SEZ clearance refund denied for non-compliance with prescribed procedure under exemption rules and Section 11B

CESTAT Bangalore held that refund of excise duty on clearances to an SEZ unit was not maintainable because the assessee had not complied with the prescribed procedure under the SEZ Rules and the relevant exemption notification. The scheme did not confer an unconditional exemption; duty-free clearance or rebate procedure, the domestic procurement certificate, and the required documentation had to be satisfied for refund under Section 11B of the Central Excise Act, 1944. As those statutory and procedural conditions were not met, the refund claim was rightly rejected and the appeal failed.

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Issues: Whether the appellant was entitled to refund of excise duty paid on clearances made to a Special Economic Zone unit despite not following the prescribed procedure under the Special Economic Zone Rules and the relevant exemption notification.

Analysis: The clearances were made to a Special Economic Zone unit on payment of duty, and the refund claim was founded on the premise that such supplies were not taxable. The governing scheme did not grant an unconditional exemption; rather, the supplies had to be made in the manner prescribed under the Special Economic Zone Rules and the applicable notification. The record showed non-compliance with the procedure for clearance to the Special Economic Zone unit, including the requirements relating to duty-free clearance or rebate procedure, domestic procurement certificate, and the prescribed documentation under the notification. A refund under Section 11B of the Central Excise Act, 1944 could not be granted where the assessee had not satisfied the statutory and procedural conditions governing such clearances.

Conclusion: The refund claim was not maintainable and was rightly rejected.

Final Conclusion: Non-observance of the prescribed procedure for clearances to a Special Economic Zone unit defeated the claim for refund of duty paid on the supplies, and the appeal failed.

Ratio Decidendi: Where exemption or refund in respect of clearances to a Special Economic Zone is conditioned on compliance with the prescribed statutory procedure, non-compliance disentitles the claimant from refund under Section 11B of the Central Excise Act, 1944.

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