2016 (8) TMI 1297 - AT - Central Excise

Court grants appellant Cenvat credit for supplies to SEZ developers, ruling in favor of export treatment

The court allowed the appeal in favor of the appellant, setting aside the denial of cenvat credit for supplies to SEZ developers. The court held that ... Treatment of DTA supplies to SEZ as export of dutiable goods - entitlement to cenvat credit for supplies to SEZ developer - applicability of the exception to maintenance of separate accounts for inputs and services under the Cenvat Credit RulesTreatment of DTA supplies to SEZ as export of dutiable goods - applicability of the exception to maintenance of separate accounts for inputs and services under the Cenvat Credit Rules - Whether supplies made by a DTA unit to an SEZ developer prior to 13.12.2008 are to be treated as export of dutiable goods and, consequently, whether the exception relieving maintenance of separate accounts for dutiable and non dutiable inputs/services applies, entitling the appellant to cenvat credit. - HELD THAT: - The Tribunal, applying decisions cited by the appellant and not contested by the revenue, accepted that after enactment of the Special Economic Zones Act, 2005 (w.e.f. 10.02.2006) supplies from DTA to SEZ are to be treated as export of dutiable goods. On that basis the Tribunal held that the exception in the Cenvat Credit Rules relieving a manufacturer from maintaining separate accounts of inputs and services for dutiable and non dutiable supplies applies to such supplies to SEZ developers. The Tribunal relied on the consistent line of prior orders which recognise that supplies to SEZ qualify for export treatment and attendant benefits under the Cenvat Credit regime, and accordingly concluded that denial of cenvat credit in respect of supplies made to the SEZ developer was not sustainable.Appeal allowed; impugned order set aside and appellant held entitled to cenvat credit in respect of supplies to the SEZ developer, with consequential relief.Final Conclusion: The appeal is allowed; the impugned order denying cenvat credit for supplies made by the DTA unit to the SEZ developer prior to 13.12.2008 is set aside, the supplies being treated as export of dutiable goods and covered by the exception relieving separate account maintenance under the Cenvat Credit Rules. Issues:- Denial of cenvat credit in respect of supplies made to SEZ developer.- Whether supplies made by DTA unit to SEZ Developer prior to 13.12.2008 are to be treated as 'exempted clearances' under Cenvat Credit Rules.Analysis:1. The appeal was against the Commissioner's order upholding the denial of cenvat credit for supplies to SEZ developer. The appellant, engaged in manufacturing Concrete Blocks, availed cenvat credit for duty paid on raw materials. They supplied finished goods to SEZ developers without duty payment, leading to a show-cause notice and subsequent denial of credit.2. The counsel for the appellant argued that the issue revolved around whether supplies made by DTA unit to SEZ Developer before 13.12.2008 should be considered 'exempted clearances' under Cenvat Credit Rules. Citing various decisions, including Sujana Metal Products Ltd. case, it was contended that such supplies should not be treated as exempted clearances, thus Rule 6(3) of Cenvat Credit Rules 2004 should not apply.3. The AR, on the other hand, acknowledged the judgments favoring the appellant's stance. Following the precedent set by previous decisions, it was established that post the enactment of the Special Economic Zones Act 2005, supplies from DTA to SEZ are treated as export of dutiable goods. Therefore, the benefit of exception in Rule 6(6) of Cenvat Credit Rules 2004, which does not mandate separate accounts for dutiable and non-dutiable inputs/services, applies. Consequently, the judgment favored the appellant, setting aside the impugned order with any consequential relief.4. The judgment was pronounced on 18.08.2016, allowing the appeal and providing relief to the appellant based on the established legal principles and precedents cited in favor of treating supplies to SEZ developers from DTA as exports of dutiable goods.