Cenvat Credit Rule 6(6) protected duty-free supplies to an SEZ developer; demand, interest and penalty failed.

Rule 6(6) of the Cenvat Credit Rules, 2004 was applied to clearances of aluminium pipes supplied to an SEZ developer without payment of duty. The Tribunal relied on prior decisions holding such supplies to be covered by the rule, and treated the December 2008 amendment as retrospective. On that basis, the clearances were valid duty-free supplies to the SEZ developer, so the demand, interest and penalty had no legal foundation and were held unsustainable.

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Issues: Whether clearances of aluminium pipes to an SEZ developer without payment of duty were covered by Rule 6(6) of the Cenvat Credit Rules, 2004, and whether the demand, interest and penalty could be sustained.

Analysis: The dispute turned on the applicability of Rule 6(6) to supplies made to an SEZ developer during the relevant period. The Tribunal noted that the issue had already been settled in favour of such clearances by prior decisions, and that the amendment brought in December 2008 was retrospective in operation. On that basis, the supplies to the SEZ developer were treated as valid clearances without duty, and the foundation for the demand, interest and penalty fell away.

Conclusion: The demand, interest and penalty were unsustainable, and the appeal succeeded.

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