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TMI Blog2015 (10) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... ER Per R Periasami The assessees (at S.Nos.1 to 9, 11 and 14 to 22) and the Revenue (at S.Nos.12, 12 & 13) in today's supplementary cause list filed appeals against the impugned orders. All these batch of appeals are taken up together as the issues are common and relates to denial of exemption on clinkers manufactured and captively consumed in the manufacture of cement. 2. The assessees are manufacturers of cement falling under Chapter Heading 2523 29 10 and 2523 29 39. In the course of manufacture of cement the assessees also manufacture Clinker falling under Heading 2523 10 00 which is further used in the same factory captively in the manufacture of cement. The appellants cleared cement to SEZ units/developers without payment of duty. Revenue issued show-cause notice denying Exemption Notification No.67/95-CE, dated 16.03.1995 on the clinker manufactured and consumed in the manufacture of cement and cleared to SEZ units/developers and demanded excise duty on the clinker manufactured and consumed within the factory. Adjudicating authorities confirmed the demands and also imposed penalty. In respect of appeals listed at Sl. No.1,2,4,9,14,15 and 19, Commissioner of Central Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Commissioner of Sales Tax, Jammu & Kashmir & Ors. Vs Pine Chemicals Ltd. & Ors. [1995] 96 STC 355 (SC). 4. He further submits that cements cleared to SEZ is not exempted goods. He refers to the Rule 2(d) of Cenvat Credit Rules, where the exempted goods are defined. In this case cement is neither exempted by any notification nor is it chargeable to nil rate of duty. Therefore, cement is not an exempted goods but merely cleared without payment of duty under Rule 19 of the Central Excise Rules, by following the procedure set out for clearance of the goods for exports. They have followed all the procedures set out for exports like filing ARE-1 return and clearing the goods for export under bond. He further submits that clearance to SEZ is treated as exports and the duty is not required to be paid on the cement cleared to SEZ as it is treated on par with physical exports. He referred to Section 2 (m) and Section 51 of the SEZ Act and mentioned that any supplies by DTA units to SEZ are treated as exports and they are entitled for the benefits like clearance without payment of duty, rebate, drawback and refunds. He further submits that even if the supplies to SEZ are trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read as a reference to the provisions of Cenvat Credit Rules, 2004. He further submits that irrespective of whether the reference to Cenvat Credit Rules, 2001 in Notification 67/95-CE is treated as legislation by way of incorporation or legislation by way of reference the result will be the same as they have fulfilled the obligations under both 2001 Rules and 2004 Rules. He also refers to this Tribunals decision in the case of Rajshree Sugars and Chemicals Ltd. &Ors. Vs Commissioner of Central Excise, Puducherry & Ors. reported in 2014 (11) TMI 919 CESTAT CHENNAI. 6. He also submits that once the final products are cleared without payment of duty to SEZ, it is treated on par with physical exports. The clinker, which is also a part of the cement exported to SEZ unit on that count also benefit cannot be denied. He relied on the Tribunals decision in the case of Toyota Kirloskar Motor Ltd. Vs Commissioner of Central Excise (LTU), Bangalore reported in 2009 (237) E.L.T.176 (Tri.-Bang.). Once the duty is levied on the intermediate product i.e., clinker, the very purpose of making export duty-free to the supplies to SEZ is defeated. He also submits that even if the duty is paid on the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and para 7.10.3 of Handbook of Procedures and submitted that they have complied with the procedure and cleared the goods under-bond. He also relied on SEZ regulation 10.2. He submitted that Notification No.58/2003 is only procedural and not an Exemption Notification. He referred to para-1 of the Circular dated 13.01.2006 and contended that excisable goods are allowed to be exported without payment of duty under-bond. He also drew our attention to the fact that the Board has clarified that Rule 19 of Central Excise Rules, 2002 and Rule 13 are similar provisions. He relied on the following decision:- Hindustan Petroleum Corporation Ltd. Vs Collector of Central Excise reported in 1995 (77) E.L.T. 256 (S.C.) 9. As regards the Revenue appeal, he submitted that the lower appellate authority has rightly allowed the exemption. 