CX - Notfn 23/2003 - Goods cleared by EOU to own units in DTA - such goods when sold in DTA had not been exempted from sales tax by any Notification - no requirement to go into analysis of sales tax on stock transfer: CESTAT
By TIOL News Service
MUMBAI, OCT 21, 2014: THE appellants are a 100% EOU and manufacture "Fatty Acids", "Fatty Alcohols" and "Soap Noodles". Apart from export, they also cleared goods in the Domestic Tariff Area (DTA) to third parties as well as to their own units.
The appellants claimed exemption (in respect of clearances of finished goods to their own units in DTA on stock transfer) from payment of duty of excise leviable as is equivalent to Special Additional Duty under Section 3(5) of the CTA in terms of sr. no. 1 of notification 23/2003-CE read with condition no. 1 of Annexure to notification. The condition no. 1 stipulates that exemption is available if the goods being cleared into Domestic Tariff Area are not exempted by the State Government from payment of sales tax.
Revenue was of the view that the appellant was not eligible for exemption as no sales tax was paid on such clearances.
The other issue raised was that as per Rule 3(7)(b)(iii)/(iiia) of the CCR, 2004, CENVAT Credit in respect of Education Cess on excisable goods and SHE cess can be utilized only towards payment of education cess on excisable goods whereas the appellant had utilized the CENVAT Credit towards payment of duty leviable on aggregate of Customs duties under proviso to Section 3 of the CEA, 1944. Inasmuch as the Revenue viewed that Customs cess was paid from the Central Excise CENVAT Credit Cess.
The demands (normal & extended period) running into crores of rupees were confirmed along with equivalent penalty and interest.
Before the CESTAT the appellant submitted that they fulfil the conditions of Notification 23/2003-CE as the goods are otherwise not exempt from sales tax by the State Government and for this reason they availed exemption from SAD in the case of stock transfer to their own units; that for this very reason, in respect of clearances made to other DTA units while availing exemption from SAD they had paid sales tax; that they dispute the amount of duty saying that department had included the clearances made to other units also. On the issue of cess, the appellant's contention is that the duty paid under proviso to sub-section (1) of section 3of the CEA, 1944 is Central Excise duty and not Customs duty. It was also submitted that there are no grounds to allege suppression as it is only a case of interpretation of law. They also relied on the decision of the Authority for Advance Ruling in the case of GE India Industrial P. Ltd. v. CC - 2013-TIOL-01-ARA-CUS.
On the other hand, the A.R. vehemently stated that exemption under Notification 23/2003-CE is not available since sales tax is not leviable on inter-unit transfer and, therefore, it can be said that the goods are in exemption by the State Govt. from payment of sales tax when the sales tax itself is not leviable. Reliance is also placed on the LB decision in Moser Baer India Ltd. v. CCE Noida - 2009-TIOL-1058-CESTAT-DEL-LB.
The Bench while noting that the ARA ruling supports the case of the appellant and the reliance on the LB decision was misplaced also observed -
++ The core issue is whether the benefit of Notification 23/2003 is allowable or not. To be eligible for exemption from payment of SAD the condition in Notification 23/2003 to be satisfied is ".......the goods being cleared into DTA are not exempt by the State Govt. from payment of sales tax or Value Added Tax (VAT)." A plain interpretation of this phrase has to be made. In this case it is not disputed that such goods when sold in DTA had not been exempted by the State Govt. by any Notification. We are not required to go into the analysis as to whether the goods are leviable to sales tax as contended by the department that there is no sales tax on stock transfer. The fact remains that the goods sold in DTA are not exempted from sales tax. Therefore, the benefit of Notification is clearly available to the appellants.
++ On the issue of wrong availment of CENVAT Credit we find that the law has not been read correctly by the adjudicating authority. The duty paid by the appellant is Central Excise duty under Section 3 of the Central Excise Act and not the Customs duties. Section 3 merely provides that the Central Excise duty payable would be aggregate of Customs duty. Therefore, the appellants have correctly utilized the CENVAT Credit in respect of cess of excisable goods towards payment of duty/cess leviable under Section 3 ibid.
++ We note that in the appellant's own case, an identical issue for different time period, has been decided in their favour by the Coordinate Bench vide Order No. A/882-883/13/EB/C-II dated 18.10.2013 - 2014-TIOL-04-CESTAT-MUM.
After setting aside the order-in-original, the appeal was allowed with consequential relief.
(See 2014-TIOL-2047-CESTAT-MUM)
