2013 (6) TMI 10 - AAR - Customs

Levy of SAD on stock transfer by SEZ unit - Clearance of goods by way of stock transfer from the SEZ unit to own DTA manufacturing unit - whether would be eligible for exemption from the payment of SAD under Notification No. 45/2005 Cus dated May 16 2005? - Held that - 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. Thus being a stock transferred no VAT is chargeable. 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. Thus eligible for exemption from the payment of SAD under Notification No. 45/2005.

Summary

Issues Involved:
1. Eligibility for exemption from the payment of Special Additional Duty (SAD) under Notification No. 45/2005 Cus dated May 16, 2005 for goods stock transferred from SEZ unit to DTA unit.
2. Proof of the applicant being a wholly owned subsidiary of a foreign company.
3. Requirement of evidence that goods are not exempted from payment of CST/VAT.
4. Clarification on the status of stock transfer under SEZ Act and SEZ Rules.

Detailed Analysis:

1. Eligibility for Exemption from SAD:
The primary issue is whether the goods stock transferred by the applicant from the 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. The notification exempts all goods cleared from SEZ and brought to any place in India from SAD levied under Section 3(5) of the Tariff Act, provided such goods are not exempted from sales tax or VAT by the State Government when sold in the domestic tariff area. The applicant asserted that the goods in question are not exempted by the Maharashtra Government from VAT, as they fall under S.No. 82 and 103 of Schedule C of the MAVT Act and are subject to a 5% tax rate. The ruling concluded that since the goods are not exempt from VAT, the applicant is eligible for the exemption from SAD for the stock transferred goods.

2. Proof of Applicant Being a Wholly Owned Subsidiary:
The applicant is a wholly owned subsidiary of GE Holding Luxembourg & Company Sarl, Luxembourg, and ultimately of General Electric Company USA. The applicant provided a chart certified by the Company Secretary to support this claim. The ruling affirmed that the applicant qualifies as a wholly owned subsidiary under Section 4(1)(c) of the Companies Act, 1956, and thus is entitled to file an application before the Authority for Advance Rulings.

3. Requirement of Evidence for Non-Exemption from CST/VAT:
The Revenue contended that the applicant did not provide sufficient evidence that the goods are not exempted from CST/VAT. The applicant countered by stating that the goods are subject to VAT at 5% and are not exempted under the SEZ Act or VAT/CST laws. The ruling emphasized that the applicant must prove that the goods are not exempted from VAT/CST to avail the exemption under Notification No. 45/2005. It was noted that the ruling is based on the factual scenario presented by the applicant, and if during any proceeding it is found otherwise, the Revenue Authority can decide accordingly.

4. Clarification on Stock Transfer under SEZ Act and SEZ Rules:
The ruling clarified that the SEZ Act and SEZ Rules do not specifically address stock transfers to DTA units but imply that such transfers are covered under clearances to DTA units. The applicant argued that stock transfers should not be treated differently from sales for the purpose of the notification. The ruling concluded that the notification applies to all clearances from SEZ, whether by sale or stock transfer, and the proviso regarding VAT/CST exemption applies in both cases.

Conclusion:
The application was disposed of with the ruling that the goods stock transferred by the applicant from the SEZ unit to its DTA unit are eligible for exemption from the payment of SAD under Notification No. 45/2005 Cus, provided the goods are not exempted from VAT/CST by the State Government. The ruling is based on the factual scenario presented by the applicant, and any deviation found during adjudication can lead to a different conclusion by the Revenue Authority.