10. Learned Shri R. Parthasarathy, Consultant appeared for the appellants at S.Nos.4,6,7,16,19,21 & 22 in seven cases and for the respondents in two cases at S. Nos.14 & 15, in all the nine cases for M/s. Madras Cements Ltd. He submitted the written submissions and reiterated the same. He also concurs with the submissions made by other counsels. He relied on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther hand, Shri Rammohan Rao, Joint Commissioner the learned Authorised Representative submitted the written synopsis. The Authorised Representative for the Revenue countered the appellants' arguments. He submits that the background of the present Notification No.67/95 is based on the earlier Notification No.217/86, which allows exemption on the intermediate goods manufactured within the factory for manufacture of final products. He further submits the exemption to be examined in the context of which it was issued. He also reiterated the grounds of appeal filed by the Revenue in respect of the three appeals of the Revenue. He submits that the benefit of Notification No.67/95 is not available to clinker used in the manufacture of cement and supplied to SEZ. On the first ground, he submits that SEZ is not mentioned as category of exception under the proviso to the notification. He elaborately discussed the provisions of SEZ Act. He drew attention to the Section 26 (1)(c) and Section 51 of SEZ Act and submitted as per the wording to said sections duty of excise on goods brought from DTA units to SEZ is clearly exempted. Therefore, it may not be said that the goods are cleared with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the above. Therefore, he submits that exception is available in the case of compliance with Rule 6 of Cenvat Credit Rules, 2001 only. The period in dispute relates to Cenvat Credit Rules 2004 and Rule 6 of Rules 2004 is not mentioned under said clause (vi).Further, appellants cannot say that they complied with Rule 6 of Cenvat Credit Rules, 2001. 17. Regarding the appellants claim that exemption relating to clearance to FTZ also covers clearances to SEZ he submits that SEZ is different from FTZ. SEZ comes into existence by a different enactment. The wording of notification is clear and unambiguous. He relied on the paragraphs 3 and 18 of the following decision:- M/s. Shri Ganesh Jute Mills Ltd. Vs The Commercial Tax Officer & Ors. reported in (1955) 2 SCR 1076. Wherein it was held that sales to Indian Stores Department would not be automatically treated as sale to Department of Supply. The same is applicable to the facts of the present case. As such, clearance to FTZ could not treated as clearance to SEZ. 18. He submits that notifications to be strictly interpreted without giving any other meaning. He relied on the decision of the Supreme Court in the case of Novopan Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of exports. He submits that as per the objectives of SEZ Act, the preamble and Statement of Objects and Reasons set out in the SEZ Act clearly states the very purpose of enacting this Act is to promote exports. Therefore, all provisions of the SEZ should be read in the context of only promotion of exports and not for creating levies under the Central Excise. 20. He also relied on para 41.3.2 of Essar case (supra) which was also relied by the Revenue. The High Court has held that the fiction created under SEZ Act is for allowing the benefit and not for imposing a levy. In the same ratio, the Section 26 exempting goods under SEZ Act cannot be imported to deny the exemption under Notification No.67/95-CE. He said that the Authorised Representative relying on the circular dated 19.3.2010 is only in favour of the appellants and in no way against them. He also submits that as per the General Clauses Act, Cenvat Credit Rules, 2001 mentioned in the Notification No.67/95 should be read a Cenvat Credit Rules, 2004. He also submits that in any case Cenvat Credit Rules, 2001 is not against the assessee. 21. Regarding the Revenues submissions on Surya Roshni (supra) that the Tribunal has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants used in the manufacture of cement cleared to SEZ without payment of duty are eligible for benefit under Notification No.67/95-CE or not? 2. Whether cement supplied to SEZ are exempted goods or not? 3. Whether sub-clause (vi) in the proviso to the notification referring to Cenvat Credit Rules, 2001 is to be read as applicable to Cenvat Credit Rules, 2001 or Cenvat Credit Rules, 2004? 4. Whether the term FTZ used in the proviso to the Notification 67/95-CE will include SEZ also? 23. Before detailed discussion, it is relevant to reproduce the Notification NO.67/95-CE dated 16.03.1995:- Captive consumption (Goods used within factory of production) GENERAL EXEMPTION NO.6 Exemption to all capital goods and specified inputs if captively consumed within factory of production.