Appellate Tribunal orders brand rate duty drawback for electricity export to SEZ, emphasizes legal compliance

The Appellate Tribunal allowed the appeal challenging the non-fixation of brand rate of duty drawback for exporting electricity to a Special Economic Zone (SEZ). The Tribunal directed the Commissioner to pass an order within three months, permitting brand rate fixation for electricity and clean energy cess exported to SEZ, emphasizing adherence to legal provisions and circulars in determining duty drawback entitlements.

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Issues:
Non-fixation of brand rate of duty drawback for export of electricity to Special Economic Zone (SEZ) under CTH 27.16 of CETA, 1985. Applicability of duty drawback on the supply of electricity from Domestic Tariff Area (DTA) to SEZ. Interpretation of SEZ Act, 2005 regarding payment for supply from Foreign Currency Account. Eligibility for fixation of brand rate when the rate is NIL in the Schedule to CETA, 1985. Binding nature of departmental circulars on brand rate for non-excisable goods.

Analysis:

1. Non-fixation of brand rate for export of electricity to SEZ: The appellant challenged the Order-in-Original regarding the non-fixation of brand rate of duty drawback for exporting electricity to SEZ. The appellant argued that as per CETA, 1985, the rate of duty chargeable for electricity is not mentioned, and since the All Industry Rate for electrical energy is NIL, no drawback is to be allowed. The Commissioner also noted that the appellant received consideration in Indian Rupees, not foreign exchange, making drawback inapplicable.

2. Applicability of duty drawback on electricity supply to SEZ: The appellant contended that supplying electricity from DTA to SEZ qualifies for duty drawback as per the SEZ Act, 2005. Referring to paragraph 8 of the Act, the appellant argued that reimbursement of duty is admissible even if payments are made in Indian Rupees, provided certain conditions are met. The appellant also cited a previous judgment to support their claim for drawback benefit on electrical energy.

3. Interpretation of SEZ Act regarding payment for supply: The appellant highlighted Rule 30(8) of the SEZ Rule, 2006, which allows payment in Indian Rupees for draw back purposes in case of supplies from DTA to SEZ developers. This provision was used to support the argument for eligibility for brand rate fixation.

4. Eligibility for brand rate fixation with NIL rate in CETA: The appellant sought fixation of brand rate for goods with a NIL rate in the CETA, 1985, under Notification No.110/2015-Cus. (N.T.) dated 16.11.2015. Citing relevant circulars, the appellant argued that exporters can avail special rates for drawback even if the drawback schedule prescribes a NIL rate, emphasizing the binding nature of departmental circulars on brand rate fixation.

5. Conclusion: The Appellate Tribunal held that the brand rate fixation for electricity and clean energy cess exported to SEZ is permissible. They directed the Commissioner to pass an appropriate order within three months, considering the findings and holding in favor of brand rate fixation. The appeal was allowed by way of remand, emphasizing the importance of following relevant legal provisions and circulars in determining duty drawback entitlements.

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