CESTAT Allows CENVAT Credit for SEZ Developer Supplies, Citing High Court Rulings & Export Treatment [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), Chandigarh Bench, has allowed the appeal filed by the appellant, holding that CENVAT credit is not required to be reversed in respect of goods supplied to Special Economic Zone ( SEZ ) developers. The Tribunal found that such supplies are to be treated as exports and thus fall outside the purview of the reversal provisions under Rule 6(6)(i) of the CENVAT Credit Rules, 2004.

The appellant, Keselec Schreder Pvt. Ltd., based in Faridabad, had supplied goods to SEZ developers and was later directed to reverse the CENVAT credit claimed on such transactions. The dispute primarily revolved around the applicability of Rule 6(6)(i) of the CENVAT Credit Rules, 2004, and the interpretation of Notification No. 50/2008-CE (NT), which came into effect on 31 December 2008 and specifically included SEZ developers within the definition of deemed exports.

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Appearing for the appellant, Prabhat Kumar, argued that the legal position regarding such supplies being treated as exports has already been settled by High Courts. He relied on the decisions of the Karnataka High Court in Commissioner of Central Excise, Bangalore-III v. Lotus Power Gears Pvt. Ltd. (2017) and the Kerala High Court in FCI OEN Connectors Ltd. v. CCE & ST, Ernakulam (2019), which had held that supplies to SEZ developers are to be treated as exports and hence do not attract the reversal requirement under Rule 6.

The Department, represented by Narinder Singh and Yashpal Singh, did not dispute the existence of these rulings but contended that the matter was still pending adjudication before the Supreme Court. It was also submitted that Notification No. 50/2008-CE, which explicitly included SEZ developers, was applicable only after the impugned period and hence could not be applied retrospectively.

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After hearing both sides, the Tribunal observed that there was no stay on the cited High Court rulings and found merit in the appellant’s arguments. It held that the law, as interpreted by the Kerala and Karnataka High Courts, should be followed and allowed the appeal with consequential relief to the appellant.

The decision was pronounced by the Bench comprising Somesh Arora, Member (Judicial), and P. Anjani Kumar, Member (Technical).

To Read the full text of the Order CLICK HERE

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