2017 (2) TMI 1490 - AT - Central Excise

Refund of SAD - denial of refunds on the ground that the respondent had not paid Value Added Tax (VAT) on this stock transfer to their DTA unit - 22/2006-CE dated 01.03.2006 - HELD THAT - The Revenue s appeal has no merits for the simple reason that identical issue has been settled by the Tribunal in the case of M/S MICRO INKS VERSUS CCE. ST. DAMAN 2014 (2) TMI 207 - CESTAT AHMEDABAD wherein the bench, after considering all the arguments made in Para 10, specifically dwelled into the entire issue of notification and exemption of sales tax and held that The inter unit clearance from EOU to DTA are not exempted from payment of sales tax by the state government by any notification and as revenue unable to bring on record any notifications issued by the state government or otherwise to indicate that inter unit transfers from EOU to DTA are exempted. T he credit taken by the respondent is correct and legal and does not require any interference - Appeal dismissed - decided against Revenue.

Summary

Issues:
- Denial of exemption of Special Additional Duty (SAD) due to non-payment of VAT on stock transfer to DTA unit.

Analysis:
1. The appeal was filed by the Revenue against the Order-in-Appeal (OIA) dated 03.02.2011, where the respondent, engaged in manufacturing Halogen Bulbs and Capsules, cleared goods to their DTA unit without paying VAT. The lower authorities held that since VAT was not paid, the respondent was not eligible for the 4% SAD exemption under Notification No.19/2006-Cus dated 01.03.2006.

2. The Departmental Representative argued that the exemption from SAD is subject to the condition that goods cleared in DTA are not exempt from Sales Tax or VAT. As the respondent did not pay Sales Tax or VAT on the goods cleared to their DTA unit, the exemption for SAD should not apply to them.

3. The respondent's Counsel cited precedents like Micro Inks and VVF Limited cases, where the Tribunal held that the benefit of SAD exemption cannot be denied if goods are cleared to own unit/sister concern on stock transfer.

4. The Tribunal analyzed the issue and noted that the Revenue's argument of exemption from Sales Tax due to non-payment on clearances to sister concern was incorrect. The Tribunal referred to the Micro Inks case where it was clarified that inter-unit clearances are not automatically exempt from Sales Tax unless specifically notified by the State Government.

5. The Tribunal emphasized that the absence of evidence showing exemption from Sales Tax on goods cleared to DTA units favored the respondent. It was highlighted that the benefit of Notification No. 23/2003-C.E. was applicable only if goods were exempted by the State Government from Sales Tax/VAT, which was not the case here.

6. Considering the judicial pronouncements and the specific conditions of the notification, the Tribunal concluded that the respondent's credit was legal and rejected the Revenue's appeal. The decision was based on the settled legal position and interpretations from previous cases like VVF Limited and STI Industries cases, which upheld similar views on SAD exemption in inter-unit clearances.

7. The Tribunal's decision was based on a thorough analysis of the legal provisions, precedents, and the specific conditions outlined in the relevant notifications. The appeal was dismissed, affirming the respondent's right to the SAD exemption in the given scenario.