- In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excises and Salt Act, 1944 (1 of 1944), read with sub-section (3) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), (hereinafter referred to as the said Special Importance Act),] the Central Government, being satisfied that it is necessary in the public interest so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /developers. We also find in some of the appellants cases, the demand relates to the period prior to the enactment of SEZ Act i.e.,10.02.2006 where the finished goods were cleared without payment of duty to SEZ under Notification No.58/2003-CE, dated 22.07.2003.The period involved in all these cases relates from 2004 to 2011. The appellants main contention is that the goods cleared to the SEZ unit/developers are not exempted from excise duty but cleared without payment of duty by following the requisite procedures set out in SEZ Act and SEZ Rules read with Central Excise Rules. The Revenue contended that goods supplied to SEZ are exempted and demanded duty on the clinkers used in the manufacture of cement which are cleared to SEZ units/developers. We find this very issue has been clearly discussed by the Tribunal Principal Bench in the case of Surya Roshni (supra). Relevant paragraphs are reproduced as under: 5. We have considered that rival submissions. There is no dispute that common Cenvat Credit availed inputs have been used in the manufacture of goods supplied to DTA buyers on payment on duty and also in respect of the goods supplied to SEZ Developers without payment of duty. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue relates to availment of Cenvat credit, where the appellants have supplied both dutiable and exempted goods. While allowing the appeal, the Tribunal has categorically discussed the meaning of exempted goods defined in Rule 2(d) of Cenvat Credit Rules and held that the goods supplied to the SEZ units/developers are neither chargeable to nilrate of duty nor the goods are exempted from payment of duty by any Exemption Notification issued under Rule 5A. The Principal Bench's above decision is squarely applicable to the facts of the present case. In the present case, we find the sub-clause (vi) of the proviso to Notification N0.67/95-CE is an exception clause where a manufacturer of dutiable and exempted goods is eligible if he discharges the obligation prescribed in Rule 6 of Cenvat Credit Rules, 2001. As rightly submitted by both Revenue and the appellants, there is no definition of 'exempted goods' in Central Excise Act except Rule 2 (d) of Cenvat Credit Rules. The Tribunals decision in the case of Surya Roshni (supra) discussed above clearly answers the above question. When the words exempted goods used in the said notification, it only means 'final products exempted und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified by notification by the Board. There is no dispute that the appellants had duly followed the procedures set out in the above Rules, and executed bond before the excise authorities and cleared the goods without payment of duty. If the goods are fully exempted, the question of following the procedure under ARE-1 and execution of bond does not arise. Accordingly, we hold that the cement cleared to SEZ unit/developers are not exempted goods but cleared without payment of duty by following the procedures and conditions stipulated in both SEZ and Rule 19 of CER Rules and the clinkers used captively for manufacture of cement cleared to SEZ is covered under Notification 67/95 from exemption of excise duty. 27.Having discussed the main issue, we now proceed to discuss the second issue whether the supplies to SEZ is treated as export or not? The Revenues contention is that goods supplied to SEZ are not exports perse and relied on the decision of the Hon'ble High Court in the case of i. Essar Steel Ltd. v. Union of India [2008 (232) ELT 617 (Guj.)] ii. Shyamaraju & Co. (India) Pvt. Ltd. v. Union of India [2010 (256) ELT 193 (Kar.)] We find that this issue has already been cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Domestic Tariff Area supplier supplying goods to a Unit or Developer shall clear the goods, as in the case of exports, either under bond or as duty paid goods under claim of rebate on the cover of ARE-1 referred to in Notification number 42/2001-Central Excise (NT) dated the 26th June, 2001 in quintuplicate bearing running serial number beginning from the first day of the financial year". 3. It can thus be seen that according to the SEZ Act, supply of goods from DTA to the SEZ constitutes export. Further, as per section 51 of the SEZ Act, the provisions of the SEZ Act shall have over riding effect over provisions of any other law in case of any inconsistency. Section 53 of the SEZ Act makes an SEZ a territory outside the customs territory of India. It is in line of these provisions that rule 30 (1) of the SEZ rules, 2006 provides that the DTA supplier supplying goods to the SEZ shall clear the goods either under bond or as duty paid goods under claim of rebate on the cover of ARE-1. 