SEZ clearances are not exempted goods for common input credit reversal, and the demand based on non-maintenance of separate records failed.

Finished goods cleared to SEZ developers under bond/LUT were held not to constitute exempted goods for purposes of reversing 10% of value of common inputs or input services for failure to maintain separate records. Relying on an earlier coordinate Bench view, the Tribunal treated such SEZ clearances as outside the exempted-goods category and rejected the proposed reversal on that basis. The demand founded on treating the clearances as exempted goods was therefore unsustainable.

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Issues: Whether finished goods cleared to SEZ developers could be treated as exempted goods so as to require reversal of 10% of value for common inputs/input services for want of separate records.

Analysis: The Tribunal noted that the dispute concerned clearance of finished goods to SEZ developers under bond/LUT. It relied on its earlier coordinate Bench view that such clearances do not fall within the category of exempted goods and therefore do not attract reversal on the ground of non-maintenance of separate records for common inputs/input services.

Conclusion: The demand based on treating the goods cleared to SEZ developers as exempted goods was unsustainable, and the assessee succeeded.

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