CX - Supply of services to SEZ - Rule 6(6A) was not introduced by way of substitution but it was a new sub-rule inserted in CCR, 2004 hence not clarificatory: CESTAT
By TIOL News Service
MUMBAI, SEPT 06, 2017: THE assessee is in appeal against denial of CENVATcredit for services provided to SEZ.
It is submitted that the period involved is September 2004 to March 2008 and Rule 6(6)(A) of CCR, 2004 was given a retrospective effect from 10.02.2006 by virtue of Finance Act, 2012. Furthermore, the Tribunal in the case of Sujana Metal Products - 2011-TIOL-1173-CESTAT-BANG [upheld by Andhra Pradesh High Court - 2013-TIOL-1128-HC-AP-SThas held that in terms of Section 51 of SEZ Act, 2005 the provisions of SEZ Act have a overriding effect;that the amendment to Rule 6(6) of the CCR, 2004 by the amending Notification No. 50/2008-C.E. (N.T.), dated 31-12-2008 shall be applicable w.e.f. 10-9-2004 when the CCR, 2004 came into existence and, therefore, exception provided under Rule 6(6) of CCR, 2004 shall be applicable to supply of exempted goods both to SEZ units and SEZ developers/promoters.
The AR sought to distinguish the applicability of the said decision by pointing out that the said order relates to Rule 6(6)(i) pertaining to goods and not 6(6A) pertaining to services.
The Bench extracted the findings given by the CESTAT in the case of Sujana Metal Products (supra) and observed –
"6. While interpreting the fact that Rule 6(6)(i) of Cenvat Credit Rules was amended by way of substitution, it was held that the same can be deemed to have a retrospective effect under certain circumstances. Consequently, it was held that the said sub-rule would be applicable with effect from 10.09.2004 when the Cenvat Credit Rules came into existence. It is however, seen that Rule 6(6)(A) was not introduced by way of substitution but it was a new Rule inserted in the Cenvat Credit Rules, 2004. The Parliament by the Finance Act has given retrospective effect to the said Rule with effect from 10.02.2008 (sic). There are no grounds to presume that the said insertion of a new sub-rule was of clarificatory nature, especially in those circumstances when retrospective effect has been given by the Parliament by the Finance Act, 2012 for the specific period 10.02.2008 (sic) to 20.02.2011 (sic). In these circumstances, there is no basis for extending the benefit of such insertion for period prior to 10.02.2008 (sic).”
The appeal was partly allowed and the penalty and interest was consequently reduced.
In passing: The amendments –
A. Notification 3/2011-CE(NT) dated 01.03.2011 -
5. In rule 6 of the said rules,-
(i) xxx
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(ix) after sub-rule (6), the following shall be inserted with effect from the 1st day of March, 2011, namely:-
"(6A) The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the taxable services are provided, without payment of service tax, to a Unit in a Special Economic Zone or to a Developer of a Special Economic Zone for their authorised operations.”.
B. THE FINANCE ACT, 2012
THE EIGHTH SCHEDULE
(See section 144)
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Provisions of CENVAT Credit Rules, 2004 to be amended
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Amendment
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Period of effect of amendment
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(1)
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(2)
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(3)
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Sub-rule (6A) of rule 6 of the CENVAT Credit Rules, 2004 as inserted by CENVAT Credit (Amendment) Rules, 2011 vide notification number G.S.R. 134(E), dated the 1st March, 2011 [3/2011-Central Excise (N.T.), dated the 1st March, 2011].
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In the CENVAT Credit Rules, 2004, in rule 6, after sub-rule (6), the following sub-rule shall be inserted with effect from the 10th day of February, 2006, namely:-
"(6A) The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the taxable services are provided, without payment of service tax, to a Unit in a Special Economic Zone or to a Developer of a Special Economic Zone for their authorised operations.".
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From 10th February, 2006 to 28th February, 2011 .
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(See 2017-TIOL-3226-CESTAT-MUM)
