CBEC New Year Gift to SEZ Developers and/or Domestic Suppliers
Just two weeks ago, we had carried an article in our Special Column - Clearances to SEZ developers: Clash between DRI and DGCEI - what is good for goose must be good for gander– highlighting the controversy in interpretation of Rule 6(6) of Cenvat Credit Rules and likelihood of it being snowballing into a conflict between two wings of CBEC on the issue of iron and steel products cleared to SEZ developers. Normally the government would wait and watch till the courts decide on such controversial issues; however, in this case, surprisingly CBEC has seized the matter quickly and resolved the issue by amending the Rule 6(6) of Cenvat credit Rules, 2004 vide Notification No. 50/2008 CE(NT) dt. 31/12/2008. The notification seeks to substitute the existing clause (i) of Rule 6(6) with the following:
“(i) cleared to a unit in a special economic zone or to a developer of a special economic zone for their authorized operations; or”.
With this amendment, the clearances made to both ‘SEZ units' and ‘SEZ developers' have been put on the same plane so far as Rule 6 of CCR is concerned and as a result, the manufacturers making clearances even to SEZ developers henceforth would not be required to maintain separate accounts or to pay 10% amount or reverse the credit as required under Rule 6 of CCR.
This amendment assumes importance because most of the recently notified SEZs are still in the construction phase requiring supplies of huge quantities of cement and steel. If this amendment is not made, all such clearances to SEZ developers by DTA units would attract 10% amount under Rule 6 of CCR which would ultimately jack up the construction costs. Apart from this, the present amendment would also set at rest the controversy that has arisen because of the distinction made by the department (basing on the letter of Addl. Director General (EP) letter F.No.DGEP/SEZ/473/2006 dt. 3/04/2008) between the clearances made to SEZ units from that of SEZ developers while interpreting Rule 6 of CCR. [see - 5.05.2008]