Whether the assessee is required to reverse any duty under Rule – 6(3) of the CCR’04 for supplies made to SEZ?

PJ/Case Laws/2011-12/1249

Case: Sujako Interiors Pvt. Ltd. v/s Commr. of Central Excise, Ahmedabad

Citation: 2011 (268) E.L.T. 505 (Tri. – Ahmd)

Issue:- Whether the assessee is required to reverse any duty under Rule – 6(3) of the CCR’04 for supplies made to SEZ?

Brief Facts:- The appellant engaged in the manufacture of furniture falling under chapter 94 of the First Schedule to the Central Excise Tariff Act, 1985 was availing cenvat credit on inputs, input services and capital goods.

During the course of scrutiny of records of the appellant unit, it was noticed that during the month of the March 2008 to August 2008, the appellant had cleared their finished goods i.e., furniture to the developers of the Special Economic Zone without payment of duty and following the procedure of the clearance under UT – 1 as provided under Rule 19 of the Central Excise Rules, 2002.

Rule 6(3) clarifies that if a unit manufacturing dutiable as well as exempted finished product, availing cenvat credit on the duty paid inputs used in the manufacture of dutiable as well as exempted finished goods and no separate accounts of inputs and input service are maintained, then the said unit is required to pay an amount equal to 10%{now 5%} of the value of exempted final products.

As per the clarification of Rule 6, it appeared that no such exception for reversal is available to finished product supplied to the “developer of SEZ”.

The manufacturers who are clearing their finished goods without payment of duty to a developer of SEZ have to either pay an amount equal to 10% of the value of their final products or maintain a separate account of the inputs.

Reasoning of the Judgment:- In the case of Bhoruka Aluminium Ltd. versus CCE, Cus. & S.T., Mysore and in the case of CCE, Hyderabad versus Vayhan Air Controls P. Ltd., tribunal has taken note of the Board’s circular no. 29/06-Cus, Dated: 27.12.2006 which is to the effect that the supplies to SEZ developers has to be taken as deemed export. If, it is considered to be export, no duty can be demanded.

The tribunal holds that the supplies made by the appellant to SEZ developers were to be treated as deemed export. If that be so, the provisions of Rule 6(3), requiring the appellants to pay an amount of equal to 10% of the value of exempted final product are not applicable.

Decision:- Appeal is allowed.

Comment:- The above decision clearly shows that Supplies to SEZ are to be treated as Deemed Export, and there is no need to reverse the amount as per Rule 6(3) of CCR’04.However the department still thinks otherwise.

Comments

PJ/Case Laws/2011-12/1249

Comments

Post a Comment

Query