Custom, Excise & Service Tax Tribunal
M/S Ultratech Cement Ltd vs Commissioner Of Central Excise, Nagpur on 29 May, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal No. E/40 & 1846/10, E/806/11, E/87011 & 87012/13 & E/85320/14 (Arising out of Order-in-Appeal No. PVR/81-82/NGP/2013 dated 13.2.2013 passed by the Commissioner of Central Excise & Customs (Appeals), Nagpur). For approval and signature: Honble Shri P.R. Chandrasekharan, Member (Technical) Honble Shri Anil Choudhary, Member (Judicial) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy : Seen of the order? 4. Whether order is to be circulated to the Departmental : Yes authorities? ====================================================== M/s Ultratech Cement Ltd. Appellant Vs. Commissioner of Central Excise, Nagpur Respondent Appearance: Shri Gajendra Jain, Advocate with Ms. Anjali Hirawat, Advocate for Appellant Dr. B.S. Meena, Addl. Commissioner (AR) for Respondent CORAM: SHRI P.R. CHANDRASEKHARAN, MEMBER (TECHNICAL) SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) Date of Hearing: 29.05.2014 Date of Decision: 29.05.2014 ORDER NO. Per: Anil Choudhary
These six appeals have been filed by the appellant M/s Ultratech Cement Ltd. A common issue arises in these appeals as to whether the supplies of cement manufactured by the appellant to the contractors of developers of SEZ under the cover of ARE-1 without payment of duty and the tax demanded on the same by the adjudicating authority and upheld in the impugned appellate order is legal and valid. For the sake of convenience, the appeals are taken up together for hearing and disposal. The details of the appeals are as under: - Appeal No. OIO No./OIA No. Period Amount (Rs.) Duty Penalty 1 2 3 4 5 E/40/10 12/2009/C dated 25.09.2009 April 2008 to December 2008 70,41,755 7,04,000 E/806/11 YDB/93/RGD/2011 dated 31.01.2011 24.07.2008 to 30.12.2008 10,97,095 10,97,095 E/87012/13 PVR/81-82/NGP/2013 dated 13.02.2013 April 2009 to June 2009 13,70,450 13,70,450 E/87011/13 PVR/81-82/NGP/2013 dated 13.02.2013 January 2009 to March 2009 23,72,642 23,72,642 E/1646/10 PIII/VM/134/10 dated 16.06.2010 October 2006 to December 2008 30,97,251 30,97,251 E/85320/10 12/2013/C dated 30.10.2013 October 2011 to August 2012 51,47,975 51,47,975
2. The brief facts of the case as per appeal No. E/87011/13 are as follows: -
The facts in brief are that the appellant is engaged in the manufacture of Cement/Clinker and are also availing the Cenvat facility in respect of duty/tax paid on inputs/Capital Goods and Service Tax under Rule 3 of CENVAT credit Rules, 2004. During the period from January, 2009 to March, 2009 and from April, 2009 to June, 2009, the appellant under the cover of ARE-1s cleared Cement without payment of duty to the firms/contractors who were neither SEZ units nor Developers in terms of Rule 6(6) of CENVAT credit Rule, 2004, but were contractors of the developers of the SEZ. From the CENVAT credit Account of the appellant, it was found that they had taken credit of duty/tax paid on inputs and input services irrespective of whether they were used for manufacture of goods cleared on payment of duty or the goods cleared to SEZ or SEZ. Developers without payment of duty and also did not maintain separate records for the said purpose. The department contended that since Cement is not covered under the items specified under Rule 6(3) ibid they were not eligible for reversal of attributable CENVAT credit on input and input services used in respect of manufacture of exempted clearances to the said contractors. It was also found that while clearing the said goods without payment of duty to the aforesaid contractors, they did not pay an amount equal to 10% of the value of the said exempted goods as required under Rule 6(3)(i) of the CENVAT credit Rule, 2004. It appeared that the said clearances were not covered under clause (i) to (vii) of sub-rule (6) of Rule 6 of CENVAT credit Rule, 2004 at the relevant time and as such the appellant were required to pay an amount equal to ten percent of value of the exempted goods under Rule 6(3)(i) of the CENVAT credit Rule, 2004 ibid. Hence, the lower authority issued a show-cause notice to the appellant demanding the said amount. During the course of adjudication, it was revealed that out of the total demand, some clearances were effected to the SEZ developers, which were exempted. The demand was therefore confirmed to the extent of Rs.23,72,642/- and Rs.13,70,450/-, after excluding the demand on the clearances to SEZ Developers. The show-cause notice were adjudicated by the Lower adjudicating authority through Order-in-Original Nos. 18/DL/JC/C.EX/2010 dated 27.10.2010 and 25/C.EX/DL/JC/2010 dated 14.12.2010 wherein he confirmed the demand of amount of Rs.23,72,642/- and Rs.13,70,450/- under Rule 14 of CENVAT Credit Rules, 2004 read with Section 11A of Central Excise Act, 1944 and ordered to recover the amount along with interest under Section 11AB of Central Excise Act, 1944 read with Rule 14 ibid. He has also imposed penalty of Rs.23,72,642/- and Rs.13,70,450/- under Rule 15(1) of CENVAT Credit Rules, 2004, upon the appellant.
