Rule 6 of CENVAT Credit Rules - Anomaly in rectifying an Anomaly

By TIOL News Service

NEW DELHI, MAR 16, 2012: LIKE every budget, this year's Budget also has some retrospective amendments. One such amendment is proposed to Rule 6(6A) of the CENVAT Credit Rules, 2004. This Rule was inserted in 2011 vide Notification No 3/2011-CE (NT), dated 01/03/2011 and reads as under:

(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.

Now, vide Schedule Eight to the Finance Bill 2012, it is proposed to give retrospective effect to the above Rule with effect from 10.2.2006. Good news indeed.

But what about sub-rule (i) of Rule 6? At present, it reads:

The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the excisable goods removed without payment of duty are either-

(i) cleared to a unit in a special economic zone or to a developer of a special economic zone for their authorized operations; or….

The word “Developer” was inserted in the above Rule only with effect from 31.12.2008 vide Notification No 50/2008 CE(NT). So, for the period prior to 31.12.2008, department is merrily continuing the litigation though the benefit was extended by the Tribunal, armed with a clarification from the Board vide F.No.267/52/2008-CX-8 dated : January 7, 2009 that the said amendment is only prospective in nature.

So, now the position is that while the service providers to the SEZ units or developers got a retrospective amendment, no such amendment is in sight for manufactures, an apparent indication of conflict in policy of babus dealing with GOODS and babus dealing with SERVICES.