TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Appeal Granted: Clinkers in Cement Production for SEZ Units Eligible for Duty Exemption under Notification No. 67/1995-CE</h1> The Tribunal allowed the appellant's appeal, setting aside the demand for duty, interest, and penalty on clinkers used in cement production cleared to SEZ ... Exemption of duty on the clinker, used captively in the production of cement vide N/N. 67/1995-CE dated 16.03.1995 as amended - Denial on the ground that the final product viz., Cement cleared to the SEZ unit is an exempted product - final product cleared to Special Economic Zone (SEZ) without payment of duty - HELD THAT:- The said issue was considered by the Tribunal in a batch of cases including the case of the appellant in M/S ULTRATECH CEMENTS LTD AND OTHERS VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, TIRUCHIRAPALLI AND OTHERS [2015 (10) TMI 1058 - CESTAT CHENNAI] where it was held that appellants are eligible for exemption under Notification 67/95-CE on clinker captively consumed for manufacture of cement cleared to SEZ units/developers without payment of duty for both the periods prior to and after the amendment of SEZ Act. In the case of COMMISSIONER OF CENTRAL EXCISE, TIRUCHIRAPALLI VERSUS MADRAS CEMENTS LTD. [2017 (12) TMI 1664 - CESTAT CHENNAI], the Tribunal has applied the said decision to set aside the demand. The demand cannot sustain. The impugned order is set aside - appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether clinker captively consumed in manufacture of cement is eligible for exemption under Notification No. 67/1995-CE when the final product (cement) is cleared to Special Economic Zone (SEZ) units/developers without payment of duty. 2. Whether supplies/clearances to SEZ units/developers fall within the scope of the proviso (clause (i)) to Notification No. 67/1995-CE which originally referred to Free Trade Zones (FTZ), or whether SEZs were effectively intended to be covered after enactment of the SEZ Act and subsequent administrative amendments. 3. Whether the fact that appellants followed ARE-1/bond procedures under Rule 19 of the Central Excise Rules, 2002 impacts the characterisation of the goods as exempt or as cleared without payment of duty. ISSUE-WISE DETAILED ANALYSIS Issue 1: Entitlement to exemption on captively consumed clinker where final product is cleared to SEZ without payment of duty Legal framework: Notification No. 67/1995-CE exempts intermediate inputs (here, clinker) used in manufacture of specified final products (cement) when consumed captively. SEZ Rules permit clearance to SEZ units without payment of Central Excise duty subject to conditions (including Rule 30 SEZ Rules and Rule 19 CER procedures for export/under-bond movement). Precedent Treatment: The Tribunal examined and applied its earlier findings in a batch of cases (Final Order No. 40936-40957/2015) and subsequently in an analogous order (Final Order No. 43174/2017) in favor of assessee-type appellants, and followed those decisions in the present appeal. Interpretation and reasoning: The Tribunal reasoned that when captively-produced clinker is consumed in manufacture of cement cleared to SEZ under-bond following statutory procedures, the clinker retains its character as eligible for Notification 67/1995-CE exemption. The Tribunal rejected Revenue's contention that exemption should be denied merely because the final product cleared to SEZ is an exempted article, holding instead that appropriate statutory procedures for under-bond clearance were followed and that such procedural compliance supports claim to exemption on inputs. Ratio vs. Obiter: The holding that captively consumed clinker qualifies for exemption under Notification No. 67/1995-CE when the final product is cleared to SEZ under-bond constitutes the ratio decidendi of the decision. Conclusion: Clinker captively consumed in manufacture of cement cleared to SEZ units/developers without payment of duty is eligible for exemption under Notification No. 67/1995-CE; demand based on denial of that exemption cannot be sustained. Issue 2: Whether clause (i) of proviso to Notification No. 67/1995-CE (referencing FTZ) excludes SEZ or must be read to include SEZ Legal framework: The proviso to Notification No. 67/1995-CE referred to FTZs; the SEZ Act came into effect, FTZs were declared redundant and many FTZs were converted to SEZs. Administrative amendments and explanatory notes to related fiscal legislation replaced references to FTZ with SEZ in other contexts (e.g., Rule 6(5)(ii) of Cenvat Credit Rules). Precedent Treatment: The Tribunal followed its prior reasoning that the replacement of FTZ by SEZ in statutory and administrative contexts demonstrates legislative-intent continuity and that the proviso should be construed accordingly. Interpretation and reasoning: The Tribunal rejected Revenue's contention that omission of explicit reference to SEZ in the proviso was deliberate to exclude SEZs. It relied on legislative history and administrative practice: FTZs were converted into SEZs by statute and notifications; Notes explaining Finance Bill amendments acknowledge redundancy of FTZ and substitution by SEZ; the Board had already amended other rules to include SEZs. On that basis the Tribunal held that the proviso must be read to include SEZs for the purpose of exemption entitlement. Ratio vs. Obiter: The interpretative conclusion that clause (i) of the proviso should be read to include SEZs (despite literal reference to FTZ) is a central ratio supporting allowance of exemption claims in the factual matrix. Conclusion: The proviso to Notification No. 67/1995-CE which referred to FTZs should be read to encompass SEZs following the SEZ Act and related administrative amendments; therefore clearances to SEZs are within the scope of the notification for the purpose of input exemption. Issue 3: Significance of following ARE-1/bond procedures under Rule 19 CER and implication for characterisation of goods as exempt or under-bond clearance Legal framework: Rule 19 of the Central Excise Rules, 2002 permits export without payment of duty and removal of material without payment of duty for use in the manufacture of goods which are exported, subject to conditions and procedures (such as ARE-1/bonds). SEZ Rules permit duty-free clearances subject to compliance with prescribed procedures and safeguards. Precedent Treatment: The Tribunal relied on its earlier authorities which held that compliance with ARE-1/bond procedures demonstrates that goods were cleared without payment of duty under statutory procedure rather than being intrinsically exempt. Interpretation and reasoning: The Tribunal observed that if the Revenue's position (that goods cleared to SEZ are inherently exempt) were correct, then there would be no rationale to follow ARE-1/bond procedures. The appellants had executed bonds and followed ARE-1 procedures; therefore the cement clearances to SEZ were clearances without payment of duty under the statutory scheme, not free/exempt clearances outside the procedure. This procedural posture supports the availability of input exemption on captively used clinker. Ratio vs. Obiter: The conclusion that adherence to ARE-1/bond under Rule 19 signifies an under-bond clearance and supports input exemption is a ratio applied to the facts; it underpins the Tribunal's decision to set aside the demand. Conclusion: The fact of executing bonds and following ARE-1/Rule 19 procedures indicates lawful under-bond clearance to SEZ, reinforcing entitlement to input exemption for captively consumed clinker under Notification No. 67/1995-CE. Overall Conclusion and Disposition The Tribunal followed and applied its prior decisions to conclude that (a) captively consumed clinker used to manufacture cement cleared to SEZ units/developers without payment of duty is eligible for exemption under Notification No. 67/1995-CE, (b) references to FTZ in the proviso to the notification must be read to include SEZ in view of the SEZ Act and subsequent administrative/legislative changes, and (c) compliance with ARE-1/bond procedures under Rule 19 supports the characterization of such clearances as under-bond and consistent with entitlement to input exemption. Consequently, the demand, interest and penalty based on denial of the exemption were set aside and the appeals allowed.
TaxTMI 
TaxTMI 
