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Issues: Whether rebate under Rule 18 of the Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.) is admissible when inputs are cleared as such to a Special Economic Zone by reversing Cenvat credit under Rule 3(4) and Rule 3(5) of the Cenvat Credit Rules, 2004.
Analysis: The Government noted that the supplies were made to an SEZ and that the dispute was limited to whether the amount reversed from Cenvat credit could be treated as duty for the purpose of rebate. It relied on the Board's circular clarifying that rebate under Rule 18 is admissible for supplies from DTA to SEZ, and on the binding principle emerging from the Bombay High Court decision that reversal of credit under Rule 3(4) and Rule 3(5) amounts to payment of duty for rebate purposes. The Government also referred to Rule 3(6), which treats the amount paid under Rule 3(5) as eligible Cenvat credit, and to the explanation to Rule 8(4), which enlarges the expression "duty" to include amounts payable under the Cenvat Credit Rules, 2004.
Conclusion: Reversal of Cenvat credit on clearance of inputs as such to an SEZ constituted payment of duty for purposes of rebate, and the rebate claim was admissible.
Final Conclusion: The departmental appeals failed, the revisional applications succeeded, and the orders allowing rebate were restored.
Ratio Decidendi: Where goods are supplied to an SEZ and the assessee reverses Cenvat credit in the manner prescribed by the rules, such reversal is to be treated as duty paid for claiming rebate under Rule 18.
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