Tribunal grants exemption for clinker in cement manufacture to SEZ units under Notification No.67/95-CE

The Tribunal held that the appellants are eligible for the exemption under Notification No.67/95-CE for clinker used in cement manufacture cleared to SEZ units/developers. Cement supplied to SEZ units is not considered exempted goods. The Tribunal found compliance with Cenvat Credit Rules and interpreted FTZ in the notification to include SEZ, supporting the appellants' eligibility. The impugned orders against the assessees were set aside, and orders in favor of the Revenue were upheld. The appeals of the assessees were allowed, while the appeals of the Revenue were rejected.

---

---

Issues Involved:
1. Eligibility for benefit under Exemption Notification No.67/95-CE for clinker used in the manufacture of cement cleared to SEZ units/developers.
2. Whether cement supplied to SEZ units is considered exempted goods.
3. Applicability of sub-clause (vi) of the proviso to Notification No.67/95-CE in relation to Cenvat Credit Rules, 2001 or 2004.
4. Whether the term FTZ in the proviso to Notification No.67/95-CE includes SEZ.

Detailed Analysis:

1. Eligibility for Benefit under Exemption Notification No.67/95-CE:
The Tribunal examined whether the clinker manufactured and captively consumed for producing cement, which was then cleared to SEZ units/developers without payment of duty, is eligible for the benefit under Notification No.67/95-CE. The notification exempts goods used within the factory for the manufacture of final products listed in its table. Both clinker and cement fall under the specified tariff headings in the notification. The Tribunal found that the appellants had followed the required procedures under Rule 19 of the Central Excise Rules, 2002, and SEZ regulations, thus making them eligible for the exemption.

2. Whether Cement Supplied to SEZ Units is Considered Exempted Goods:
The Tribunal referred to the definition of "exempted goods" under Rule 2(d) of the Cenvat Credit Rules, 2004, and concluded that cement supplied to SEZ units does not fall under this category as it is not exempted by any notification under Section 5A of the Central Excise Act. The Tribunal cited the Principal Bench decision in Surya Roshni Ltd., which held that supplies to SEZ are treated as exports and not as exempted goods. Therefore, the clinker used in the manufacture of cement cleared to SEZ units is not subject to excise duty.

3. Applicability of Sub-Clause (vi) of the Proviso to Notification No.67/95-CE:
The Tribunal addressed whether the reference to Cenvat Credit Rules, 2001, in the proviso to Notification No.67/95-CE should be read as applicable to the Cenvat Credit Rules, 2004. It was determined that the General Clauses Act allows for such interpretation, meaning the obligations under Rule 6 of the Cenvat Credit Rules, 2004, are relevant. The Tribunal found that the appellants had complied with these obligations, thus qualifying for the exemption under Notification No.67/95-CE.

4. Whether the Term FTZ Includes SEZ:
The Tribunal considered whether the term FTZ (Free Trade Zone) in the proviso to Notification No.67/95-CE includes SEZ (Special Economic Zone). It was noted that after the enactment of the SEZ Act, FTZs were converted into SEZs. The Tribunal referred to the Finance Bill, 2007, which amended the Central Excise Act to replace FTZ with SEZ. Consequently, it was held that the term FTZ in the notification should be interpreted to include SEZ, making the appellants eligible for the exemption.

Conclusion:
The Tribunal concluded that the appellants are eligible for the exemption under Notification No.67/95-CE for the clinker used in the manufacture of cement cleared to SEZ units/developers. The cement supplied to SEZ units is not considered exempted goods, and the appellants have complied with the relevant Cenvat Credit Rules. The term FTZ in the notification includes SEZ, supporting the appellants' eligibility for the exemption. The Tribunal set aside the impugned orders against the assessees and upheld the orders in favor of the Revenue, allowing the appeals of the assessees and rejecting the appeals of the Revenue.

---