Whether supplies made to SEZ could be considered as export under Rule 19(2) of Central Excise Rules, 2002?

PJ/Case Laws/2012-13/1310

Case:-SHRI BAJRANG POWER & ISPAT LTD. V/s COMMISSIONER OF C. EX., RAIPUR.

Citation:-2012 (282) E.L.T. 108 (Tri.-Del.)

Brief Facts:- The Appellant purchased duty free goods for manufacture of finished gods and supplied the same goods without payment of duty to 3 parties namely M/s Shri Bajrang Alloys Ltd., M/s Shri Bajrang Metallics & Power Ltd.,
and M/s J.J Re-rollers. The said clearances were effected without payment of duty in terms of provisions of Rule 19(2) of the Central Excise Rules, 2002 read with Notification No. 43/2001- C.E. (NT) dated 26.01.2001. In terms of said provision of law, an assessee is entitled to clear their products to their buyers who was to ultimately clear the goods for export. Inasmuch as the appellant’s buyer supplied the goods to the SEZ, the Revenue entertained a view that supplies to SEZ cannot be considered as export under Rule 19(2). As such, the proceedings were initiated against the appellant for confirmation of demand on the above ground.

Appellant Contentions:- The appellant submitted that clearances were effected on the basis of permission letter issued by the buyers. The Appellant submit that manufacture of finished goods when cleared to a unit in SEZ shall amount to export as per Board Circular No. 29/2006-Cus. This clarification is enough to dismiss the Revenue's appeal. The supply of goods to SEZ has to be equated with export and the issue stands settled at the appellant's buyer's end namely M/s Bajrang Metallics and Power Ltd by the Tribunal. Therefore, the benefit is available in terms of Rule 19(2) read with Notification No. 43/2001-CE (NT) dated 26.01.2001.

Respondent Contentions:- The respondent reiterated the submissions that supplies made to SEZ cannot be treated as exports for the purpose of Rule 19(2) of the Central Excise Rules, 2002.

Reasoning of Judgment:- It is seen that clearances were effected by the appellant on the basis of permission letter issued by the buyers. Simultaneously, the proceedings were initiated against one of the buyer of the appellant for cancellation of letter. The adjudicating authorities in those cases, held against the assessee by observing that the clearances to SEZ cannot be equated to exports. On appeal to Commissioner Appeals, the matter was held in favour of the assessee. Thereafter, Revenue filed appeal to Tribunal. It is seen that while dealing with the Revenue’s Appeal in the case of buyer M/s Shri Bajrang Alloys Ltd., the Tribunal has held in favour of the assessee that :

“The dispute is in very narrow compass to whether goods procured duty free from a DTA by a DTA unit for manufacture of finished goods when cleared to a unit in SEZ shall amount to export. Without going into any other detail, a bare perusal of clarification issued by Board vide Circular No. 29/2006-Cus dated 27.12.2006, clarifying that section 2(m) of the SEZ Act, 2005 envisages that supply of goods or providing services, from DTA to a SEZ unit or SEZ developer shall constitute export. This clarification is enough to dismiss Revenue appeal. We order accordingly.”

In view of above discussion, the impugned order is set aside and appeal is allowed with consequential relief to the appellant.

Decision: - Appeal allowed.

Comment: The issue involved in the case was very clear as the Board Circular clarifies that supply of goods or providing services from DTA to a SEZ constitutes export. Therefore, Rule 19(2) of the Central Excise Rules, 2002 was undoubtedly applicable.

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PJ/Case Laws/2012-13/1310

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