CX - Stock transfers by EOU to other units do not attract Sales Tax/VAT - it cannot be said that VAT is 'exempted' so as to deny benefit of exemption from SAD in view of specific exemption granted under notfn. 23/2003-CE - Appeals allowed: CESTAT
By TIOL News Service
MUMBAI, JAN 01, 2014: IN the words of the Bench, the CCE, Belapur was ‘pleased to confirm' against the appellant the amount of duty of Rs.4.81 Crores & Rs.4.10 Crores respectively along with penalties and interest in respect of clearances effected to its other units located in DTA by way of stock transfer.
The Central Government by Notification No. 23/2003-CE dated 31.03.2003, has exempted the goods manufactured and produced in an EOU and cleared to DTA from levy of SAD subject to the condition that the said goods cleared to DTA are not exempted by the State Government from payment of Sales tax/VAT.
Revenue issued show-cause notices to the appellant under the belief that non-payment of Sales Tax/VAT on stock transfer made by the appellant EOU to its other unit's amounts to exemption of Sales Tax/VAT.
The appellant while contesting the show-cause notices submitted that Sales Tax/VAT is not exempted by the State Government, but the same is not leviable in the facts and circumstances due to stock transfer made to its other units located elsewhere. Thus, there being no element of sale (transfer of ownership), Sales Tax/VAT is not attracted although the same is chargeable incase of sale transaction.
As mentioned, the adjudicating authority was pleased to confirm the demands by taking the following stand - “ in the proviso to S.No.2 of the table annexed to NotificationNo.23/03-CE as amended, additional customs duty leviable under Section 3(5) of the Customs Tariff Act shall be included, if the goods cleared into DTA are exempted from payment of Sales Tax or VAT and the word 'exempt' is not qualified by the word - ‘generally'. The word ‘exempt' in the expression -‘if the goods are cleared into DTA are exempted from payment of Sales Tax or VAT' would cover unconditional general exemption as well as conditional area based exemption.” Thus there cannot be two views or different interpretation on the aspect that the clearances to DTA in the nature of Stock Transfer which do not attract Sales Tax/VAT are construed to be exempted from such levy .”
Before the CESTAT, the appellant submitted -
+ Undisputedly Sales Tax is leviable on the sale of goods in question when cleared to DTA (by way of sales), meaning thereby that there is no exemption from payment of Sales Tax/VAT. Thus, the exemption from payment of SAD on DTA clearances was admissible to the appellant even if stock transfer is made to its another unit located in the DTA, although no Sales Tax was attracted in the absence of element of sale. Accordingly, the benefit of Notification No.23/03-CE will be available to them while calculating the correct duty of customs for the purpose of levy of duty of Central Excise on DTA clearance, cleared otherwise than by way of sale.
+ Commissioner has erred in concluding that in all cases where Sales Tax/VAT is not payable, it can be consequently held that the State Government has granted the exemption from payment of Sales tax. The exemption from Sales Tax and/or Sales Tax being not leviable in absence of sale is very different and cannot be equated as exempt transaction. Thus, no SAD is leviable on goods cleared to DTA wherein the State Government have not given any exemption from levy of Sales Tax, the chargeability is not attracted in absence of sale, there being only stock transfer.
+ Reliance is also placed on the decisions in GE India Industrial Pvt. Ltd. Vs.CC(Exp.) - 2013-TIOL-01-ARA-CUS ,Bharat Electronics Ltd. Vs.Dy. Commissioner (CT)-2011 (46) VST 170 (AP),Peekay Re-rolling Mills Vs. AC - 2007-TIOL-43-SC-CT, Goodyear India Ltd. Vs. State of Haryana - 2002-TIOL-786-SC-CT .
The Revenue representative reiterated the findings of the adjudicating authority and also relied on the LB decision in Moser Baer India Ltd. Vs. Commissioner of Central Excise, Noida - 2009-TIOL-1058-CESTAT-DEL-LB .
The Bench observed -
"5. Having considered the rival contentions, it is held that the ruling relied upon by the Revenue is of no help being clearly distinguishable in view of the additional exemption of Sales Tax in respect of the concerned goods in the case of Moser Baer. Whereas in the present case, it is admitted position that the goods are not exempted from the Sales tax in the DTA to which they have been cleared from EOU unit of the appellant. Thus, we hold that the appellant is entitled to the benefit of exemption from levy of SAD leviable under Section 3(3) of the Customs Tariff Act 1975 in view of the specific exemption granted under Notification No. 23/2003-CE, as amended."
The appeal was allowed with consequential relief.
(See 2014-TIOL-04-CESTAT-MUM)
