SEZ developer supplies treated as exports, so Rule 6 Cenvat restrictions and related demand could not survive.

Supplies made to a SEZ developer were treated as exports under the SEZ Act, 2005, which was applied as having overriding effect over the Cenvat Credit Rules, 2004. On that basis, Rule 6 did not apply to such clearances, and a demand for 10% of the value of the supplies under Rule 6(3) with consequential recovery could not be sustained. The issue was decided in favour of the assessee because the goods were cleared to the SEZ developer without payment of duty under the ARE-1 procedure.

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Issues: (i) Whether supplies made to a SEZ developer are to be treated as exports so that Rule 6 of the Cenvat Credit Rules, 2004 does not apply and the demand of 10% of the value of such clearances is unsustainable.

Analysis: The goods were cleared to a SEZ developer without payment of duty under the ARE-1 procedure. The Tribunal relied on prior decisions holding that supplies to SEZ or SEZ developers are treated as exports under the SEZ Act, 2005, which has overriding effect, and therefore the restriction in Rule 6 of the Cenvat Credit Rules, 2004 does not apply to such clearances. Once the clearances are treated as exports, the demand raised by invoking Rule 6(3) and the consequential recovery provisions cannot survive.

Conclusion: The demand against the assessee was not sustainable and the issue was decided in favour of the assessee.

Ratio Decidendi: Supplies made to a SEZ developer are to be treated as exports, and Rule 6 of the Cenvat Credit Rules, 2004 does not apply to such clearances.

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