TaxTMI 
TaxTMI 
2025 (11) TMI 1194
X X X X Extracts X X X X
X X X X Extracts X X X X
....on input services in terms of CENVAT Credit Rules, 2004. During the EA-2000 Audit conducted by the department on the records maintained by the appellant, it was noticed that the appellant had cleared "Apron Front Body PVC Disposable" in 45 invoices over a period 2015-16 to June, 2017 for a total value of Rs.60,16,500/- to M/s SE Blades Ltd./Suzlon Energy Limited, SEZ Units situated in Nadasal Village, Udupi, Karnataka, without payment of duty under Notification No. 58/2003-C.E. dated 22.07.2003. The Audit Officers noticed that the said clearances were neither reflected in ER-1 Returns nor were re-warehousing certificates produced to substantiate the claim for clearance without payment of duty to SEZ units. Accordingly, show-cause proceedings were initiated proposing demand of Central Excise duty of Rs.7,52,063/- along with interest and for imposition of equal amount of penalty on the appellant under Section 11AC of the Central Excise Act, 1944. On adjudication of the Show-Cause Notice (SCN) dated 11.06.2019, the original adjudicating authority confirmed the demand of duty and imposition of penalty vide Order-in-Original dated 30.09.2021. Being aggrieved with the said Orderin-Origin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cases and it was held that the demand of duty is not sustainable, as the said decisions of the Tribunal/ High Court have also been upheld by the Hon'ble Supreme Court: (i) Eclerx Services Limited Vs. Commissioner of CGST & C.Ex., Navi Mumbai - 2023 (72) G.S.T.L. 99 (Tri.-Mumbai) and upheld by the Hon'ble Supreme Court in Civil Appeal No.549 of 2023 (ii) Cummins Turbo Technology Vs. Commissioner of Customs, Central Excise & Central Tax, Indore - (2023) 12 Centax 334 (Tri.Del.) (iii) GMR Aerospace Engineering Ltd. Vs. Union of India - 2019 (312) G.S.T.L. 596 (A.P.) and upheld by the Hon'ble Supreme Court in Special Leave Petition (Civil) Diary No.22140 of 2019 4. On the other hand, learned Authorized Representative on behalf of Revenue submitted that the procedure prescribed as per the Board Circular No. 29/2016-Cus. dated 27.12.2006 has not been complied with by the appellant. This has been discussed elaborately in Paragraphs 9 & 10 of the order-in-original which was also confirmed in the impugned order. Therefore, he prayed that the impugned order is correct and the appeal filed by the appellant is liable to be rejected. 5. Heard both sides and peru....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the liability of payment of duty, fine, penalty and interest relating thereto, would lie with the supplier in DTA, in addition to any other liability under any law in force. 10. The primary document required in case of clearance of goods from DTA unit to your unit in SEZ is ARE-1 and Letter of Undertaking. The assessee has submitted copies of Goods Consignment Notes, Ledger and the letter from M/s Suzlon Energy Ltd. as the assessee has not complied with the procedure required as per the circular it is obvious that the no such document has been issued. In this scenario the documents submitted by the assessee cannot take the place of ARE-1 which is the prescribed document for such clearances. Thus it is evident that the assessee has not made any compliance of the procedure set in the said circular. 11. The plea of the assessee that non-compliance of the Notification was a procedural lapse cannot be accepted. When the procedure has been prescribed by the government for claiming certain benefits, it is mandatory on the part of the beneficiary to comply with the same.... Thus where substantial compliance is required the assessee cannot claim procedural lapse without ev....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se of Harichand Shri Gopal reported at 2010 (260) ELT 3(SC) whereby it was made clear by the Hon'ble Court that the mere attempted compliance may not be sufficient but the actual compliance of the same is required. On going through excel sheet produced by the appellant it is seen that there are 45 invoices issued during the material period cleared to the SEZ unit. It is not understood or rather intriguing that such huge clearances were not reflected in the ER-1 Return. By going through the sheer volume of the clearances it cannot be accepted that the appellant had merely erred in not showing the clearances in ER-1 Return. The arguments put forth by the appellant are afterthought and an attempt to cover up the shortcomings. The SEZ units, as per the admission of the appellant are closed and there are no chance of getting the verification done, In totality I am not inclined to accept the plea of the appellant as they failed to defend their end. There is no evidence on record