By TIOL News Service

MUMBAI, AUG 14, 2014: THE issue is - 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.

The appellant is engaged in the manufacture of Cement/Clinker and are also availing the CENVAT. 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.

It is the case of the department that since Cement is not covered under the items specified under Rule 6(3) ibid the appellants 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 CCR, 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 CCR, 2004, ibid.

The appellant is before the CESTAT against the orders of the Commissioner(A) upholding the demand confirmed by the lower authorities.

After hearing the lengthy submissions made by the appellant the Bench adverted to the cited decision of the High Court of Chhatisgarh in the case of UOI Vs. Steel Authority of India Ltd. - 2013-TIOL-384-HC-CHATTISGARH-CX, 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)(i) is retrospective or not.”

The Bench also extracted the paragraphs 32 to 37 of the High Court decision wherein it was concluded that supply of goods from the domestic tariff area to a developer is to be treated as an export in view of sub-section 2(m) of the SEZ Act and consequently all benefits as given to export under any other law should be given.

Mentioning that the Bench is in agreement with the reasoning and findings recorded by the High Court holding that the amendment under Rule 6(6)(i) made on 31.12.2008 is clarificatory in nature and is applicable retrospectively from the date when the 2004 Rules were implemented, the orders appealed were set aside and the appeals were allowed with consequential relief.

(See 2014-TIOL-1506-CESTAT-MUM)