TMI Blog2013 (5) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... It appears that the aforesaid mistake was realised by the Government and rule 6(6)(i) of the 2004-Rules was substituted by the following new sub-rule & after substitution of rule 6(6)(i) by the Amended Rules, the discrimination between the developer and a unit in SEZ has been obliterated. Both stand in the same footing. It is now in consonance with the Article 14 of the Constitution of India. It is settled rule of interpretation that rule or notification takes effect from the date it is issued and not from any prior date. However, Justice GP Singh in his book 'Principles of Statutory Interpretation' 12th Edition, 2010 at page 1021 observes that a rule, which is not in terms retrospective, may have retrospective operation because of the retrospective operation of the enactment in respect of which it is made.So is the case here. The substituted sub-rule 6(6)(i) of the 2004-Rules should have retrospectivity in order not to discriminate and to be in consonance with the nature of excise duty. Thus the rule is clarificatory, corrects an obvious mistake, removes discrimination, and provides correct legal principle. Its prospective enforcement would leave it to be suspect at the tou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 6 (Sub-rule 6(3)} of the 2004-Rules, it may not do so, but in that event, the manufacturer is required to pay certain amount of total price of the exempted goods; Sub-rule (6) of rule 6 {sub-rule 6(6)} of the 2004-Rules exempts the operation of sub-rules 6(1) to 6(4) of the 2004-Rules in certain contingencies. 4. Initially when the 2004-Rules were framed, sub-rule 6(6)(i) exempted the operation of sub-rules 6(1) to 6(4) to the goods cleared to the units in the Special Area Zone (SEZ) established under the Special Area Zone Act, 2005 (the SEZ-Act). 5. Later on, sub-rule 6(6)(i) was amended and new sub-rule 6(6)(i) was substituted by the Cenvat Credit (Third Amendment) Rules, 2008 the Amending-Rules (see Appendix-2). By the substituted sub-rule 6(6)(i) of the 2004-Rules not only clearance to a unit but clearance to a developer was also exempted from operation of sub-rules 6(1) to 6(4) of the 2004 - Rules. 6. The SEZs are being developed with the private enterprises at different parts of the country. One SEZ is at Kochi. M/s Mundra Port Special Economic Zone, Mundra and M/s Bharat Petroleum Corporation Limited are its co-developers. One another SEZ is at Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e treated as exempted goods for the purpose of Rule 6(3)(b) of the Cenvat Credit Rules and can further be treated as exports under Section 2(18) of the Customs Act as well as under Clause (V) of Rule 6(6) of Cenvat Credit Rules, 2004 ?' However, the main point involved is, as mentioned in the second paragraph of the judgement. THE DECISION 14. The counsel for the Department submits that: At the relevant time, sub-rule 6(6)(i) of the 2004-Rules did not include clearance to a developer in the SEZ. It was included by the Amending-Rules; Under sub-rule (2) of rule 1 {sub-rule1(2)} of the Amending-Rules, it came into force on the date of its publication in the official gazette; The Amending-Rules were published in the official gazette on 31.12.2008. They were not in force during the time when goods were cleared to the developers in SEZ; The Assessee is not entitled to claim benefit of the same. 15. Whereas, the counsel for the Assessee submits that: Excise duty is not levied or is remitted on the goods that are exported; The goods cleared to the units and developers of the SEZ are treated to be export under the law; Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contradistinction upon the individuals - is generally referred to as 'duty'; whereas, tax is levied also on the tax payers, who could be individuals or legal entitles. Duty and tax have same connotation, same purpose, though duty is sub-specie of the tax. Nature of Excise and Customs Duties 21. Different kind of duties are imposed upon goods. Traditionally, two duties were imposed: one is customs and the other is excise. Though, of late, other kinds of duties, such as Countervailing Duty (CVD), Education Cess, Anti Dumping Duty, Safeguard Duty etc are also being imposed. 22. The word 'Excise' is said to be ambiguous. In Atlantix Smoke Shops Ltd vs Colon AG for Canada - 1943 AC 550, the Privy council observed, '"Excise" is a word of vague and somewhat ambiguous meaning.... The word is usually (though by no means always) employed to indicate a duty imposed on home manufactured articles in the course of manufacture before they reach the consumer. So regarded, an excise duty is plainly indirect. A further difficulty in the way of the precise application of the word is that many miscellaneous taxes, at any rate in this country, are classed as "excise" merely becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment'. They provide as to how the assessment of the excise duty is required to be done; Rule 17, 18 and 19 are titled 'Removal of goods by a hundred percent. Export-Oriented Undertaking for Domestic Tariff Area', 'Rebate of duty', and 'Export without payment of duty' respectively. These three rules together conceive an arrangement by which if the goods are to be exported, then no custom duty is charged or remitted back to them on proof of export and in case 100% export oriented undertaking removes the goods to the domestic tariff area instead of export then it is liable to pay excise duty. Provisions of the Customs Act 28. Section 2 of the Customs Act is titled as 'definitions'. Sub-section (11) of section 2 {sub-section 2(11)} explains what is 'customs area'. Sub-section (18) of section 2 {sub-section 2(18)} explains what is 'export'. Sub-section (23) of section 2 {sub-section 2(23)} explains what is 'import'. Sub-section (27) of section 2 {sub-section 2(27)} explains what is 'India'. 