By TIOL News Service

NEW DELHI, MAY 28, 2013: THE Applicant proposes to clear the goods by way of stock transfer to their own manufacturing unit located in Pune, Maharashtra and pay the duties of customs in terms of Section 30 of SEZ Act and proposes to avail the benefit of exemption Notification No.45 /2005 Cus dated May 16, 2005 that exempts goods cleared from the SEZ to DTA from payment of whole of the additional duty of customs leviable ('SAD') under Section 3(5) of the Customs Tariff Act subject to the fulfillment of the conditions mentioned in the proviso of the notification, which is 'no such exemption shall be applicable if such goods, when sold in domestic tariff area, are exempted by the State Government from payment of sales tax or value added tax.'

The only question for Advance Ruling is:

"Whether the goods stock transferred by the applicant SEZ unit to its DTA unit would be eligible for exemption from the payment of SAD under Notification No. 45/2005 Cus dated May 16, 2005?"

According the applicant the goods are sent by way of stock transfer from the SEZ unit to its DTA unit. The position is crystal clear that Notification No. 45/2005 Cus exempts all goods cleared from the SEZ and brought to any of the place in India from the SAD levied thereon under Section 3(5) of the Tariff Act.

However, when such goods are sold in domestic tariff area and are exempted by the State Government from the payment of sales-tax or VAT such exemption is not available. The applicant makes a positive statement that such goods when sold in domestic tariff area are not exempted by the State Government from payment of sales-tax or VAT.

It is pointed out that under MVAT Act the parts and components of wind operated electricity generators are subject to tax @ 5%. It is conceded position that goods imported by the applicant are not exempted by the State Government from the payment of VAT. It is to be noted that in case of stock transfer, two persons are not involved, as the stock transfer is between the units of same legal entity. It is not a 'sale' as defined under Section 2(24) of the MVAT Act, The inevitable conclusion is that VAT which is a tax on sale of goods within the state cannot be levied on stock transfer. The position whether there is a sale involved or mere stock transfer as claimed by the applicant has to be adjudicated by the concerned authorities.

The Authority for Advance Rulings held,

So far as, present application is concerned the ruling is being given by holding the position that being a stock transferred no VAT is chargeable. However, if during any proceeding initiated under the MVAT Act it is found that the claim of the applicant is not factually supportable, the Revenue Authority can decide that issue in accordance with law. It is therefore made clear that the present ruling is being rendered by treating the transaction on the factual scenario as projected by the applicant and not on analysis of the factual position. It is significant to note that section 6(A) of the CST Act deals with the burden of proof etc. in case of transfer of goods claimed otherwise than by way of sale. To put it differently, section 6A mandates that stock transfer of goods is not covered within the definition of 'sale' and as such Central Sales-tax is not levied on stock transfer of goods.

Therefore the answer to the question formulated by the applicant on the facts as projected by the applicant is in the affirmative. However, as noted if at the time of adjudication, the adjudicating authority finds that the claim of stock transfer of goods is not legally supportable, it would be open to the Authority to arrive at such conclusion as is available in law.

(See 2013-TIOL-01-ARA-CUS)