Reversal of Cenvat Credit

[RAKESH R]

Reg: supplies to SEZ by Merchant Exporter under Rule 19 of CE Rule. As per SEZ Act, Rules, supplies to SEZ Deveopers are considered as "Export" and the procedure presribed under Notifiction issued under Rule 19 of CE 2002. to be followed. Consequent to circular dated 3.4.08 issued by Director General of Export Promotion, Ministry of Finance, The Excise Officers are insisting for reversal of cenvat credit used on the goods cleared and supplied to SEZ Developer. (Refer para 4(10) of the said circular). I am of the view that this is contrary to the SEZ Act / SEZ Rules and Cenvat Credit Rule. Rule 5 of Cenvat Credit Rule, 2004 allows to retain the credit, the demand of reversal in terms of Rule 6(6) of CCR, 2004 is not correct. The same rule allows the benefit if cleared for export under CE Rules. Please give your expert opinion.

regards

s. gokarnesan

AI Summary

Cenvat credit: supplies to SEZ treated as exports so input credit retention applies under export rules.
Dispute whether cenvat credit on goods supplied to a SEZ developer by a merchant exporter must be reversed when the supplies are cleared as exports under the Central Excise Rules. The supplies are treated as physical exports under the SEZ framework and, therefore, eligible for retention of input credit under the cenvat credit rules that permit credit where goods are cleared for export under the Central Excise export procedure; administrative demands for reversal conflict with that export treatment.