2009 (5) TMI 643 - AT - Central Excise

Tribunal rules in favor of appellant, citing SEZ Act exemption, interprets demand as tax.

SUJANA METAL PRODUCTS LTD. Versus COMMR. OF CUS. & C. EX. HYDERABAD

The Tribunal ruled in favor of the appellant, emphasizing the exemption under the SEZ Act for supplies to developers and interpreting the demand as tax, ... Stay/Dispensation of pre-deposit - Cenvat/Modvat - Interpretation of statutes - Held that: - the amendment to Cenvat Credit Rules, 2004 should be taken to be clarificatory in nature as the word “substituted” has been used - tax is compulsory contribution to the support of Government, levied on persons, property, income, commodities, transactions etc. now at fixed rates mostly proportional to the amount on which the contribution is levied.” In view of this the amount of 10% levied and also to be treated as tax and all the provisions of SEZ Act would be applicable to the said amount. Therefore, we order complete waiver of the dues demanded in the impugned order - appeal allowed - decided in favor of appellant. Issues:1. Pre-deposit amount under Rule 6 of Cenvat Credit Rules.2. Interpretation of provisions under Special Economic Zones Act, 2005.3. Applicability of SEZ Act over Cenvat Credit Rules.4. Retrospective effect of amendment in Cenvat Credit Rules.5. Nature of demand made and its treatment as tax.Issue 1: Pre-deposit amount under Rule 6 of Cenvat Credit Rules:The case involved the pre-deposit of Rs. 1,53,84,947, which was 10% of the value of goods supplied to developers without payment of duty. The Revenue contended that the credit attributable to this supply was not covered under Rule 6 of the Cenvat Credit Rules. The Commissioner confirmed the proposal and imposed a penalty under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the CEA, 1944.Issue 2: Interpretation of provisions under Special Economic Zones Act, 2005:The Commissioner denied the benefit of exemption to goods supplied to developers as the word 'developer' was not mentioned in the Cenvat Credit Rules. However, the appellant argued that the SEZ Act, 2005 defined 'export' and 'developer,' providing for exemption even to developers. The appellant highlighted Section 26(1)(c) of the SEZ Act, emphasizing the exemption from duty for goods brought to SEZ by developers.Issue 3: Applicability of SEZ Act over Cenvat Credit Rules:The appellant argued that the SEZ Act should prevail over any inconsistency with the Cenvat Credit Rules. Referring to Section 51 of the SEZ Act, which states that the provisions of the Act shall have effect notwithstanding any inconsistency in any other law, the appellant emphasized that the SEZ Act's overriding effect should be considered.Issue 4: Retrospective effect of amendment in Cenvat Credit Rules:The appellant pointed out an amendment in Cenvat Credit Rules 6(6)(i) adding the word 'developer' to remove inconsistencies. The appellant argued that this amendment should have a retrospective effect, clarifying the exemption for supplies made to developers even before the amendment date.Issue 5: Nature of demand made and its treatment as tax:After considering the arguments and provisions pointed out by the appellant, the Tribunal found that the SEZ Act provided for exemption of supplies to developers. The Tribunal viewed the amendment to Cenvat Credit Rules as clarificatory and considered the demand made as a tax. Citing a previous court case, the Tribunal ordered a complete waiver of the demanded dues until the appeal's disposal, treating the 10% amount as tax and applying all SEZ Act provisions to it.In conclusion, the Tribunal ruled in favor of the appellant, emphasizing the exemption under the SEZ Act for supplies to developers and interpreting the demand as tax, leading to a complete waiver of the dues until the appeal's final resolution.