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2009 (6) TMI 48 - AT - Central ExciseWhether in respect of a 100% EOU availing Sales tax exemption, for determining the excise duty payable based on aggregate value of Customs duty, the element of SAD should be taken into account or not? Held that Section 3(5) of CTA enables levy by on imported goods to counterbalance the sales tax, VAT, local tax and other charges - The said levy is not assessee specific or area specific or State specific - Tribunal cannot go into the legality of levy under Section 3 (5) - In respect of clearances made from a 100% EOU, as the assessment is required to be done at the time of removal the Notification No. 20/2003-CE dated 31/3/2003 as amended - In respect of clearances on which sales tax is exempted, SAD components should be included while determining duty in terms of the Notification No. 20/2003-CE dated 31/3/2003 as amended In respect of a 100% EOU availing sales tax exemption, for determining the excise duty payable based on aggregate value of Customs duty, the element of SAD should be taken into account Larger Bench
Issues Involved:
1. Whether the Special Additional Duty (SAD) should be included in the aggregate value of customs duty for determining excise duty payable by a 100% Export Oriented Unit (EOU) availing sales tax exemption. Detailed Analysis: 1. Background and Facts: - The appellant is a 100% EOU located in a backward area of Uttar Pradesh, engaged in manufacturing CDR, CD ROM, DVDR, DVD ROM, and availing sales tax/VAT exemption. - The appellant sold part of their goods in the Domestic Tariff Area (DTA) at a concessional rate of duty under Notification No. 23/03-CE, which exempts these goods from sales tax. - The department issued a show cause notice proposing to include the 4% SAD in the aggregate value of customs duty for determining the excise duty payable, leading to a demand of Rs. 10,27,94,461/- and an equal penalty. 2. Appellant's Submissions: - The appellant argued that SAD is meant to counterbalance sales tax on domestically procured goods, and since their goods are exempt from sales tax, SAD should not be applicable. - They cited the Finance Minister's speech and the case of Thermax to support that SAD is not applicable where there is no sales tax to counterbalance. - They also contended that the levy of SAD is assessee-specific and should not apply when domestic sales tax exemption is in place. - The appellant claimed that availing concession under Section 4A of U.P. Trade Tax Act does not make the goods exempt from sales tax. 3. Department's Submissions: - The department argued that SAD is imposed to create a level playing field between imported and indigenous goods and is not assessee-specific. - They maintained that the Central Government decides the SAD rate at a macro level, and it should be included in the aggregate value of customs duty for excise duty calculation. - The department cited the Supreme Court's judgment in Novopan India Ltd. to support their stance. 4. Tribunal's Analysis: - The Tribunal examined the interplay of the Customs Act, Central Excise Act, and state sales tax laws. - SAD under Section 3(5) of the Customs Tariff Act is a levy to counterbalance sales tax, VAT, and other local taxes. - The Tribunal rejected the appellant's argument that SAD should be nil if the sales tax/VAT is nil in the state where the goods are sold. - The Tribunal emphasized that SAD is determined at a macro level by the Central Government and is not to be assessed case-by-case by individual officers. - The Tribunal held that the exemption granted by some states does not affect the SAD rate fixed by the Central Government. - The Tribunal clarified that it is not the forum to challenge the Central Government's decision on SAD rates. - The Tribunal noted that the levy of SAD is not dependent on whether sales tax is payable but whether it is leviable. 5. Specific Findings: - For DTA clearances from a 100% EOU, the excise duty is equal to the aggregate customs duties, including SAD if the goods are exempt from sales tax/VAT. - The Tribunal rejected the appellant's reliance on the Thermax case, as the issue was different. - The Tribunal also dismissed the relevance of the Pine Chemicals case, as the word "exempt" in the notification is not qualified by "generally." - The Tribunal found that earlier decisions in Hanil Era Textiles and Morarjee Brembana Ltd. were not applicable to the present case. 6. Conclusion: - The Tribunal concluded that for a 100% EOU availing sales tax exemption, the element of SAD should be included in the aggregate value of customs duty for determining excise duty payable. - The case was referred back to the referral bench for further necessary action. Pronouncement: - The judgment was pronounced in open court on 26/06/2009.
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