29. Section 12 of the Customs Act is titled 'dutiable goods' and is a charging section under the Customs Act. It provides for custom duty to be paid on the export as we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the SEZ-Act is titled 'Act to have overriding effect'. It provides that the SEZ-Act will have effect notwithstanding anything contained in any other law for the time being in force or in any other instrument. It has overriding effects over any other law and in case of conflict, the SEZ Act is to prevail. 36. The SEZ-Act is within the territorial limits of the country; the goods supplied to the unit or to the developer in SEZ do not go outside the country, yet, in view of the definition in section 2 (m) of the SEZ Act, they are to be treated as export. 37. In the present case, the Assessee had supplied goods from the domestic tariff area to a developer and it is to be treated as an export in view of sub-section 2(m) of the SEZ Act. In case it is treated to be export then all benefits as given to export under any other law should be given. 38. In case, the general principle as well as the framework of the Customs Act or Excise Act is to be understood, in that event, there should not be any excise duty on anything which is supplied to a unit or developer. The principle that is applicable to the unit in the SEZ should also apply to a developer as well. 39. The S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealised by the Government and rule 6(6)(i) of the 2004-Rules was substituted by the following new sub-rule (see Appendix-2): "(i)cleared to a unit in a special economic zone or to a developer of a special economic zone for their authorised operations". 46. After substitution of rule 6(6)(i) by the Amended Rules, the discrimination between the developer and a unit in SEZ has been obliterated. Both stand in the same footing. It is now in consonance with the Article 14 of the Constitution of India. 47. Nevertheless, in case the submission of the Department-that the amended substituted sub-rule came into force from the date of its publication in the official gazette i.e on 31.12.2008-is accepted, then the discrimination would be there prior to 31.12.2008 though after this date it would not be there. 48. The Central government is a state within the meaning of Article 12 of the Constitution. It is prohibited to discriminate under Article 14 of the Constitution. In case the submission of the Department is accepted, it would leave the Central government to the charge of discrimination. Could this be the intention; can this be presumed; should this be the result ? 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecial Area Zone Act; (c) The substituted sub-rule 6(6)(i) is enforced from the date the 2004-Rules came into force. 53. In view of above, both the substantial questions of law are decided against the Department. The appeal has no merit. It is dismissed. Appendix-1 Rule 6 of the 2004-Rules as it was initially framed was as follows: Rule 6. Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services.-(1) The CENVAT credit shall not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or exempted services, except in the circumstances mentioned in sub-rule(2). (Inserted by Notification No.13/2005-C.E.(N.T.), dated 1.3.2005.) [Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule.] (2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services, (Omitted by Notification No.27/2005-C.E. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lling within heading 2710 of the said First Schedule, for ultimate sale through public distribution system.] The manufacturer shall pay an amount equivalent to the CENVAT credit attributable to inputs and input services used in, or in relation to, the manufacture of such final products at the time for their clearance from the factory; (b) if the exempted goods are other than those described in condition the manufacturer shall pay an amount equal to ten per cent of the total price, excluding sales tax and other taxes, if any, paid on such goods, of the exempted final product charged by the manufacturer for the sale of such goods at the time of their clearance from the factory; (c) the provider of output service shall utilize credit only to extent of an amount not exceeding twenty per cent of the amount of service tax payable on taxable output service. Explanation I.- The amount mentioned in conditions (a) and (b) shall be paid by the manufacturer or provider of output service by debiting the CENVAT credit or otherwise. Explanation II.- If the manufacturer or provider of output service fails to pay the said amount, it shall be recovered along with interest in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under section 3 of the said Customs Tariff Act when imported into India and supplied against International Competitive Bidding in terms of notification No..6/2002-Central Excise dated the 1st March, 2002.] Appendix-2 The Amending-Rules are as follows: MINISTRY OF FINANCE (DEPARTMENT OF REVENUE) New Delhi Dated: December 31, 2008 Notification No.50/2008-Central Excise (N.T.) G.S.R.(E). - In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944) and section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the CENVAT Credit Rules, 2004, namely:- 1.(1) These rules may be called the CENVAT Credit (Third Amendment) Rules, 2008. (2) They shall come into force on the date of their publication in the Official Gazette. (Emphasis supplied) 2. In the CENVAT Credit Rules, 2004, in rule 6, in sub-rule(6), for clause (i), the following clause shall be substituted namely:- "(i) cleared to a unit in a special economic zone or to a developer of a specia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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