Retrospective SEZ exemption under Cenvat Credit Rules protects supplies to developers and defeats duty, credit reversal, and penalty.

An amendment to Rule 6(6) of the Cenvat Credit Rules extending exemption to supplies made to SEZ developers was treated as clarificatory and retrospective because it aligned the Cenvat Credit Rules with the SEZ Act, 2005 and the established policy that supplies to SEZ developers for authorised operations are export-like transactions. On that basis, supplies to SEZ developers qualified for exemption from inception, so the duty demand, Cenvat credit reversal and penalty could not survive. The impugned order was set aside and the appeal succeeded with consequential relief.

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Issues: Whether the amendment extending the exemption under Rule 6(6) of the Cenvat Credit Rules, 2004 to supplies made to Special Economic Zone developers by Notification No. 50/2008-CE (N.T.) dated 31.12.2008 operated retrospectively so as to protect the appellant's clearances and Cenvat credit.

Analysis: The applicable legal position was controlled by the SEZ framework, under which supplies from the Domestic Tariff Area to an SEZ unit or developer for authorised operations were treated as exports. The amendment to Rule 6(6) was made by substitution and was understood as clarificatory, intended to align the Cenvat Credit Rules with the SEZ Act, 2005 and the consistent governmental policy recognising supplies to SEZ developers as export-like transactions. The settled view of the jurisdictional High Court and the Tribunal had already held that the 2008 amendment extended the exemption to SEZ developers from inception and not merely prospectively.

Conclusion: The appellant's supplies to SEZ developers were eligible for exemption, the demand of duty and reversal of Cenvat credit could not survive, and the penalty also could not survive.

Final Conclusion: The impugned order was set aside and the appeal succeeded with consequential relief in accordance with law.

Ratio Decidendi: An amendment made by substitution to align Cenvat credit exemptions with the SEZ regime is to be treated as clarificatory and retrospective where it merely gives effect to the existing statutory policy of treating supplies to SEZ developers for authorised operations as exempt.

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