SEZ developers not liable for retrospective demands under Cenvat Credit Rules

The Tribunal held that the amendment in Rule 6(6)(i) of Cenvat Credit Rules, 2004, allowing retrospective application, rendered the demand for 10% value of goods supplied to SEZ developers unsustainable. The separate judgment in Ultratech Cement Limited further clarified that supplies to SEZ developers were not exempted goods, and the provisions of Rule 6(1), 6(2), and 6(3) were inapplicable. Consequently, the demands under Rule 6(3)(b) were set aside based on the retrospective application of the clarificatory amendment.

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Issues involved:
The case involves the liability of the respondent to pay an amount equal to 10% of the value of cement cleared to Special Economic Zone (SEZ) developers under Rule 6(3)(b) of Cenvat Credit Rules, 2004 during April 2007 to December 2008.

Issue 1: Liability under Rule 6(3)(b) of Cenvat Credit Rules, 2004

The Revenue contends that the respondent was liable to pay 10% of the value of goods supplied to SEZ developers prior to 31.12.2008 as per the relevant amendment in Rule 6(3). The Commissioner (Appeals) erred in dropping the demand, as per the Revenue. The respondent argues that the amendment in Rule 6(6)(i) is clarificatory and has retrospective effect, citing various judgments to support this claim.

Judgment:

The Tribunal examined whether the amendment in Rule 6(6)(i) of Cenvat Credit Rules, 2004, brought by Notification No. 50/2008-CE(NT) dated 31.12.2008, can be applied retrospectively. The Tribunal noted that any amendment by way of substitution is treated as existing even prior to the date of the amendment, allowing retrospective application. The Tribunal also acknowledged that supplies to SEZ are considered as exports, making the demand for 10% value of goods supplied to SEZ developers unsustainable. This view is supported by previous decisions, including those of Pankaj Extrusion Limited, Blue Star Limited, and Ultratech Cement Limited.

Separate Judgment by the Tribunal:

In the case of Ultratech Cement Limited, the Tribunal ruled that the supplies made to SEZ developers were not exempted goods, as they were subject to duty under the Central Excise Tariff Act. The Tribunal held that the provisions of Rule 6(1), 6(2), and 6(3) of Cenvat Credit Rules, 2004 were not applicable in this scenario. Citing the ruling of the Hon'ble High Court of Chhattisgarh in UOI v. Steel Authority of India Ltd., the Tribunal emphasized that the amendment in Rule 6(6)(i) is clarificatory and applicable retrospectively. As a result, the demands on the grounds of Rule 6(3)(b) were set aside.

This summary provides a detailed breakdown of the issues involved in the legal judgment, the arguments presented by both parties, and the Tribunal's decision based on the relevant legal provisions and precedents.

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