to interfere with the findings of the lower authority. The appeal does not succeed." From the above it transpires that the learned Commissioner (Appeals) had concluded that the appellants are not eligible to e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....emption from any duty of customs, under the Customs Act, 1962 (52 of 1962) or the Customs Tariff Act, 1975 (51 of 1975) or any other law for the time being in force, on goods imported into, or services provided in, a Special Economic Zone or a Unit, to carry on the authorised operations by the Developer or entrepreneur; (b) exemption from any duty of customs, under the Customs Act, 1962 (52 of 1962) or the Customs Tariff Act, 1975 (51 of 1975) or any other law for the time being in force, on goods exported from, or services provided, from a Special Economic Zone or from a Unit, to any place outside India; (c) exemption from any duty of excise, under the Central Excise Act, 1944 (1 of 1944) or the Central Excise Tariff Act, 1985 (5 of 1986) or any other law for the time being in force, on goods brought from Domestic Tariff Area to a Special Economic Zone or Unit, to carry on the authorised operations by the Developer or entrepreneur; (d) drawback or such other benefits as may be admissible from time to time on goods brought or services provided from the Domestic Tariff Area into a Special Economic Zone or Unit or services provided in a Special Economic Zon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....omic Zone Unit shall be responsible and liable for proper utilization of such goods in all cases." Notification No. 58/2003-C.E., dated 22-7-2003 Exemption to goods supplied to units in SEZ "In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) (hereinafter referred to as the Central Excise Act), read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts all excisable goods (hereinafter referred to as the said goods) specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), produced or manufactured by a unit (hereinafter referred to as the unit) when supplied to units in special economic zone, from whole of the duty of excise leviable thereon under section 3 of the said Central Excise Act, and the additional duty of excise leviable under sub-section (1) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), subject to the following conditions, namely ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....under, for proper implementation of the said Rule. Department of Commerce has also issued Instruction No. 6 dated 3rd August, 2006 on the said issue. 3. The important provisions of the Act & the Rules having a bearing on procurement of goods from DTA by SEZ units and SEZ developers for their authorized operations are listed below :- (a) Under Section 2(m) of the Act, supplying goods or providing services, from DTA to a SEZ unit or a SEZ developer, has been defined to constitute "export". (b) Section 51 of the Act provides that the said Act shall have effect in case of any inconsistency with the provisions contained in any other law for the time being in force, etc., (c) Sub-section (1) of Section 52 of the Act provides that w.e.f. 14-32006, the provisions contained in Chapter XA of the Customs Act, 1962, the SEZ Rules, 2003 and the SEZ (Customs Procedure) Regulations, 2003 made thereunder, shall not apply to Special Economic Zones; and (d) Section 53 of the Act provides that w.e.f 10-2-2006, a Special Economic Zone shall be deemed to be territory outside the customs territory of India for the purposes of undertaking the authorized operat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Export, as the case may be, within a period of 45 days, the duty should be demanded from the DTA supplier by the jurisdictional Central Excise Officer as is done in the case of nonavailability of proof of export for normal export of goods, without payment of Central Excise duty, under Rule 19 of Central Excise Rules, 2002. 7. Clearance of goods at the place of dispatch, i.e., at the factory or warehouse may be, at the option of the exporter (DTA Supplier), either 'under examination and sealing of goods by the Central Excise officer', or, 'under self- sealing and self examination', as is applicable in the case of export of goods under Rule 18 or 19 of Central Excise Rules, 2002. The manner of disposal of copies of ARE-1, monitoring of proof of exports, demand of duty in case of non-submission of proof of exports, etc. shall be the same as is applicable in case of exports made under Rule 18 or Rule 19 of the Central Excise Rules, 2002. The DTA supplier shall ensure the bona fides of the SEZ unit or SEZ developer to whom duty free goods are being supplied. In the event of non-receipt of proof of export due to loss of goods in transit due to