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TMI Blog2013 (5) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... r words, whether the substituted sub-rule 6(6)(i) is retrospective or not'. THE FACTS 3. Rule 6 of the 2004-Rules (see Appendix-1) imposes different obligations on a manufacturer of exempted and dutiable goods: * Under sub-rule 2 of rule 6 {sub-rule 6(2)} of the 2004-Rules such a manufacturer is required to maintain separate accounts for the receipt, consumption, and inventory of input and input service meant for use in manufacture of dutiable goods; * Under sub-rule 3 of rule 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-R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. We have heard counsel for the parties. This case was admitted on 30.10.2012 on the following questions of law: '(i) Whether the Tribunal erred in holding the amendment notification 50/2008 dated 31.12.2008 as retrospective, when admittedly the said notification provides for they shall come into force on their publication in official gazette ? (ii) Whether the supplied made to SEZ developers prior to 31.12.2008 can also be 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 31.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the people, and includes duties, imposts, and excises. Although a tax is often thought of as being pecuniary in nature, it is not necessarily payable in money; * Duty is a tax imposed on a commodity or transaction, esp. on imports. A duty in this sense is imposed on things and not persons. 20. Thus, tax-imposed upon commodities, goods, financial transactions in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Central Excise Tariff Act, 1985. 27. The Central Excise Rules, 2002 (the 2002 Rules) provides how excise duty is to be assessed and collected: * Rule 4 is titled 'Duty payable on removal'. It provides excise duty to be payable on removal of goods; * Rules 6 and 7 are titled 'Assessment of duty' and 'provisional assessment'. 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- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing services, from the domestic tariff area to a unit or developer. * Sub-section (zc) of section 2 {sub-section 2(zc)} defines the words 'existing unit' and 'unit', it means, a unit which has been set up by an entrepreneur in a SEZ and includes an existing unit. 35. Section 51 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the SEZ Act the position of the developer as well as the unit was one and the same; they were in the same class, entitled to the same treatment. This appears to be an inadvertent omission. 45. 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 (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rimination between developers and units in special area zones. It merely clarifies or explains the existing law of providing non-imposition of excise duty on goods that are held to be export under the Special 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Petroleum Gases (LPG) falling under tariff items 2711 12 00, 2711 13 00 and 2711 19 00 of the said First Schedule] (ix) Kerosene falling 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005.) (vii) all goods which are exempt from the duties of customs leviable under the First 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 sp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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