Tribunal rules on Cenvat Credit for SEZ goods, highlights need for separate accounts

The Tribunal held that Rule 6(3) of the Cenvat Credit Rules, 2004 was not applicable to the respondent as they exclusively manufactured dutiable goods cleared to SEZ developers without duty payment. Since the goods were dutiable and not exempted, the Tribunal dismissed the revenue's appeal, emphasizing the need for separate accounts for dutiable and exempted goods. The decision underscored the importance of the nature of goods cleared to SEZ developers and relied on judicial precedents in support of the respondent's position.

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Issues:
Whether the respondent is liable to pay 10% on the value of goods cleared to SEZ developers under Rule 6(3) of the Cenvat Credit Rules, 2004.

Analysis:
The case involved a dispute where the revenue appealed against an order concerning the liability of the respondent to pay 10% on the value of goods cleared to SEZ developers under Rule 6(3) of the Cenvat Credit Rules, 2004. The respondent, engaged in manufacturing excisable goods, availed Cenvat credit on inputs and cleared goods both in the domestic market with duty payment and to SEZ developers without duty payment. The revenue contended that since goods cleared to SEZ developers are exempted, the respondent is liable to pay 10% as per Rule 6(3). The respondent challenged this, citing judicial decisions favoring their stance. The Commissioner (A) ruled in favor of the respondent, leading to the revenue's appeal.

The revenue relied on a circular stating that clearances to SEZ units are exempted goods, justifying the imposition of 10% on the value of goods cleared to SEZ developers. However, the respondent argued citing judicial precedents such as the decisions in Sujana Metals Products Ltd. and Fosroc Chemicals (India) Pvt. Ltd., asserting that Rule 6(3) does not apply in their case. The Tribunal also referred to the case of Steel Authority of India Ltd., followed in the case of Surya Roshni Ltd., supporting the respondent's position.

After hearing both parties and considering the submissions, the Tribunal analyzed the issue at hand. It was established that the respondent exclusively manufactured dutiable goods, which were cleared to SEZ developers without duty payment. The Tribunal clarified that the mere clearance to SEZ developers does not categorize the goods as exempted. As Rule 6(3) applies to situations involving both dutiable and exempted goods, and since the respondent only dealt with dutiable goods, the Tribunal held that Rule 6(3) was not applicable in this case. The Tribunal upheld the impugned order, dismissing the revenue's appeal due to the absence of any merit.

In conclusion, the Tribunal's decision clarified the non-applicability of Rule 6(3) of the Cenvat Credit Rules, 2004 to the respondent's case, emphasizing the nature of goods manufactured and cleared to SEZ developers. The judgment highlighted the importance of maintaining separate accounts for dutiable and exempted goods under Rule 6(3) and relied on judicial precedents to support the respondent's position, ultimately leading to the dismissal of the revenue's appeal.

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