theft, illegal diversion or any o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uty under Rule 19 of Central Excise Rules, 2002, since the exemption Notification No. 58/2003-C.E., dated 22-7-2003 regarding the supply of goods to SEZ units & SEZ developers have become redundant. It further states that such supplies from DTA to a SEZ unit, or to SEZ developers, may be treated as in the nature of exports. Thus, it flows from the CBEC circular that there is no requirement for payment central excise duty on supply of goods from DTA to SEZ unit with the introduction of legal changes discussed above. Therefore, the conclusions arrived at by the impugned order confirming demands of excise duty on clearances made from DTA to SEZ unit in the pretext of not following the conditions of notifications No. 58/2003-C.E., dated 22.07.2003; No.42/2001-C.E. (N.T.) dated 26.06.2001 and/or the Circular No.29/2006-Cus., dated 27.12.2006 does not stand the legal scrutiny. 8.3 Furthermore, I also find that the learned Commissioner (Appeals) had come to the conclusion that the SEZ units were closed and there is no possibility to verify the receipt of goods in the SEZ unit which were cleared by the appellant from his factory. On perusal of the database maintained by the Ministry of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cations issued under various enactments such as Customs Act, 1962, Customs Tariff Act, 1975, Central Excise Act, 1944, Central Excise Tariff Act, 1985, Finance Act, 1994 and Central Sales Tax Act, 1956 etc., enlisted in clauses (a) to (g) of sub-section (1) of Section 26 of the Act. 19. The only argument of Smt. Sundari R. Pisupati, Learned Senior Standing Counsel for the Department is that since SEZ Act, 2005 and the Rules framed thereunder do not constitute a self-contained Code, the availability of exemptions under Section 26 of the Act would certainly depend upon the terms and conditions stipulated in the notifications issued under the respective enactments indicated in clauses (a) to (g) of sub-section (1) of Section 26. But, the contention of Mr. S. Niranjan Reddy, Learned Senior Counsel appearing for the petitioners, is that there is no scope for restricting Section 26, especially when the SEZ Act, 2005 which is also a parliamentary enactment of a later date, is given an overriding effect under Section 51 of the Act. 20. In order to find an answer to this question, one must understand in conceptual terms, what a Special Economic Zone is. As pointed out by t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ay be admissible from time to time on goods brought or services provided from the Domestic Tariff Area into a Special Economic Zone or Unit or services provided in a Special Economic Zone or Unit by the service providers located outside India to carry on the authorised operations by the Developer or entrepreneur; (e) exemption from service tax under Chapter V of the Finance Act, 1994 (32 of 1994) on taxable services provided to a Developer or Unit to carry on the authorised operations in a Special Economic Zone; (f) exemption from the securities transaction tax leviable under section 98 of the Finance (No. 2) Act, 2004 (23 of 2004) in case the taxable securities transactions are entered into by a non-resident through the International Financial Services Centre; (g) exemption from the levy of taxes on the sale or purchase of goods other than newspapers under the Central Sales Tax Act, 1956 (74 of 1956) if such goods are meant to carry on the authorised operations by the Developer or entrepreneur. (2) The Central Government may prescribe the manner in which, and the terms and conditions subject to which, the exemptions, concessions, drawback or oth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y be specified in the notification, taxable service of any specified description from the whole or any part of the service tax leviable thereon. (2) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by special order in each case, exempt any taxable service of any specified description from the payment of whole or any part of the service tax leviable thereon, under circumstances of exceptional nature to be stated in such order." 27. A look at Section 93 of the Finance Act, 1994 would show that it has nothing to do with the units located in a SEZ. Section 93 is a general power of exemption available for the benefit of all and sundry. In fact, Section 93 was substituted in its present form by Finance (No. 2) Act, 1998 with effect from 16-10-1998. The notifications issued under Section 93 may cover taxable services of any description. Even the units located outside a SEZ are entitled to the benefit of the notifications issued under Section 93 of the Finance Act, 1994, if the conditions stipulated in those notifications are fulfilled. 