Retrospective SEZ exemption under Cenvat credit rules prevents the 10% reversal demand on supplies to developers.

A substitution of clause (i) in rule 6(6) of the Cenvat Credit Rules, 2004 by Notification No. 50/2008-CE (NT) was treated as clarificatory and retrospective, because the SEZ framework regards supplies to Special Economic Zone developers as exports and the SEZ Act has overriding effect. On that basis, the requirement to pay an amount equal to 10% of the value of goods under rule 6(3)(b) for such supplies was held unsustainable. The demand for the prior period was therefore rejected, and the order dropping it was sustained.

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Issues: Whether the substitution of clause (i) in rule 6(6) of the Cenvat Credit Rules, 2004 by Notification No. 50/2008-CE (NT) dated 31.12.2008 operated retrospectively so as to exempt supplies made to developers of Special Economic Zones from the requirement of paying 10% under rule 6(3)(b) of the Cenvat Credit Rules, 2004.

Analysis: The amendment to rule 6(6)(i) was made by substitution, which indicates a clarificatory and retrospective operation where the legislative intent is to treat the earlier position as covered by the amended wording. Supplies to SEZ developers are treated as export under the Special Economic Zones Act, 2005, and the SEZ Act has overriding effect. In that statutory setting, the demand to pay an amount equal to 10% of the value of goods supplied to SEZ developers was held unsustainable. The reasoning followed the consistent view that the amendment merely clarified the existing legal position and that SEZ clearances were not meant to attract rule 6(3)(b).

Conclusion: The amendment was held to be retrospective and applicable to the prior period, and the demand raised under rule 6(3)(b) for supplies made to SEZ developers was rejected.

Final Conclusion: The Revenue's challenge failed, and the order dropping the demand was sustained.

Ratio Decidendi: A statutory amendment made by substitution, where the context shows it is clarificatory and aligned with the SEZ regime treating such supplies as exports, applies retrospectively and prevents levy of the rule 6(3)(b) amount on supplies to SEZ developers.

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