Custom, Excise & Service Tax Tribunal
M/S. Bonfiglioli Transmissions Pvt. ... vs Cce, Chennai-Iv on 19 January, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
E/101, 102/2011
(Arising out of Order-in-Original No.24 & 25/2010 dated 23.11.2010 passed by the Commissioner Central Excise, Chennai-IV Commissionerate, Chennai).
M/s. Bonfiglioli Transmissions Pvt. Ltd. : Appellant
Vs.
CCE, Chennai-IV : Respondent
Appearance Shri Joseph Prabakar, Advocate, for the Appellant Shri S. Govindarajan, AC (AR) for the Respondent.
CORAM:
Honble Ms. Sulekha Beevi, Member (Judicial) Honble Shri Madhu Mohan Damodhar, Member (Technical) Date of Hearing/Decision: 19.01.2018 FINAL ORDER No. 40150-40151/2018 Per Bench Brief facts are that the appellants are manufacturers of Gear Box, Gear Motor and parts thereof and are registered with the Central Excise Department. The officers of the department visited the premises of the appellant and noticed that during the period 2006-07 to 2008-09, the appellants have cleared their manufactured products to SEZ without payment of excise duty, being deemed exports. They were also availing the exemption on inputs such as parts of gear box and motor captively consumed in terms of Notification No. 67/1995. The department was of the view that as the final products are cleared without payment of duty, the appellants are not eligible for the benefit of exemption of duty under Notification No. 67/1995 for the reason that the said notification does not specify clearances made to SEZ. SNCs were raising the above allegation and proposing to demand differential duty along with interest and also for imposing penalties. After due process of law, the Commissioner confirmed the demand, interest and imposed penalties. Aggrieved, appellants are before the Tribunal.
2. On behalf of the appellants, the Ld. Counsel, Shri Joseph Prabakar submitted that the clearances made to SEZ are to be treated as exports. The finished products manufactured by them are not exempted products but are exempted from duty as the clearances made to SEZ are to be treated as exports. That therefore the appellants are eligible for exemption. He adverted to the Notification No. 67/1995 and submitted that as per clause (1) of the said notification, the clearances made to free trade zone will be considered for eligibility under the notification even though the final goods are cleared without payment of duty. That the said sub-clause was amended by way of substitution w.e.f. 14/06/2016, vide Notification No. 25/2016-CE and the words Free Trade Zone was substituted by the words Special Economic Zone. Whenever there is an amendment brought with substitution, the same has retrospective effect. That therefore the appellants are eligible for the exemption for the disputed period. To support his arguments, he relied upon the decision in the case of CCE, Bangalore Vs. Lotus Power Gears (P) Ltd. 2017 (346) ELT 347 (Kar.), wherein it was held that when the amendment is made by way of substitution such amendment has retrospective application. He also submitted that the issue stands covered in the case of Ultratech Cements Ltd. Vs. CCE & ST, Trichy 2016 (343) ELT 164 (Tri.-Chen.)
3. The Ld. AR, Shri S. Govindarajan, AC, reiterated the findings in the impugned order.
4. Heard both sides.
5.1 The issue posing for consideration is whether the appellants are eligible for exemption under Notification No. 67/1995, when the final products are cleared to SEZ.
5.2 The relevant part of the Notification as it stood during the material time reads as under:-
Provided that nothing contained in this notification shall apply to inputs used in or in relation to the manufacture of final products which are exempt from the whole of duty of excise or additional duty of excise leviable thereon or are chargeable to Nil rate of duty, other than those goods which are cleared, -
(i) .
(ii) .
(iii)
(iv)
(v) ..