28. The SEZ Act, 2005 is also a parliamentary enactment issued later in poin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cribed the terms and conditions for grant of exemptions under Rule 22. Therefore, there is no question of comparing the terms and conditions prescribed in Rule 22 with the terms and conditions prescribed in the notifications issued under any one of five enactments listed in Section 26(1) to find out whether there was any inconsistency. 31. Support can be drawn for the above interpretation, from Section 50 of the SEZ Act, 2005 also. Section 50 of the SEZ Act, 2005 enables State Governments to enact laws for the grant of exemption from state taxes, levies and duties. Since a Central Law cannot provide for exemption from the levy of State taxes, Section 50 merely enables the State Governments to enact laws. 32. A combined reading of Sections 7, 26 and 50 of the SEZ Act, 2005, would show that SEZ Act, 2005 speaks of three different types of exemptions. They are, - (1) exemption from payment of taxes under the enactments specified in the First Schedule, in respect of goods and services exported out of, or imported into or procured from a DTA by a unit in a Special Economic Zone or a Developer under Section 7, (2) exemption from payment of duties under....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Maharashtra - 2011 (3) SCC 1, relied upon by Smt. Sundari R. Pisupati, Learned Senior Standing Counsel, the Supreme Court considered in detail the question as to when the provisions of a statute could be construed as a self-contained code. It was pointed out in the said judgment that if complete machinery or mechanism is not provided under an Act to ensure effective execution of the functions assigned therein, with due protection of the rights of the interested persons, within the framework of law, it may not be possible for the court to hold that such a statute is a self-contained code. But, the Court also pointed out in the said decision that it is not possible to State parameters of universal application, which could determine with precision as to whether an Act is a self-contained code or not. In paragraph 35 of the report in Girnar Traders, the Supreme Court held that where a law contains a compilation of provisions, which would comprehensively deal with various aspects of the purpose sought to be achieved by that law and its dependence on other legislations is either absent or minimal, the same can be said to be a complete code. 37. Even if apply the parameters ind....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ions subject to which the exemptions are to be granted. Therefore, all the parameters indicated in Girnar Traders are satisfied in Section 26 and the Rules issued thereunder. If the word "prescribe" has not been defined or at least if Section 26 had used the words "prescribed under the relevant statutes" the position would have been different. 40. Inviting our attention to a Circular No. 105/08/2008 in F. No. 137/168/2008-CX.4, dated 16-9-2008, Smt. Sundari R. Pisupati, Learned Senior Standing Counsel contended that there is no exclusion of SEZ in Chapter-V of the Finance Act, 1994 and that the service tax is applicable on taxable services provided by SEZ units, except those that are exempt by Notification No. 4 of 2004. She also drew our attention to the amendment introduced to the SEZ Rules by way of notification in GSR 772(E), dated 5-8-2016. Under this notification, sub-rule (5) was inserted under Rule 47 of the SEZ Rules, 2006. This sub-rule (5) inserted in Rule 47 of the SEZ Rules, 2006 reads as follows : "(5) Refund, Demand, Adjudication, Review and Appeal with regard to matters relating to unauthorized operations under Special Economic Zones Act, 2005, tra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o included the procedure for grant of exemption within its purview, then the stand taken by the Department would be perfectly valid. The very fact that sub-rule (5) of Rule 47 made the Rules and notifications issued under certain Acts applicable only to issues of refund, demand etc., would show that Rules 22 and 31 have independent legs to stand." 9.2 I further find that in the Civil Appeal filed by the department against the aforesaid order of the Hon'ble Andhra Pradesh High Court holding that exemption provided under Section 26 of the SEZ Act, 2005 has over riding effect and that the breach of conditions is procedural, the Hon'ble Supreme Court had dismissed the appeal filed by the department, by upholding the order of the High Court of Andhra Pradesh. The copy of the said judgement of the Hon'ble Supreme Court is extracted and given below: ITEM NO.18 COURT NO.10 SECTION XII-A S U P R E M E C O U R T ....