Export - Rebate of duty and refund of Cenvat Credit - Clearances to SEZ covered - CBEC
BUDGET 2015 had mischievously included a definition of ‘export' in the Central Excise Rules and the Cenvat Credit Rules.
An explanation was added to Rule 18 of the Central Excise Rules (Rebate of duty);
"Explanation.- For the purposes of this rule, "export", with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India and includes shipment of goods as provision or stores for use on board a ship proceeding to a foreign port or supplied to a foreign going aircraft.".
Similarly in Rule 5 of the Cenvat Credit Rules (Refund of Cenvat Credit) an explanation was added:
"export goods" means any goods which are to be taken out of India to a place outside India.".
What is the effect of these explanations? The immediate reaction in the field was that no rebate will be given and no refund will be given for clearances to SEZs. Several Assistant Commissioners told me so.
After two months of confusion, the CBEC has now issued a clarification. The Board says apprehensions have been expressed by the trade (the apprehension was with the department and not the trade) as to whether the following benefits would be available after these amendments:
i. Benefit of rebate of duty on goods cleared from DTA to SEZ.
ii. Refund of accumulated CENVAT credit when goods are cleared from DTA to SEZ.
Board clarifies:
According to the SEZ Act, supply of goods from DTA to the SEZ constitutes export. Further, as per section 51 of the SEZ Act, the provisions of the SEZ Act shall have over riding effect over provisions of any other law in case of any inconsistency. Section 53 of the SEZ Act makes an SEZ a territory outside the customs territory of India. It is in line of these provisions that rule 30 (1) of the SEZ rules, 2006 provides that the DTA supplier supplying goods to the SEZ shall clear the goods either under bond or as duty paid goods under claim of rebate on the cover of ARE-1.
It was in view of these provisions that the DGEP vide circulars No. 29/2006-customs dated 27/12/2006 and No. 6/2010 dated 19/03/2010 clarified that rebate under rule 18 of the Central Excise Rules, 2002 is admissible for supply of goods made from DTA to SEZ. The position as explained in there (what Board means is 'these' and not 'there') circulars does not change after amendments made vide Notification No. 6/2015-CE (NT) and 8/2015-CE (NT) both dated 01.03.2015, since the definition of export, already given in rule 18 of Central Excise Rules, 2002 has only been made more explicit by incorporating the definition of export as given in the Customs Act, 1962. Since SEZ is deemed to be outside the Customs territory of India, any licit clearances of goods to an SEZ from the DTA will continue to be export and therefore be entitled to the benefit of rebate under rule 18 of CER, 2002 and of refund of accumulated CENVAT credit under rule 5 of CCR, 2004, as the case may be.
Board deserves unlimited appreciation for this sound clarification. We should only hope that the field officers show some respect to the Law and the Board and implement this clarification.
Please also see Supplies from DTA to SEZ - Rebate should continue and Unnecessary explanations adding to avoidable litigation
CBEC Circular No. 1001/8/2015-CX, Dated: April 28, 2015