(vi) by a manufacturer of dutiable and exempted final products, after discharging the obligation prescribed in rule 6 of the Cenvat Credit Rules, 2004. 5.3 The clause (1) in the above notification has been amended by Notification No. 25/2016-CE dated 14.06.2016, whereby the words Free Trade Zone has been substituted by the words Special Economic Zone. The amendment has been made by way of substitution. The decision in the case of Lotus Power Gears Pvt. Ltd. (supra) has held that the amendment brought by way substitution would take effect retrospectively. The Tribunal in the case of Ultratech Cements Ltd. (supra) had occasion to consider the very same issue and observed that the benefit of notification cannot be denied for the reason that the finished goods are cleared to SEZ. The relevant portion is reproduced as under:-
23.?Before detailed discussion, it is relevant to reproduce the Notification No. 67/95-C.E., dated 16-3-1995 : -
Captive consumption (Goods used within factory of production) GENERAL EXEMPTION NO. 6 Exemption to all capital goods and specified inputs if captively consumed within factory of production. - In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excises and Salt Act, 1944 (1 of 1944), read with sub-section (3) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), (hereinafter referred to as the said Special Importance Act),] the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts -
(i) capital goods as defined in the Cenvat Credit Rules, 2002 manufactured in a factory and used within the factory of production;
(ii) goods specified in column (1) of the Table hereto annexed (hereinafter referred to as inputs) manufactured in a factory and used within the factory of production in or in relation to manufacture of final products specified in column (2) of the said Table :
Provided that nothing contained in this notification shall apply to inputs used in or in relation to the manufacture of final products which are exempt from the whole of duty of excise or additional duty of excise leviable thereon or are chargeable to nil rate of duty, other than those goods which are cleared, -
(i) to a unit in a Free Trade Zone, or
(ii) To a hundred per cent. Export Oriented Undertaking, or
(iii) To a unit in an Electronic Hardware Technology Park, or
(iv) To a unit in a Software Technology Park, or
(v) Under notification No. 108/95-Central Excise, dated the 28th August, 1995, or
(vi) By a manufacturer of dutiable and exempted final products, after discharging the obligation prescribed in rule of the Cenvat Credit Rules, 2001.
TABLE S. No. Description of inputs Description of final products (1) (2) (3) All goods falling under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the light diesel oil, high speed diesel oil and motor spirit commonly known as petrol.
All goods falling within the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than matches As seen from the above notification, the clause (ii) of the notification is relevant in the present case which exempts the goods specified in Col. 1 of the table ( referred to as inputs) manufactured in a factory and used within the factory of production in or in relation to manufacture of final products specified in Col. 2 of the table. Clinker classifiable under sub-heading 2502 10 is covered under Column 1 of the Table as input and cement classifiable under Chapter Heading 2502 09 is covered under Column 2 of the Table as final product. Therefore, there is no dispute that both inputs and final products are specified in the table of the notification and the appellants manufactured clinker and captively consumed for manufacture of cement and cleared the cement on payment of duty to DTA and without payment of duty to S EZ units/developers. We also find in some of the appellants cases, the demand relates to the period prior to the enactment of SEZ Act i.e., 10-2-2006 where the finished goods were cleared without payment of duty to SEZ under Notification No. 58/2003-C.E., dated 22-7-2003. The period involved in all these cases relates from 2004 to 2011. The appellants main contention is that the goods cleared to the SEZ unit/developers are not exempted from excise duty but cleared without payment of duty by following the requisite procedures set out in SEZ Act and SEZ Rules read with Central Excise Rules. The Revenue contended that goods supplied to SEZ are exempted and demanded duty on the clinkers used in the manufacture of cement which are cleared to SEZ units/developers. We find this very issue has been clearly discussed by the Tribunal Principal Bench in the case of Surya Roshni (supra). Relevant paragraphs are reproduced as under :
5.?We have considered that rival submissions. There is no dispute that common Cenvat credit availed inputs have been used in the manufacture of goods supplied to DTA buyers on payment of duty and also in respect of the goods supplied to SEZ Developers without payment of duty. The point of dispute is as to whether the goods supplies to SEZ Developers without payment of duty are to be treated as exempted goods within the meaning of this term as defined in Rule 2(d) of the Cenvat Credit Rules, 2004 and whether in respect of these supplies, the provisions of sub-rules (2) and (3) of Rule 6 ibid would be applicable.
6.?The term exempted goods as defined in Rule 2(d) in Cenvat Credit Rules means excisable goods which are exempted from the whole of the duty leviable thereon including the goods which are chargeable to nil rate of duty. There is no dispute about the fact that neither the goods, in question, are chargeable to nil rate of duty nor these goods when supplied to SEZ Developers are exempted from payment of duty by virtue of some exemption notification issued under section 5A(1) of the Central Excise Act, 1944. Admittedly no duty is required to be paid on the goods supplied to SEZ Developers, as the same are treated as export in terms of the definition of this term as given in Section 2(m) of SEZ Act, 2005. Though the learned departmental representative pleads that supplies to SEZ Developers are only deemed export and cannot be treated as export for the purpose of Central Excise Act, 1944 and the Rules made thereunder, Section 51 of the SEZ Act provides that the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act. In view of the overriding provisions of Section 51 of SEZ Act, supplies to SEZ as well as to SEZ Developers by a D.T.A. unit would have been treated as exports for the purpose of Cenvat Credit Rules, 2004. Since the supplies to SEZ Developers are export, the same cannot be treated as exempted goods and hence the provisions of sub-rules (1), (2) and (3) of the Rule 6 of the Cenvat Credit Rules, 2004 would not be applicable. Same view have been taken by the Tribunal in the case of Sujana Metal Products Ltd. v. CCE, Hyderabad (supra), wherein the Tribunal held that during the period prior to 31-12-2008, supplies to SEZ Developers made without payment of duty are to be treated as exports and would be covered by sub-rule (6) of Rule 6 and accordingly the provision of sub-rules (1), (2) and (3) of Rule 6 would not be applicable.
