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Appearance Shri Raghavan Ramabadran, for the appellant Shri P. Arul, Supdt. (AR), for the respondent CORAM Honble Shri P.K. DAS, Judicial Member Honble Shri R. PERIASAMI, Technical Member Date of Hearing : 06.08.2014 Date of Decision: 06.08.2014 Per: R. PERIASAMI The present appeal is arising out of the impugned order passed by the Commissioner of Central Excise, Chennai  II. The brief facts of the case are that the appellants are manufacturers of Aluminium Composite Panels with Glass falling under Chapter sub-heading 7610 1000 of the Central Excise Tariff Act, 1985 and registered under the Central Excise. They availed input credit on the inputs used in or in relation to the manufacture of final. They have cleared the final products to DTA on payment of excise duty and to SEZ developers cleared without payment of duty by following ARE-I procedures. They have not availed input credit on the materials used in the manufacture of finished goods cleared to SEZ developers. A Show Cause Notice dated 22.01.2009 was issued to the appellants demanding an amount equivalent to 10% of the transaction value on the goods cleared to SEZ developers/Co-developers, for the period involving June, 2008 to December, 2008. It has been alleged that the appellants have not maintained separate accounts in terms of Rule 6(2) of Cenvat Credit Rules, and used common inputs in the manufacture of dutiable and exempted finished goods cleared to non-SEZ buyers (i.e. SEZ developers). The adjudicating authority confirmed an amount of Rs. 71,94,674/- along with interest. Aggrieved by this order, the appellants filed the present appeal.

2. The Ld. Advocate on behalf of the appellants submits that they have followed the procedures prescribed under Central Excise Rules for clearance of goods without payment of duty. The SEZ developers were duly approved by the Development Commissioner of SEZs for import/procurement of indigenous goods with duty exemption. He further submits that they have submitted Letter of Undertaking (LUT) dated 11.01.2008 before the Dy. Commissioner of Central Excise, Chennai-II Division, in terms of Rule 19 of CER, 2002 before effecting clearance of excisable goods to SEZ developers without payment of duty. The said LUT has been duly accepted by the jurisdictional Dy. Commissioner. Accordingly, they have secured orders from the SEZs developers and cleared their finished goods without payment of duty. Clearance to SEZ developers deemed to be an export as per the Boards Circular No. 29/2006-Cus dated 27.12.2006. Therefore, it is covered by the provisions of Rule 6 (6) of CCR, 2004. They have followed ARE-I procedure prescribed under Rule 19 of CER for all the clearances made to SEZ developers. He submits that the goods cleared to SEZ developers are dutiable, but, cleared without payment of duty in terms of Rule 19 of the CER. He further submits that the amendment introduced under Rule 6 (6) (i) adding SEZ developers by notification No. 50/2008-CE (NT) dated 31.12.2008 is retrospective in nature. He relied upon the following case laws in support of his contention.

1. CCE Vs. M/s. Raghuvar (I) Ltd.

2000 (118) ELT 311 (SC)

2. CCE, Pondicherry Vs. Bansal Metallic Oxides 2013 (296) ELT 215 (Tri.  Chen.)

3. BAPL Industries Ltd. Vs. UOI 2007 (211) ELT 23 (Mad.)

4. CCE, Thane Vs. Tiger Steel Engg. (I) Pvt. Ltd.

2010 (259) ELT 375 (Tri.-Mum.)

5. Advait Steel Rolling Mills Pvt. Ltd. Vs. UOI 2012 (286) ELT 535 (Mad.)

4. We have carefully considered the written submissions and the grounds of appeal and perused the records. The issue in this case relates to demand of an amount equivalent to 10% of the transaction value of the goods cleared to SEZ developers during the period from January to December, 2008. There is no dispute on the fact that the appellants cleared the goods to DTA on payment of excise duty and also cleared to SEZ developers/Co-developers without payment of duty. The adjudicating authority held that though the appellants not availed any Cenvat credit on the main inputs ie., panels and glasses used in the manufacture of goods cleared to SEZ developers, they availed contain common inputs which are used in the final products cleared to both DTA and SEZ developers. The adjudicating authority held that since the appellants had not maintained separate accounts of inputs as per Rule 6(2), they are liable to pay 10% of the value of the goods cleared to SEZ developers as there is no exclusion provided under Rule 6(6) for clearance to SEZ developers. Rule 6 (6) of CCR as it stood prior to December 2008 is reproduced as under:-

31.?With the aforesaid framework in the background, let us understand the purpose of the SEZ Act, clearance to units and developers in SEZ, and purpose of the newly substituted sub-rule 6(6)(i) of the 2004-Rules.
Purpose of SEZ and Clearance of Goods to SEZ is Export
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.