity of input meant for use in the manufacture of exempted goods or services and take CENVAT credit only on that quantity of input or input service which is intended for use in the manufacture of dutiable goods or in providing output service on which Service Tax is payable. (3) Notwithstanding anything contained In sub-rules (1) and (2), the manufacturer of goods or the provider of output service, opting not to maintain separate accounts, shall follow either of the following options, as applicable to him, namely : - [(i) the manufacturer of goods sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of inputs which is used in the manufacture of exempted goods except in circumstances mentioned in sub-rule (2). Sub-rule (2) stipulates that the manufacturer shall maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the manufacture of dutiable final products and similar accounts for inputs meant for use in the manufacture of exempted goods. In such a situation, cenvat credit shall be taken only on the quantity of inputs which is intended for use in the manufacture of dutiable goods. Sub-rule (3) provides for option not to maintain separate accounts if amounts are paid as stipulated in the said Rule on the total price of exempted goods. Sub-rule (5) of the Rule 6 of CCR, 2002 and sub-rule (6) of Rule 6 of CCR, 2004 provide exception from applying the provisions of sub-rule (1), (2), (3) and (4). Such exceptions have been granted in respect of clearances made for export under bond and also in respect of goods cleared to a unit in SEZ. If the supplies made to SEZ are treated as supply of dutiable goods, then the question of present assessees manufacturing both dutiable and exempted goods does not arise and therefore, the provisions of Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot disputed that the Notification No. 50/2008-C.E. (N.T.), dated 31-12-2008 brings in amendment to Rule 6(6)(i) of the CCR, 2004, 'by way of substitution'. It is true that every case of amendment by substitution cannot be deemed to be having retrospective application. However, the judgments of the Hon'ble Supreme Court in the case of WPIL Ltd., Indian Tobacco Association and Zile Singh v. State of Haryana & Ors. [(2004) 8 SCC 1] provide guidelines as to when an amendment made by way of substitution has to be given retrospective effect. 10.2 In the case of WPIL Ltd., it has been held that when the policy of the Govt. was not to impose excise duty on the parts of power driven pumps used in the factory premises for manufacture of power driven pumps, the subsequent notification should be treated as clarificatory in nature and making explicit what was implicit. 10.3 In the case of India Tobacco Association, Hon'ble Supreme Court invoking the doctrine of fairness for treating the amendment retrospective in para 28 held as under :- "28. The doctrine of fairness also is now considered to be a relevant factor for construing a statute. In a case of this nature where the eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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