2018 (6) TMI 1654 - AT - Central Excise

Tribunal rules in favor of MITC Rolling Mills Pvt. Ltd. on SEZ Developer liability

The Tribunal allowed the appeal of M/s. MITC Rolling Mills Pvt. Ltd. regarding liability to pay 10% of the value of exempted goods cleared to SEZ ... CENVAT Credit - goods supplied to SEZ Developer without payment of duty - common inputs used in the goods supplied to SEZ Developer/exempt goods - HELD THAT:- The issue stands settled by the Tribunal orders in case of M/s. Sujana Metal Products Ltd. v. CCE, Hyderabad [2011 (9) TMI 724 - CESTAT, BANGALORE] as upheld by Hon’ble High Court reported in Commissioner v. Sujana Metal Products Ltd. [2015 (3) TMI 781 - ANDHRA PRADESH HIGH COURT], Ultratech Cement Ltd. v. CCE, Nagpur [2014 (8) TMI 655 - CESTAT MUMBAI]. The views of the Hon’ble Court is that the supplies made to SEZ/SEZ developers is treated as export in terms of the SEZ Act, 2005 which overrides all the acts. Therefore in respect of the goods cleared for export, provision of Rule 6 of CCR, 2004 shall not apply. Demand do not sustain - appeal allowed - decided in favor of appellant. Issues:1. Liability to pay an amount equal to 10% of the value of exempted goods cleared to SEZ Developer under Rule 6(3)(b) [later 6(3)(i) w.e.f. 1-4-2008].2. Confirmation of demand and setting aside of demands of the extended period.3. Imposition of penalty under Section 11AC.Issue 1: Liability under Rule 6(3)(b) [later 6(3)(i)]:The case involved the liability of M/s. MITC Rolling Mills Pvt. Ltd. to pay an amount equal to 10% of the value of exempted goods cleared to SEZ Developer under Rule 6(3)(b) [later 6(3)(i) w.e.f. 1-4-2008]. The Commissioner had confirmed the demand, but the extended period demands were set aside. M/s. MITC Rolling Mills Pvt. Ltd. contended that the issue was settled through various judgments by the Hon'ble High Court of Karnataka and the Tribunal, providing a bunch of judgments in support. The Tribunal referred to precedents like M/s. Sujana Metal Products Ltd. v. CCE, Hyderabad and Ultratech Cement Ltd. v. CCE, Nagpur, where it was held that supplies to SEZ/SEZ developers are treated as exports under the SEZ Act, 2005, overriding other acts. Consequently, the demand against the Appellant was deemed unsustainable, leading to the allowance of M/s. MITC's appeal and the dismissal of the revenue's appeal.Issue 2: Confirmation of Demand and Extended Period Demands:The Tribunal analyzed the demand confirmation and the setting aside of demands for the extended period. The adjudicating authority had confirmed the demand against M/s. MITC Rolling Mills Pvt. Ltd., but had set aside the demands for the extended period. The Tribunal's decision was influenced by the settled issue that supplies to SEZ/SEZ developers are considered exports under the SEZ Act, 2005, which supersedes other acts. Citing judgments like M/s. Sujana Metal Products Ltd. and Ultratech Cement Ltd., the Tribunal held that the demand made against the Appellant was unsustainable. Consequently, the appeal filed by M/s. MITC was allowed, while the revenue's appeal was dismissed.Issue 3: Imposition of Penalty under Section 11AC:The judgment did not explicitly address the imposition of penalty under Section 11AC. The focus was primarily on the liability under Rule 6(3)(b) [later 6(3)(i)] and the confirmation of demand for goods cleared to SEZ Developer. The Tribunal's decision centered on the interpretation of the SEZ Act, 2005, and its impact on the applicability of Rule 6 of CCR, 2004 to goods cleared for export. As a result, the demand against M/s. MITC Rolling Mills Pvt. Ltd. was deemed unsustainable, leading to the allowance of their appeal and the dismissal of the revenue's appeal.This detailed analysis of the judgment highlights the key issues of liability under Rule 6(3)(b) [later 6(3)(i)], confirmation of demand, and the impact of the SEZ Act, 2005 on the treatment of supplies to SEZ/SEZ developers as exports, ultimately influencing the Tribunal's decision in favor of the Appellant.