Tribunal allows appeal on CENVAT Credit Rules application to SEZ developers, emphasizing need for separate accounts

The appeal was allowed as the Tribunal found that the demand raised under Rule 6(3)(b) of the CENVAT Credit Rules, 2004 on goods cleared to SEZ developers was not justified. The Tribunal held that the amendment to Rule 6 by Notification No.50/2008 had only prospective effect, making Rule 6(3) applicable to the appellant for the period before 31.12.2008. Relying on a previous decision, the Tribunal ruled that clearances to SEZ developers should be treated as exports, not exempted goods, thus setting aside the demand and emphasizing the need for separate accounts for dutiable and exempted goods.

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Issues:
1. Demand raised under Rule 6(3)(b) of the CENVAT Credit Rules, 2004.
2. Applicability of Rule 6(3) to goods cleared to SEZ developers.
3. Retrospective application of the amendment to Rule 6 by Notification No.50/2008.

Analysis:

Issue 1: The appeal was filed against a demand raised on the assessee under Rule 6(3)(b) of the CENVAT Credit Rules, 2004. The department alleged that goods cleared to SEZ developers without payment of duty should be treated as "exempted goods," and the appellant failed to maintain separate accounts for common inputs used in the manufacture of dutiable products and exempted products. The original authority upheld the demand, which was also affirmed by the appellate authority.

Issue 2: The appellant contended that the provisions of Rule 6 of the CCR, 2004 were not applicable to them during the period of dispute, citing the Special Economic Zones Act, 2005, and the Special Economic Zones Rules, 2006. The appellant argued that the amendment to Rule 6 by Notification No.50/2008 was retrospective. However, the impugned order held that the amendment had only prospective effect, making Rule 6(3) applicable to the appellant for the period before 31.12.2008.

Issue 3: The Additional Commissioner acknowledged a previous Tribunal judgment in the case of M/s. Sujana Metal Products Ltd. vs. CCE, Hyderabad, where it was held that clearances to SEZ developers should be considered as exports and not as clearances of exempted goods, thus ruling out the applicability of Rule 6(3) to such cases. Despite the Tribunal's decision being under appeal, no stay order was produced. The Tribunal in the present case found that the issue had already been decided against the Revenue by a previous decision, and as the period of dispute was prior to the amendment date, the impugned order was set aside, and the appeal was allowed.

This judgment highlights the importance of maintaining separate accounts for dutiable and exempted goods and clarifies the applicability of Rule 6 of the CCR, 2004 to goods cleared to SEZ developers. The retrospective application of amendments to rules was also a key point of contention in this case.

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