4. It was in view of these provisions that the DGEP vide circulars No. 29/2006-customs dated 27/12/2006 and No. 6/2010 dated 19/03/2010 clarified that rebate under rule 18 of the Central Excise Rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cilities offered to the Special Economic Zone developer and units are implemented through various notifications and circulars issued by the concerned Ministries/Departments. The present system, therefore, does not lend enough confidence for investors to commit substantial funds for development of infrastructure and for setting up of the units in the Zones for export of goods and services. In order to give a long term and stable policy framework with minimum regulatory regime and to provide expeditious and single window clearance mechanism, a Central Act for Special Economic Zones has been found to be necessary in line with international practice. To achieve this purpose, a "Special Economic Zones Bill, 2005" is proposed. The salient features of the Bill are as under:- i.. ii.. iii.. iv... v... vi... 5. The Bill seeks to achieve the aforesaid objects. From the above enactment, it is evident the object of SEZ is only to extend benefits and allow free of taxes and duties on the goods & services supplied to SEZ units. 29. Therefore, in view of the recent Boards circular, dated 28.04.2015 and as per objectives of the SEZ Act, we hold that the goods supplied to SEZ unit/develope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2001. 6. From the above proviso to Notification No. 67/95-C.E. ibid, it appears that the bar created therein is not applicable to the inputs used in or in relation to the manufacture of exempted final products cleared by a manufacturer of such exempted final products as well as dutiable final products. In other words, where the manufacturer manufactures both dutiable and exempted final products and uses the inputs in question in the manufacture of the exempted final products, he is entitled to the benefit of exemption from payment of duty on such inputs in terms of the opening paragraph of the Notification. This right is not hit by the opening portion of the proviso to the Notification as the manufacturer is squarely covered by the exception carved out of the proviso vide clause (vi) under the proviso. The Department, it appears, would like to drive the assessee out of the purview of this exception on the ground that the latter had not discharged the obligation prescribed in Rule 6 of the CENVAT Credit Rules, 2004. We have already held that the assessee did not have any liability under sub-rules (1) to (4) of Rule 6 inasmuch as these sub-rules were not applicable, by virtue of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7/95 provides exception only for clearance to FTZ and not for SEZ. It is contended that the very purpose of the non-inclusion of SEZ in Notification No.67/95 is to make it apply only to FTZ and not to SEZ. We are unable to accept departments the view for the reasons that during the relevant period under dispute there were no FTZ in operation and if the Revenues view is to be taken, no clearance would be made to FTZ after the enactment of SEZ Act with effect from 10.02.2006. Once the SEZ Act came into effect from 10.02.2006 all the units functioning as FTZ were declared as SEZ units. We find that the Notification No.4/2003-CE, dated 30.03.2003 was issued to convert various FTZs into SEZs. 33. Further as per the Notes Explaining Clauses of the Finance Bill, 2007 clause 106, after enactment of SEZ Act FTZs have become redundant and hence it seeks to amend sub-section (1) of Section 3 of the Central Excise Act. The Relevant clause is reproduced as under:- Clause 106 seeks to amend sub-section (1) of section 3 of the Central Excise Act, 1944 with a view to omit the provisions relating to free trade zone which have become redundant due to enactment of the Special Economic Zones Act, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of M/s. Bajaj Tempo Ltd. v. CCE - [1994 (69) E.L.T. 122] laying down that the object of the captive consumption notifications is to avoid unnecessary scriptory work, resulting in no benefit to the Revenue and to ensure the same result. The demand in the present case is admittedly available as credit to the appellant and the same would have added in more scriptory work to the assessee, in stead of resulting in any revenue earning to the Department or revenue loss to the assessees. The entire situation being revenue neutral, we find no justification for confirmation of demands in question on this ground. 35. In view of foregoing discussions, we hold that the appellants are eligible for exemption under Notification 67/95-CE on clinker captively consumed for manufacture of cement cleared to SEZ units/developers without payment of duty for both the periods prior to and after the amendment of SEZ Act. Accordingly, the impugned orders in all the assessees appeals are set aside and the appeals allowed. The Revenue appeals are rejected and the impugned orders are upheld. Consequently, connected miscellaneous applications are disposed of. All appeals are disposed of in the above ..... X X X X Extracts X X X X X X X X Extracts X X X X
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