TMI Blog2011 (9) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the period May, 2007 to March, 2008 besides interest and penalties. 1.2 Appeal No. E/1539/2010 is by M/s. Prakash Glass Rubber Works challenging the demand of amount of Rs. 4,55,997/- relating to the period January, 2008 to August, 2008 besides interest and penalties. 1.3 Appeal No. E/1596/2010 is by M/s. Zuari Cements Ltd. challenging the demand of amount of Rs. 1,13,66,040/- relating to the period February, 2004 to November, 2008 besides interest and penalties in pursuance of show-cause notices 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. 1,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omoters of SEZ would come within the meaning of the word export as defined under Section 2(m) of the SEZ Act, 2005. b. In terms of Section 26 of the SEZ Act, 2005, every developer and the entrepreneur shall be entitled to the exemptions from any duty of excise under the CEA, 1944 (in addition to other exemptions, drawbacks, concessions, etc.). c. Rule 23 of the SEZ Rules, 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts both to units as well as to the developers. If SEZ developer is not treated at par with SEZ unit, the purpose of SEZ scheme shall be defeated. c. Supply of goods without payment 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 Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose 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/promoters were entitled to get the goods supplied by the manufacturers in DTA without payment of duty. There is also no dispute that when exempted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars 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 export has not been defined in the Central Excise Act or in the Central Excise Rules or in the Cenvat Credit Rules. The term export under the Customs Act means t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 admitted to SEZ from DTA has to be treated only as exports till 9-2-2006 when the said provisions were in vogue. 8.1 SEZ Act came into effect from 10-2-2006. The definition of Export under the SEZ Act in relation to supplying of goods or providing of servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances 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 equivalent to the CENVAT credit attributable to inputs used in, or in relation to, the manufacture of such final products at the time of their clearance from the factory; or (b) if the exempted goods are other than those described in condition (a), the manufacturer shall pay an amount equal to eight per cent of the total price, excluding sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 shall pay an amount equal to five per cent of value of the exempted goods and the provider of output service shall pay an amount equal to sic per cent of value of the exempted services; or] (ii) the manufacturer of goods or the provider of output service shall pay an amount equivalent to the CENVAT Credit attributable to inputs and input services used in, or in relation to, the manufacture of exempted goods or for provision of exempted services subject to the conditions and procedure specified in sub-rule (3A). Explanation I - If the manufacturer of goods or the provider of output service, avails any of the option und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 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 6 of Cenvat Credit Rules, 2002/2004 are not at all attracted. The question of applying exception arises only when the supplies are treated as exempted goods. 9.3 Insofar as Rule 6 (6) relating to the SEZ was concerned, the same was amended w.e.f. 31-12-2008. The provisions prior to amendment was : The provisions of sub-rule (1), (2), (3) and (4) shall not applicable in case the excisable goods removed without payment of duty (1) cleared to a unit in SEZ. The provisions after amendment was : The provisions of sub-rule (1), (2), (3) and (4) shall not applicable in case the excisable goods removed without payment of duty or either cleared to a unit in SEZ or to a developer of SEZ for their authorized operations. 9.4 According to the Department the amendment effective from 31-12-2008 Rule 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 effect of a beneficent statute was sought to be extended keeping in view the fact that the benefit was already availed of by the agriculturists of tobacco in Guntur, it would be highly unfair if the benefit granted to them is taken away, although the same was meant to be extended to them also. For such purposes the statute need not be given retrospective effect by express words but the intent and object of the legislature in relation thereto can be culled out from the background facts. 10.4 In the case of Zile Singh v. State of Haryana Ors, the Hon ble Supreme Court held that the substitution of one text for the other pre-existing text is one of the known and well-recognized practices employed in legislative drafting and Substitution has to be distinguished from supersession or a mere repeal of an existing provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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