Madras HC: Amendment to CENVAT Credit Rules Retrospective. Assessee Not Liable to Pay 10% to SEZ Developers

The Madras High Court held that the amendment to Rule 6(6) of the CENVAT Credit Rules is retrospective, and thus, the assessee is not required to pay 10% of the value of goods cleared to SEZ developers before 31.12.2008. The court dismissed the Revenue's appeal, stating that any contrary decision by the Supreme Court in pending appeals could prompt reconsideration by the competent authority without invoking the plea of limitation.

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Issues Involved:
1. Whether the amendment of Rule 6(6) of the CENVAT Credit Rules under Notification 50/2008-CE (N.T.), dated 31.12.2008, is clarificatory and therefore retrospective in nature.
2. Whether the assessee is liable to pay 10% of the value of goods cleared to SEZ developers as per Rule 6(6) of the CENVAT Credit Rules prior to 31.12.2008 when common inputs are used and separate accounts are not maintained.

Issue-wise Detailed Analysis:

1. Retrospective Nature of the Amendment:
The primary issue is whether the amendment to Rule 6(6) of the CENVAT Credit Rules by Notification 50/2008-CE (N.T.), dated 31.12.2008, is clarificatory and thus retrospective. The Tribunal, relying on the Chhattisgarh High Court's decision in Union of India vs. Steel Authority of India Ltd., held that the amendment is retrospective. The Chhattisgarh High Court interpreted that the amendment, being a "substitution," is retrospective. The court noted that the SEZ Act treats both SEZ units and developers equally, and the amendment corrects an inadvertent omission, ensuring that developers receive the same benefits as units. The High Court of Karnataka in Commissioner of Central Excise and Sales Tax, Bangalore vs. Fosroc Chemicals (India) Pvt. Ltd., supported this view, stating that the amendment is clarificatory and should be read as if it was always part of the original Rules. The Punjab & Haryana High Court in Commissioner of Central Excise vs. DEE Development Engineers Pvt. Ltd. also echoed this interpretation, emphasizing consistency across jurisdictions.

2. Liability to Pay 10% for Goods Cleared to SEZ Developers:
The second issue is whether the assessee must pay 10% of the value of goods cleared to SEZ developers before 31.12.2008 when common inputs are used, and separate accounts are not maintained. The Revenue argued that the exception under Rule 6(6) applied only to SEZ units and not developers before the amendment. However, the Tribunal, supported by precedents from various High Courts, concluded that the amendment to include SEZ developers is retrospective. The courts reasoned that supplies to SEZ developers are to be treated as exports, which are not subject to excise duty, aligning with the principle that excise duty is not levied on exports. The courts found that treating SEZ developers differently from units was an inadvertent error corrected by the amendment.

Conclusion:
The Madras High Court, agreeing with the Chhattisgarh, Karnataka, and Punjab & Haryana High Courts, held that the amendment to Rule 6(6) of the CENVAT Credit Rules is retrospective. Consequently, the assessee is not liable to pay 10% of the value of goods cleared to SEZ developers before 31.12.2008. The appeal by the Revenue was dismissed, with the court clarifying that if the Supreme Court decides otherwise in pending appeals, the matter may be reconsidered by the competent authority without raising the plea of limitation.

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