3. Being aggrieved, the appellant carried the matter before the Commissioner (Appeals) on the following grounds: -
The said clearances are for the developers of SEZ and hence these shall be treated as exports as per SEZ Act & Rules and no duty is demandable. The Rule 6(6)(i) was amended from 31.12.2008 wherein the developer was also included along with units of SEZ and hence no demand survives after that date and even for the clearances made prior to that date, as this amendment is clarificatory in nature and hence retrospective in nature. Cement supplied by them are not exempted goods as per definition 2(d) of Cenvat Credit Rules, 2004 and hence, there is no requirement of paying any duty for the clearances effected to SEZ, being exports. SEZ Rules have overriding effect over the Central Excise Act. He also cited Circular No. 29/2006-Cus dated 27.12.2006 wherein it was clarified that supplies from DTA to SEZ unit or developers may be treated as Exports. After issue of this Circular, the Notification No. 58/2003-CE date 22.7.2003 is redundant and consequently, the DTA supplies are governed by the provisions of SEZ Act & Rules. Hence, goods being in the nature of export goods, Rule 6 of Cenvat Credit Rules, 2004 does not apply. Hence, there is no requirement of reversal of duty under Rule 6 of Cenvat Credit Rules, 2004. He has also relied upon the case law of Sujana Metal Products decided by this Tribunal. He has also relied upon the decision of the Hon'ble Bombay High Court in the case of Repro India Ltd. Vs. UOI 2009 (235) ELT 614 (Bom). In any case there is no revenue loss because, had they opted to pay the duty they would have got the rebate.
3.1 The learned Commissioner (Appeals) vide the impugned order upheld the demands raised recording the findings that Rule 6(6) of the Cenvat Credit Rules, 2004 prior to 1.1.2009 stated that provisions of sub-rule (1), (2), (3) and (4) of Rule 6 were not applicable to the clearances made without payment of duty of a unit in a SEZ for their authorized operation. By virtue of amendment made in the sub-rule (6) w.e.f. 31.12.2008, the Government extended the benefit to the duty free clearances made to the developers of SEZ also. The relevant Notification No. 50/2008-CE dated 31.12.2008 clearly indicates the intent of the legislature that the developer of SEZ who till then did not figure in the statute, were also to be given the benefit along with SEZ units. As the clearances have been admittedly made to the contractors of the developers of SEZ, which are separate from the SEZ unit or its developers, it is settled law that exemption Notification have to be strictly construed and one who claims the exemption must fall within the four corners of such exemption.
4. Being aggrieved, the appellant carried the matter before this Tribunal. The appellants have raised the following grounds of appeal: -
(a) Section 26 of the Special Economic Zones Act, 2005 provides for exemption, drawbacks and concessions available to a Developer and Entrepreneur of SEZ unit. The terms and conditions subject to which an entrepreneur and developer shall be entitled to these exemptions, drawbacks and concessions are governed by Chapter 4 of the Special Economic Zones Rules, 2006.
(b) Rule 30 of the said SEZ Rules lays down the procedure for clearance of goods by a DTA unit to an SEZ unit in order to qualify for the exemptions, drawbacks and concessions, as the case may be, which are available to the Developer or Entrepreneur under the SEZ Act.
(c) Rule 30(1) inter alia provides that the supplier located in DTA who supplies the goods to a SEZ unit shall clear the goods, as in the case of exports, either under bond or as duty paid goods under claim of rebate on the cover of ARE-1 in accordance with the provisions of Notification No. 40/2001-CE (NT) dated 26.6.2001 in quintruplicate bearing running serial number beginning from the first day of the financial year.
(d) Further, Rule 30(2) provides that the goods procured by a Unit or Developer on which central excise duty exemption has been availed but without any availment of export entitlements, shall be allowed admission into the SEZ on the basis of ARE-I.
(e) Sub-rule (10) of Rule 30 provides that where the goods are to be procured by a unit or developer from a DTA supplier who is not registered with the Central Excise authorities, or is a trader or merchant exporter, the procedure under sub-rule (1) and (2) above shall apply, mutatis mutandis, excepts that the goods shall be brought to the SEZ under the cover of an invoice and the ARE-1 shall not be required.
(f) In other words, Rule 30(10) provides that where the supplier of goods who is located in the DTA is a person not registered with the Central Excise authorities or is a trader, the procedure laid down in sub-sections (1) and (2) of Section 30 are to be followed mutatis mutandis as may be applicable to him.
(g) From a reading of the aforesaid provisions, it is clear that the contractors of SEZ units/ SEZ developers are treated at par with the SEZ units/ SEZ developers with regard to the benefits, exemption, concessions available in respect of the goods cleared from the DTA to SEZ.
