Tribunal allows appeal, credits CENVAT, treats supplies to SEZ as exports

The Tribunal allowed the appeal, holding that the appellant's recredit of CENVAT credit was admissible, citing legal precedents. The Tribunal determined that supplies to SEZ units are to be treated as exports, rejecting the department's contention that credit on inputs used in goods supplied to SEZ is not available. The appellant's taking of suo motto credit for adjustment was deemed lawful, and the impugned order was set aside, granting the appeal with consequential reliefs.

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Issues:
1. Availment of CENVAT credit on inputs supplied to SEZ units.
2. Reversal and recredit of CENVAT credit under protest.
3. Legality of taking suo motto credit by the appellant.

Analysis:

Issue 1: Availment of CENVAT credit on inputs supplied to SEZ units
The appellants supplied goods to SEZ units without payment of duty under Letter of Undertaking (LUT) and claimed CENVAT credit on inputs used in the manufacture of these goods. The department contended that credit on inputs used in goods supplied to SEZ is not available as these supplies are to be treated as exempted goods. The original authority confirmed the demand, but the Tribunal, relying on precedent, held that supplies to SEZ are to be treated as exports, and the demand for payment of 10% of the value of goods is not sustainable.

Issue 2: Reversal and recredit of CENVAT credit under protest
The appellants, under pressure from the department, reversed the credit of a certain amount but later took recredit of the same amount, arguing that the department had raised a demand regarding the same credit. The department issued a show-cause notice alleging irregular credit availed by the appellants. The Commissioner(Appeals) upheld the demand and interest but reduced the penalty. The main question was whether the recredit taken by the appellant was admissible.

Issue 3: Legality of taking suo motto credit by the appellant
The department contended that the appellant cannot take suo motto credit and should have filed a refund application under Section 11B. The appellant argued that the recredit was an adjustment made due to the demand raised by the department regarding the same credit. The Tribunal held that credit taken suo motto for such adjustment is admissible, citing relevant judgments. The Tribunal found no impediment in the appellant taking suo motto credit and set aside the impugned order, allowing the appeal with consequential reliefs.

In conclusion, the Tribunal allowed the appeal, holding that the appellant's recredit of CENVAT credit was admissible, given the circumstances and legal precedents cited.

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