SEZ developer supplies under the export regime are outside Rule 6 CENVAT reversal, with the demand set aside.

Supplies of finished goods to SEZ developers under LUT and through ARE-1 were treated as export or deemed export under the SEZ framework, so Rule 6 of the CENVAT Credit Rules, 2004 did not apply. The Tribunal relied on its earlier view that the Rule 6(6) exception covers supplies to SEZ units and SEZ developers or promoters, and rejected the contrary approach of the adjudicating authority. The demand for reversal or recovery under Rule 6 was therefore set aside, and the assessee succeeded.

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Issues: Whether clearances of finished goods made to SEZ developers under LUT were to be treated as exports or exempted clearances so as to attract Rule 6 of the CENVAT Credit Rules, 2004.

Analysis: The clearances were made to SEZ developers under LUT and through ARE-1 under the SEZ framework. The Tribunal treated such supplies as export/deemed export in view of its earlier decisions and held that the restrictions under Rule 6 of the CENVAT Credit Rules, 2004 did not apply to recover amounts on such clearances. It also noticed that the exception under Rule 6(6) covered supplies to SEZ units and SEZ developers/promoters, and that the contrary view of the adjudicating authority could not stand.

Conclusion: Rule 6 of the CENVAT Credit Rules, 2004 was held inapplicable to the impugned clearances, and the issue was decided in favour of the assessee.

Final Conclusion: The order confirming demand was set aside and the appeal succeeded.

Ratio Decidendi: Supplies to SEZ developers made under the SEZ regime are to be treated as exports for the purpose of Rule 6 of the CENVAT Credit Rules, 2004, and therefore no reversal or amount under that rule can be demanded on such clearances.

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