DTA-SEZ Supplies not “deemed exports”: CESTAT Sets Aside Excise Refund Rejection, Remands for Fresh Consideration [Read Order]

The Chennai Bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) set aside rejection of excise duty refund claims on Domestic Tariff Area (DTA) supplies made to Special Economic Zone (SEZ) units, holding that such supplies cannot be treated as “deemed exports” under Chapter 8 of the Foreign Trade Policy (FTP)

CESTAT further relied on a Circular dated 28.04.2015, held that DTA-to-SEZ clearances were to be treated as exports for excise purposes. The matter was remanded to the original authority for fresh consideration in light of the circular and judicial precedents.

The Appellant, M/s. Sundaram Brake Linings Ltd., filed six excise appeals before CESTAT Chennai,against the Commissioner of GST & Central Excise, Chennai Outer Commissionerate.

These appeals arose from six different Orders-in-Appeal passed by Commissioner of Central Excise (Appeals-I) and Commissioner of CGST & Central Excise (Appeals-II), Chennai, dated 31.05.2016, 31.10.2016, 30.12.2016, 27.12.2017, 28.04.2018 and 28.04.2018 respectively.

The Appellant filed appeals for refund of excise duty totalling ₹88,61,502/- paid on supplies made from its DTA to its SEZ units during the period February 2013 to June 2017. The lower authorities rejected all refund claims on the ground that such export benefits must be claimed from the Development Commissioner or Regional Authority under Chapter 8 of the Foreign Trade Policy 2009-14, treating SEZ supplies as "deemed exports."

“According to the provisions contained in Chapter 8 (Deemed Exports) of Foreign Trade Policy, 2009-14, as notified in Handbook of Procedure (Vol.I) by the Director General of Foreign Trade, in respect of supplies under paragraph 8.2(b) of FTP (Foreign Trade Policy) and DFIA (Duty Free Import Authorization), deemed export benefits have to be claimed from DC (Development Commissioner) or RA (Regional Authority) concerned.”

The Counsel for the Appellant, M. Kannan, submitted that the lower authorities erred in treating supplies to SEZ as "deemed exports" under Chapter 8 of the Foreign Trade Policy 2009-14, as para 8.2(b) specifically refers only to supplies to EOU/STP/EHTP/BTP and did not include SEZ and argued that both authorities ignored the binding CBEC Circular No. 1001/8/2015-C.X.8 dated 28.04.2015, which clarifies that rebate of duty on goods cleared from DTA to SEZ would be treated as export for purposes of CENVAT Credit Rules and Central Excise Rules.

Further, the Counsel relied on the Bombay High Court’s decision in M/s. Tiger Steel Engineer (India) Pvt. Ltd. vs. Union of India (2025) , stating that DTA to SEZ clearances qualify as exports and refund claims should be allowed accordingly wherein High Court referred to the Departmental Circular No. 1001/8/2015-C.X.8, dated 28.04.2015, and held:

“After having considered the rival contentions and by consent of the parties, in our view since the orders under challenge were passed prior to 2015, the original adjudicating and the appellate authorities did not have the benefit of the circular dated 28 April 2015, wherein it is clarified that, rebate of duty on goods cleared from Domestic Tariff Area to SEZ would be treated as export for the purposes of CENVAT Credit Rules and Central Excise Rules. Therefore, in the interest of justice and by consent of both the parties we remand the matter back to the Appellate Authority to decide the issue afresh after considering the Circular dated 28 April 2015 and all the decisions which the parties wishes to rely upon.”

On the other hand, Authorized Representative for the Respondent, Sanjay Kakkar supported the orders of the lower authorities, contending that supplies to SEZ units constitute "deemed exports" under Chapter 8 of the Foreign Trade Policy 2009-14. According to the provisions contained in the Handbook of Procedure (Vol.I) by the Director General of Foreign Trade, deemed export benefits for supplies under paragraph 8.2(b) of FTP must be claimed from the Development Commissioner or Regional Authority concerned.

Further, the Counsel argued that since the appellant belongs to an SEZ unit, the decision of the lower authorities in rejecting the refund claims and directing the appellant to approach the Development Commissioner or Regional Authority was correct and should be upheld.

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The Tribunal consisted of Judicial Member, P. Dinesha and Technical Member, M. Ajit Kumar, considering the submissions made, agreed that both lower authorities erred in ignoring CBEC Circular No. 1001/8/2015-C.X.8 dated 28.04.2015, which was binding on them. Following the Bombay High Court decision in Tiger Steel Engineer (India) Pvt. Ltd. vs. Union of India, the Tribunal set aside the impugned orders and remanded the matter to the Original Authority to decide afresh after considering the 2015 circular and other relevant judicial pronouncements.

Thus, the Tribunal allowed the appeals for statistical purposes and all the contentions were left open.

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