24.?From the above decision, we find that the issue relates to availment of Cenvat credit, where the appellants have supplied both dutiable and exempted goods. While allowing the appeal, the Tribunal has categorically discussed the meaning of exempted goods defined in Rule 2(d) of Cenvat Credit Rules and held that the goods supplied to the SEZ units/developers are neither chargeable to nil rate of duty nor the goods are exempted from payment of duty by any exemption notification issued under Rule 5A. The Principal Benchs above decision is squarely applicable to the facts of the present case.
In the present case, we find the sub-clause (vi) of the proviso to Notification No. 67/95-C.E. is an exception clause where a manufacturer of dutiable and exempted goods is eligible if he discharges the obligation prescribed in Rule 6 of Cenvat Credit Rules, 2001. As rightly submitted by both Revenue and the appellants, there is no definition of exempted goods in Central Excise Act except Rule 2(d) of Cenvat Credit Rules. The Tribunals decision in the case of Surya Roshni (supra) discussed above clearly answers the above question. When the words exempted goods used in the said notification, it only means final products exempted under the Central Excise Act read with Central Excise Rules or any notification issued thereunder.
25.?Revenue contended that Section 26(1)(c) of the SEZ Act clearly exempts the goods supplied by the DTA to SEZ units/developers and this should be considered while construing the proviso to Notification No. 67/95-C.E. This proposition of the Revenue is not acceptable and the word used in the proviso to Notification No. 67/95-C.E. is dutiable and exempted final products in relation to Cenvat Credit Rules, 2001. The Cenvat Credit Rules is to enable availment of Cenvat credit of excise duty or any other duties specified under the Central Excise Act or Customs Act or under the Finance Act. In the present case, the final product cement is an excisable commodity falling under Chapter 25 of CETA which are dutiable. There is no exemption of excise duty on cement. Therefore, in view of the Tribunals Principal Bench decision of Surya Roshini case already discussed above, we are of the considered view that the final product cement cleared to SEZ units/developers is not exempted goods under any notification issued under Section 5A of the Central Excise Act.
26.?In this regard, it is pertinent to state that if the Revenues contention is to be taken that the goods cleared to the SEZ units are exempted, then the question of following the procedures stipulated under SEZ Act and under Rule 19 of Central Excise Rules, 2002 does not arise. On a perusal of the records, we find that the appellants have cleared the goods to SEZ under-bond by following the ARE-1 procedures prescribed under Rule 19 of the Cenvat Credit Rules. Rule 19 of Central Excise Rules, 2002 is reproduced as under :
RULE 19.?Export without payment of duty. - (1)?Any excisable goods may be exported without payment of duty from a factory of the producer or the manufacturer or the warehouse or any other premises, as may be approved by the Principal Commissioner or Commissioner, as the case may be.
(2)?Any material may be removed without payment of duty from a factory of the producer or the manufacturer or the warehouse or any other premises, for use in the manufacture or processing of goods which are exported, as may be approved by the Principal Commissioner or Commissioner, as the case may be.
(3)?The export under sub-rule (1) or sub-rule (2) shall be subject to such conditions, safeguards and procedure as may be specified by notification by the Board.
There is no dispute that the appellants had duly followed the procedures set out in the above Rules, and executed bond before the excise authorities and cleared the goods without payment of duty. If the goods are fully exempted, the question of following the procedure under ARE-1 and execution of bond does not arise. Accordingly, we hold that the cement cleared to SEZ unit/developers are not exempted goods but cleared without payment of duty by following the procedures and conditions stipulated in both SEZ and Rule 19 of CER Rules and the clinkers used captively for manufacture of cement cleared to SEZ is covered under Notification 67/95 from exemption of excise duty.
6. From the discussions made above, as well as following the decision in the case of Ultratech Cements Ltd. (supra), we are of the opinion that the demand cannot sustain.
7. The impugned orders are set aside. Appeals are allowed with consequential reliefs.
(Operative part of the Order pronounced in the open Court)
(MADHU MOHAN DAMODHAR) (SULEKHA BEEVI C.S.)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
BB