The Principal Commissioner Of vs. M/S Azko Nobel

Held

The Court held that the controversy involved in the present case is covered by the decision of a cognate bench of the same Court in the case of Commissioner of C. Ex. & S.T., Bangalore –vs- Fosroc Chemicals (India) Pvt. Ltd., (2015 (318) E.L.T. 240 (Kar.)). In that judgment, it was held that the amendment of Rule 6(6)(i) of the Cenvat Credit Rules, 2004, made in 2008, has to be given retrospective effect as it was clarificatory in nature. The Court reasoned that the Special Economic Zones Act, 2005, particularly Section 53, deems an SEZ as a territory outside the Customs territory of India for authorized operations. Section 2(m)(ii) of the SEZ Act defines 'export' to include supply of goods to a 'Unit' or 'Developer'. The amendment in 2008 was to clarify the doubt arising from the omission of 'Developer' in the original rule. The Court found that the amendment was clarificatory and should be read as if it were present from the inception. Therefore, the benefit of Rule 6(6)(i) as amended in 2008 has to be extended to goods cleared to a 'developer' of an SEZ for their authorized operations. The substantial question of law was answered in favour of the assessees and against the Revenue. The appeal was dismissed.

Facts

The Principal Commissioner of Central Tax, Bengaluru East (appellant/revenue) filed an appeal against the order passed by the CESTAT. The dispute pertains to the eligibility of CENVAT credit for goods cleared to a developer of a Special Economic Zone (SEZ) for their authorized operations. The respondent, M/s. Azko Nobel Coating India Pvt. Ltd., had claimed this credit. The appellant contended that the amendment to Rule 6(6)(i) of the Cenvat Credit Rules, 2004, made in 2008, which included 'developer' alongside 'unit', should be given retrospective effect. The CESTAT, in its order dated December 14, 2016, had granted relief to the respondent, relying on a previous judgment of the Karnataka High Court.

Key Issues

1. Whether the amendment of Rule 6(6)(i) of the Cenvat Credit Rules, 2004, by Notification No.50/2008 C.E. (N.T.), dated 31.12.2008, which included 'developer' of an SEZ for their authorized operations, has retrospective effect? (Question of law) Contentions: Petitioner/Appellant (Revenue): Argued that the amendment to Rule 6(6)(i) of the Cenvat Credit Rules, 2004, made in 2008, should be given retrospective effect as it was clarificatory in nature. Relied on the decision in Commissioner of C. Ex. & S.T., Bangalore –vs- Fosroc Chemicals (India) Pvt. Ltd., (2015 (318) E.L.T. 240 (Kar.)). Respondent (Assessee): Submitted that the impugned order was not sustainable as it was opposed to law and judgments of higher judicial fora. Argued that benefits available to SEZ units equally apply to SEZ developers, and no disparity should exist. The amendment to Rule 6 of CCR, 2004, is clarificatory and applicable to previous periods. Relied on the jurisdictional High Court of Karnataka's judgment in Commissioner of Central Excise vs. Fosroc Chemicals India Pvt. Ltd.: 2015(318) ELT 240 (Kar.).