CCE SURAT Vs. M/S ESSAR STEEL LTD.

JUDGEMENT

(1.) BRIEF background of the case is that the appellant is engaged in manufacture of various steel products falling under Chapter 72 of Customs Excise Tariff Act, 1985. The appellant cleared their finished goods CR sheets without payment of duty to SEZ developers. As per the provisions of Rule 6(1) of CENVAT Credit Rules, 2004, the CENVAT Credit shall not be allowed on such quantity of inputs and input services which are used in manufacture of exempted goods. However, the manufacturer of dutiable as well as exempted goods, has option either to maintain separate account of the inputs or services used for manufacture of exempted goods or he can take the credit but pay an amount equivalent to 10% of the value of exempted goods cleared by him. In the instant case, the appellant, during the financial year 2008 -09, cleared 23.770 MT of Cold Rolled Galvanized Non -Alloy Steel valued at Rs. 11,62,472/ - to SEZ developer viz. M/s Mundra Port & SEZ Ltd. Mundra without payment of duty under ARE -1 and also availed CENVAT Credit on the inputs used in such CR sheets cleared to SEZ developer. As per the provisions of Rule 6(6)(i) of CENVAT Credit Rules, 2004, reversal of CENVAT Credit is not required to be done if such goods are cleared to a unit in SEZ. It appeared that appellant cleared the goods to SEZ developer which is not specified in Rule 6(6). The appellant did not maintain separate account for the inputs used in the manufacture of such goods. Therefore, it appeared that they were liable to pay duty equivalent to 10% of the value of exempted goods cleared by them. Proceedings were initiated which culminated in denial of CENVAT Credit of Rs. 116,247/ - and equal amount of penalty.

(2.) HEARD both sides.