2012 (8) TMI 536 - AT - Central Excise

Waiver of pre-deposit - 100% E.O.U. - clearance of goods to DTA in pursuance of permission granted by the Development Commissioner - whether they are required to pay component of SAD or not Held that - Applicant claimed the benefit of Notification No. 23/2003-C.E. - SAD is levied under Section 3(5) of the Customs Tariff Act on the imported goods to counter-balance of the sales tax, value added tax, local tax, etc - demand of duty including SAD component in the aggregate of duty is not sustainable

Summary

Issues:
1. Whether the appellant is required to pay the component of Special Additional Duty (SAD) on goods cleared to the Domestic Tariff Area (DTA) as an 100% Export Oriented Unit (E.O.U).

Analysis:
The appellant, an E.O.U manufacturing bulk drugs, cleared goods to the DTA under permission from the Development Commissioner and paid duty on such clearances. The dispute arose regarding the requirement to pay the SAD component. The appellant claimed the benefit of Notification No. 23/2003-C.E., dated 31-3-2003, which was denied by the original authority, resulting in a confirmed demand of Rs. 27,10,449/- along with interest and imposition of a penalty of Rs. 2,00,000. The Commissioner (Appeals) upheld the original authority's decision.

The appellant argued that since they cleared goods to the DTA with permission and paid applicable Sales Tax, the question of paying the SAD component does not arise. They relied on the decision of the Larger Bench of the Tribunal in the case of Moser Baer India Ltd., which held that SAD should not be included in determining the aggregate duty of Customs for clearances made on payment of VAT/Sales Tax. The appellant also highlighted that in a similar situation for a subsequent period, the Commissioner (Appeals) had ruled that no SAD component was payable on DTA clearances.

The Departmental Representative (DR) reiterated the findings and reasoning of the Commissioner (Appeals) in the impugned order. Upon careful consideration of the submissions and records, the Tribunal noted that SAD is levied under Section 3(5) of the Customs Tariff Act to counter-balance various taxes on imported goods. The Tribunal found the decision of the Larger Bench in Moser Baer India Ltd. to be prima facie applicable to the present case, making the demand of duty including the SAD component in the "aggregate of duty" unsustainable.

Consequently, the Tribunal ruled in favor of the appellant, waiving the pre-deposit of dues as per the impugned order and staying the recovery of the same until the appeal's disposal. The operative portion of the order was pronounced in open court upon completion of the hearing.