SEZ developers exempt from 10% demand on goods cleared, retrospective effect applied

The court held that the demand of 10% of the value of goods cleared to SEZ developers was not sustainable as supplies to SEZ developers are treated as exports, exempting them from the payment requirement under Rule 6 of CCR 2004. Additionally, the court ruled that the amendment to Rule 6(6)(1) of CCR 2004 should have retrospective effect from 10.09.2004, dismissing the Revenue's appeals and affirming that the demand was not valid.

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Issues:
1. Whether demand of 10% of the value of goods cleared to SEZ developers is sustainable.
2. Whether the amendment to Rule 6(6)(1) of CCR 2004 has retrospective effect.

Analysis:

Issue 1:
The appeal was against the Order-in-Appeal allowing the respondent's appeal regarding the demand of 10% of the total value of exempted goods supplied to SEZ developers. The respondent argued that supplies to SEZ developers are deemed exports under the SEZ Act, making them eligible for export benefits. Circulars from CBEC supported this view. The Tribunal and High Courts in previous judgments upheld that goods cleared to SEZ developers are deemed exports, exempting them from the 10% payment requirement under Rule 6 of CCR 2004. The judge concluded that the demand was not sustainable as supplies to SEZ are treated as exports, dismissing the Revenue's appeals.

Issue 2:
The second issue revolved around the retrospective effect of the amendment to Rule 6(6)(1) of CCR 2004 through notification 50/08-CE dated 31.12.2008. The Revenue argued for a retrospective application, while the respondent contended it was prospective. The judge referred to previous judgments where it was established that the amendment should be retrospective from 10.09.2004. The judge clarified that the High Court judgment cited by the Revenue was not relevant to the present case as it concerned free trade zones, not SEZs. Consequently, the judge dismissed both appeals of the Revenue, affirming that the amendment to Rule 6(6)(1) should be retrospective and that the demand of 10% of goods supplied to SEZ developers was not sustainable.

This detailed analysis of the judgment covers the issues involved comprehensively, highlighting the arguments presented by both parties and the legal reasoning behind the decision.

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