5. The finished goods cleared by the appellants to contractors of SEZ units/ developers without payment of duty during the period in dispute are not exempted goods within the meaning of Rule 2(d) of the Cenvat Credit Rules, 2004. 5.1 Therefore, for the goods in question to qualify as exempted goods for the purposes of Cenvat Credit Rules, the said goods must be (i) subject to nil rate of duty under the schedule to the Central Excise Tariff Act, 1985 or (ii) should be exempted from the whole of the duty leviable thereon vide a notification issued under Section 5A(1) of the Central Excise Act, 1944. 5.2 In the present case, it is undisputed that the finished goods manufactured and cleared by the appellants to the contractors of SEZ units/ SEZ developers are subject to a rate of duty under the First Schedule to the Central Excise Tariff Act, 1985 and are not wholly exempt from payment of duty. Further, there is no notification issued under Section 5A(1) of the Central Excise Act, which grants exemption from excise duty to goods manufactured and cleared by a DTA unit to the contractors of SEZ units/ SEZ developers. Therefore, it is submitted that both the conditions required to be fulfilled for the goods in question to qualify as exempted goods under Rule 2(d) of the Cenvat Credit Rules, are not satisfied in the present case. Hence, the finished goods cleared by the appellants to the contractors of SEZ units/ SEZ developers are not exempted goods. Accordingly, the provisions of Rule 6(1), 6(2) and 6(3) of Cenvat Credit Rules, 2004 are not attracted in the present case.
6. The appellant also relies on the ruling of the Hon'ble High Court of Chhatisgarh in the case of UOI Vs. Steel Authority of India Ltd. - 2013 (297) ELT 166 (CG), wherein the question involved was whether the benefit provided by the substituted sub-rule 6(6)(i) in the 2004 Rules can be availed on the date prior to its substitution in the 2004 Rules or not and whether the substituted sub-rule 6(6)(v) is retrospective or not. The facts in that case are that the assessee was engaged in manufacture of Iron & Steel products both dutiable as well as exempted goods and supplied by them to the developers of SEZ. However, it neither maintained separate account as required under sub-rule 6(2) nor it had paid 10% of the value of the exempted goods under sub-rule 6(3)(2) of the Cenvat Credit Rules, 2004. The Revenue issued show-cause notice as to why 10% of the total value of the exempted goods be not recovered from it under sub-rule 6(3)(b) of the 2004 Rules and same was upheld on the ground that at the relevant time the clearances of the goods to the developers of SEZ was not covered by sub-rule 6(6)(i), the substituted sub-rule 6(6)(i) was prospective and the assessee cannot take benefit of the same. The Hon'ble High Court examined the difference between the tax and duty, nature of excise and customs duties. The following paragraphs of the judgment are worth taking note of 32.?The Government of India introduced a policy on 1-4-2000 for setting up of the Special Economic Zones (SEZ), with a view to provide an internationally competitive and hassle free environment for exports. The units could be set up in the SEZ for manufacture of goods and rendering services. They were to be net foreign exchange earner and were not to be subjected to any pre-determined value addition or minimum export performance requirements.
33.?Initially, in order to implement the aforesaid policy, the Customs Act was amended and Chapter XA with Sections 76A to 76H was inserted. Subsequently, the SEZ-Act was enacted and Chapter XA of the Customs Act was deleted.
34.?Section 2 of the SEZ Act is titled definitions. It provides as follows:
Sub-section (g) of Section 2 [sub-section 2(g)] of the SEZ-Act defines developer. It means a person or a State, which is granted a letter of approval under sub-section (10) of section 3 [Section 3(10)] of the SEZ Act by the Central Government and includes an authority and a co-developer;
Sub-section (m) of Section 2 [sub-section 2(m)] defines the word export. It means supplying goods, or providing services, from the domestic tariff area to a unit or developer.
Sub-section (zc) of Section 2 [sub-section 2(zc)] defines the words existing unit and unit. It means, a unit which has been set up by an entrepreneur in a SEZ and includes an existing unit.
35.?Section 51 of the SEZ-Act is titled Act to have overriding effect. It provides that the SEZ-Act will have effect notwithstanding anything contained in any other law for the time being in force or in any other instrument. It has overriding effects over any other law and in case of conflict, the SEZ Act is to prevail.
36.?The SEZ-Act is within the territorial limits of the country; the goods supplied to the unit or to the developer in SEZ do not go outside the country, yet, in view of the definition in Section 2(m) of the SEZ Act, they are to be treated as export.
37.?In the present case, the Assessee had supplied goods from the domestic tariff area to a developer and it is to be treated as an export in view of sub-section 2(m) of the SEZ Act. In case it is treated to be export then all benefits as given to export under any other law should be given.
7. The learned Addl. Commissioner (AR) appearing for the Revenue relies upon the impugned orders.
8. Having considered the rival contentions, we are in agreement with the reasoning and findings recorded by the Hon'ble High Court of Chhatisgarh in Steel Authority of India Ltd. (supra) holding that the amendment under Rule 6(6)(i) made on 31.12.2008 is clarificatory in nature and is applicable retrospective from the date when the 2004 Rules were implemented. Accordingly, the impugned orders are set aside and the appeals are allowed with consequential relief, if any, in accordance with law.
(Operative part of order pronounced in Court)
(P.R. Chandrasekharan) (Anil Choudhary)
Member (Technical) Member (Judicial)
Sinha
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