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Issues: Whether clearances made without payment of duty to a special economic zone developer were covered by Rule 6(6)(i) of the CENVAT Credit Rules, 2004 after its amendment by Notification No. 50/2008-C.E. (N.T.) and whether the demand of 10% of the value of such clearances under Rule 6 was sustainable.
Analysis: The dispute turned on the scope of the exclusion in Rule 6(6)(i), which originally referred only to goods cleared to a unit in a special economic zone. The amendment made by Notification No. 50/2008-C.E. (N.T.) substituted the clause so as to include clearances to a developer of a special economic zone for authorised operations. The relevant legal question was whether this substitution was merely prospective or whether it operated retrospectively as a clarificatory amendment. The prior authoritative interpretation relied upon held that the substitution was intended to remove an omission and that, in the light of the scheme of the Special Economic Zones Act, 2005, supplies from the Domestic Tariff Area to a developer are treated as exports. On that basis, the amended rule was read as if the added words had been part of the rule from the inception.
Conclusion: The amendment to Rule 6(6)(i) was held to be retrospective, the supplies to the special economic zone developer were entitled to the exclusion under Rule 6(6), and the demand and penalty could not survive.
Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.
Ratio Decidendi: A substitution introduced to extend Rule 6(6)(i) to clearances made to a special economic zone developer is clarificatory and retrospective, and such supplies are to be treated as exports for purposes of the CENVAT credit exemption from reversal.
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