Custom, Excise & Service Tax Tribunal
M/S. Dalmia Cement (Bharat) Ltd vs Cce, Ltu, Delhi on 28 September, 2016
IN THE CUSPTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI
Date of Hearing:16.09.2016
Date of Decision:28.09.2016
Excise Appeal No.1995/2010-EX(DB)
(Arising out of Order-in-Original No.06/Commr./2010 dated 8th April, 2010 passed by the Commissioner, Central Excise & Service Tax, New Delhi )
M/s. Dalmia Cement (Bharat) Ltd. Appellants
Vs.
CCE, LTU, Delhi Respondent
Appearance:
Rep. by Shri P.K. Sahu, Advocate for the appellant.
Rep. by Shri Yogesh Agarwal, DR for the respondent.
Coram: Honble Mr. Justice (Dr.) Satish Chandra, President Honble Mr. B. Ravichandran, Member (Technical) Final Order No.53866/2016 Per B. Ravichandran:
The appellant is aggrieved by the Order dated 8.4.2010 of the Commissioner of Central Excise, New Delhi.
2. The brief facts of the case are that the appellants are engaged in the manufacture of Cement and Clinker liable to central excise duty. They have cleared cement to the units, which are situated in Special Economic Zone, without payment of duty. The clinker was captively used in the production of cement and was exempted from payment of duty vide Notification No.67/95-CE dated 16.03.05 provided the final product (Cement) is cleared on payment of duty. Since in the present case, cement is cleared without payment of duty to SEZs unit, proceedings were initiated against the appellant to demand duty on such clinker used in the manufacture of cement within the unit. The Original Authority confirmed the demand of Rs.4,07,91,300/- and imposed equal amount of penalty.
3. Ld. Counsel for the appellant submitted that the demand arose mainly on the understanding that the SEZ is not mentioned in the list of categories of clearances under proviso to Notification No.67/95-CE.The units located in Free Trade Zone or 100% EOU are specifically mentioned in the list. In other words, clearance of final products to these units (FTZ/100% EOU) will not disentitle the manufacturer for exemption on captively consumed goods in the premises of the said notification. When the notification was issued in 1995, the concept of SEZ was not there but FTZ was prevalent. The SEZ Act came much later. They have supplied cement to Export Oriented Unit situated in SEZ and hence, there is no bar for them to claim exemption under the above said notification. Reliance was placed on various decided cases of the Tribunal on the said issue.
4. Ld. AR reiterated the findings in the Original Order.
5. We have heard both the sides and examined the appeal records.
6. We find that the exemption available to captively consumed clinker in terms of Notification No.67/95-CE is sought to be denied only on the ground that the final product cement, was cleared to the units in SEZ and SEZ not being listed in the exclusion in the proviso of the said notification. We find that this issue has been a subject matter of the decision by the Tribunal reported in 2015-TIOL-2110-CESTAT-Madras, wherein the Tribunal has held as under:-
32. As regards the last issue, the Revenue contended that the clause (i) of proviso to Notification No. 67/95 provides exception only for clearance to FTZ and not for SEZ. It is contended that the very purpose of the non-inclusion of SEZ in Notification No.67/95 is to make it apply only to FTZ and not to SEZ. We are unable to accept departments the view for the reasons that during the relevant period under dispute there were no FTZ in operation and if the Revenues view is to be taken, no clearance would be made to FTZ after the enactment of SEZ Act with effect from 10.02.2006. Once the SEZ Act came into effect from 10.02.2006 all the units functioning as FTZ were declared as SEZ units. We find that the Notification No.4/2003-CE, dated 30.03.2003 was issued to convert various FTZs into SEZs.
