SEZ Duty Exemption Upheld: Precedents Support Tax Exemption for Supplies to SEZ Units

The Tribunal held that the duty exemption applied to intermediate goods used in manufacturing final products supplied to a SEZ unit. Citing precedents, the Tribunal determined that supplies to SEZ were not chargeable to duty, qualifying for exemption under the Cenvat Credit Rules. The decision in Surya Roshni Ltd. was referenced to establish that supplies to SEZ by a DTA unit are not subject to duty. Consequently, the impugned order demanding duty, interest, and penalty was set aside, and the appeal was allowed in favor of the appellant.

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Issues involved:
Duty exemption on intermediate products used captively in the production of final products supplied to SEZ without payment of duty.

Analysis:
The case involved the appellant, engaged in the manufacture of industrial alcohol and chemicals, who cleared certain products to a unit in the Special Economic Zone (SEZ) without payment of duty. The appellants were availing duty exemption on intermediate products used captively in the production of final products. The issue arose when the Department contended that duty was payable on intermediate products consumed captively in the manufacture of final products cleared to SEZ, as SEZ units were not included in the circumstances allowing duty exemption. The original authority demanded duty with interest and imposed a penalty, which was upheld by the Commissioner (Appeals), leading to the appeal.

During the hearing, the appellant's consultant cited precedents where similar issues were decided in favor of the appellant. The Revenue supported the impugned order. After considering the arguments and facts, the Tribunal found that the issue was covered by previous case laws. The Tribunal referred to the decision in Surya Roshni Ltd. where it was established that supplies to SEZ by a Domestic Tariff Area (DTA) unit are not chargeable to Nil rate of duty or exempt from payment of duty, thus not qualifying as exempt goods under the Cenvat Credit Rules. The Tribunal also highlighted the definition of exempted goods under the Cenvat Credit Rules and the treatment of supplies to SEZ as exports under the SEZ Act. Following the precedents, the Tribunal held that the appellants were entitled to the benefit of duty exemption for intermediate goods used to manufacture final products supplied to a SEZ unit. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief as per law.

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