Important points:
" The exemption provided under Rule 6 (6) of the CENVAT Credit Rules will not apply with respect to the inputs removed as such, without manufacturing any products. It is also contended that, the exemption contained in Rule 6 (6) will apply only with respect to finished products, for which the excise duty is payable, in the manufacture of which the inputs are used.
" The provisions under Rule 30 (1) of the SEZ Rules was framed in line with those provisions and it provides that a DTA supplier supplying goods to the SEZ shall clear the goods either under bond or as duty paid goods under the claim of rebate on the cover of ARE-1. It is further clarified that, since the SEZ is deemed to be outside the customs territory of India, any licit clearance of goods to the SEZ from DTA will continue to be export and therefore be entitled to the benefit of rebate under Rule 18 of Central Excise Rules and for refund of the accumulated CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2004.

Abdul Rehim, J:

The common appellant in both these cases is challenging a common order of the Customs, Central Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bangalore, in Appeal Nos.E/20148/2016-SM and E/20149/2016-SM, dated 26-10-2017, in appeals instituted under Section 35 G of the Central Excise Act, 1944.

2. The Commissioner of Central Excise, Cochin through a common order passed on 30-01-2012 held that, the appellant had taken ineligible credit and utilized the amount to the tune of Rs.36,38,579/-and Rs.20,93,732/-on the inputs cleared as such; and that they are liable to reverse the credit availed along with interest and penalty of an equal amount. The appellant filed appeals before the Commissioner of Central Excise and Service Tax (Appeals), Cochin against the order mentioned above, in Appeal No.COC-EXCUS-000-APP-140 & 141-15-16. The Commissioner (Appeals) had confirmed the demand issued by the lower authority by holding that the same is perfectly in order. Aggrieved by the order of the Commissioner (Appeals) the appellant had approached the Appellate Tribunal. Through the order impugned herein, the Appellate Tribunal had dismissed the appeals and confirmed the orders of the lower authorities. It is under such circumstances the above appeals are filed.

3. On the basis of the pleadings and arguments raised, a substantial question of law was formulated as to whether the appellant is liable to reverse the CENVAT credit availed with respect to the inputs removed as such to a unit situated in the Special Economic Zone (SEZ) by using Form No. ARE-I, under Rule 3 (5) of the CENVAT Credit Rules, 2004.

4. Brief facts are as follows. The appellant imported inputs for usage in the process of manufacturing, by availing exemption from payment of customs duty, as provided under the Customs (Import of Goods on Concessional Rate of Duty for Manufacture of Exciseable Goods) Rules, 1996 and in terms of Notification No.25/2005 – CUS issued under the Customs Act. As the appellant was unable to use the inputs for manufacture, allegedly due to the lack in their production capacity, the inputs as such was removed to an industrial unit situated in the SEZ, for use in the manufacture of finished products, under the cover of ARE-1, after paying the customs duty which was waived at the time of the import; and by availing credit of the 'Counter Vailing Duty' (CVD). The assessing authority issued show cause notice demanding reversal of the credit availed, by relying on Rule 3 (5) of the CENVAT Credit Rules, 2004. Despite the objections submitted by the appellant, the authority confirmed the proposal and demanded payment of the credit availed, along with interest, and penalty to the tune of an equivalent amount. Whether the demand is sustainable or not is the question to be decided?

5. Adv. G. Sivadas, learned Senior Counsel appearing for the appellant contended that, provisions contained in Rule 3 (5) of the CENVAT Credit Rules, which insists upon payment of an amount equal to the credit availed with respect to the inputs removed as such from the factory of the appellant, cannot be applied with respect to removal of inputs to a unit situated in the SEZ. Under Section 2 (m) of the Special Economic Zones Act, 2005 supply of any goods from a Domestic Tariff Area (DTA) to a unit in SEZ will amount to an 'export', which is exempted from payment of the duty of excise as provided under Section 26 (c) of the Special Economic Zones Act, 2005. It is further pointed out that, Rule 6 of the CENVAT Credit Rules, which prohibits allowance of CENVAT Credit in the circumstances mentioned under sub-rule (2) thereof, will not apply in the case of the appellant, because of the specific exemption provided under sub-rule (6) of Rule 6. Argument of the learned Senior Counsel is also based on the provisions contained in Section 51 of the Special Economic Zones Act, which provides that the said Act shall be having an overriding effect on any other la