33. Further as per the Notes Explaining Clauses of the Finance Bill, 2007 clause 106, after enactment of SEZ Act FTZs have become redundant and hence it seeks to amend sub-section (1) of Section 3 of the Central Excise Act. The Relevant clause is reproduced as under:-
Clause 106 seeks to amend sub-section (1) of section 3 of the Central Excise Act, 1944 with a view to omit the provisions relating to free trade zone which have become redundant due to enactment of the Special Economic Zones Act, 2005. It is also proposed to amend clause (iii) of Explanation 2 of said sub-section so as to substitute the meaning of Special Economic Zonein the manner as is assigned to it in clause (za) of section 2 of the Special Economic Zones Act, 2005.
By virtue of the above Act, the word FTZ was omitted and substituted with the word SEZ. Therefore, the Revenues plea that the goods supplied to SEZ is not covered under clause (i) of the Proviso to the notification is not acceptable. We find that when the Board already amended the Rule 6 (5) (ii) of Cenvat Credit Rules, 2001 to include supplies to SEZ, the clause (i) of the proviso to Notification No.67/95 should also been amended accordingly to replace the word FTZ to SEZ. Therefore, we are unable to accept the dept. plea that clause (i) of proviso to the notification No.67/95 is intentionally kept and meant only to FTZ and not SEZ and we hold that the appellants are eligible for the exemption under Notification No.67/95.
34. Having discussed all the points on merits, we also find that as final resort demanding duty on the intermediate product is otherwise also hit by Revenue neutrality, as the appellants are otherwise entitled to avail the Cenvat credit of the duty, if any paid on clinker. Alternatively, if a manufacturer avails exemption on intermediate product under Notification 67/95-CE and chooses to pay duty on the cement when cleared to SEZ unit/developer, the duty paid on final product will be fully available to him as refund/rebate. Thus, on both counts the issue is purely revenue neutral. It is not the intention of the government to demand duty on the intermediate product having considered that the supplies to SEZ are exports. Therefore, the demand of duty on the intermediate product clinker used in manufacture of cement supplied to SEZ units/developers is clearly revenue neutral as the appellants could have claimed refund or availed Cenvat credit. In this regard, as rightly held by the Tribunal in the case of Reliance (supra) demand of duty on intermediate products will only increase scriptory work with no benefit to the revenue. Relevant para is extracted below:
6. The Tribunal in the case of CCE, Surat v. Reliance Industries Ltd. - [2004 (167) E.L.T. 118 (Tri. - Mumbai)] = 2008-TIOL-151-CESTAT-AHM, while dealing with an identical captive consumption Notification No. 217/86-C.E., has followed the earlier decision of the Tribunal in the case of M/s. Bajaj Tempo Ltd. v. CCE - [1994 (69) E.L.T. 122] = 2002-TIOL-125-CESTAT-MUM laying down that the object of the captive consumption notifications is to avoid unnecessary scriptory work, resulting in no benefit to the Revenue and to ensure the same result. The demand in the present case is admittedly available as credit to the appellant and the same would have added in more scriptory work to the assessee, in stead of resulting in any revenue earning to the Department or revenue loss to the assessees. The entire situation being revenue neutral, we find no justification for confirmation of demands in question on this ground.
35. In view of foregoing discussions, we hold that the 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. Accordingly, the impugned orders in all the assessees appeals are set aside and the appeals allowed.
7. In the above order, the Tribunal dealt with the same issue involving large number of cement units. We find that the denial of exemption by the Original Authority is not legally justifiable. A reference can also be made to the decision of the Honble Supreme Court in the case of Ambuja Cement Ltd. 2005 (326) ELT 13 (SC). The Honble Supreme Court allowed the appeal of the assessee for claim of exemption under the above mentioned notification by interpreting the said notification along with Rule 6 of the Cenvat Credit Rules, 2001.
8. In view of the above discussions and following the ratio of the decided cases, we find no merit in the original order and accordingly, the same is set aside. The appeal is allowed.
[Order pronounced on 28.09.2016] (Justice Dr. Satish Chandra) President ( B. Ravichandran ) Member (Technical) Ckp.
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