2018 (5) TMI 1146 - AT - Customs

Refund of SAD - SCN issued on the ground that the imported goods were sold to various units in Dadra/ Silvassa and have not paid sales tax as all sales were made against sales tax form - Held that - as per the terms of the declaration of the Notification in question, in order to avail exemption the declaration to the effect is that sale of the goods will not be effected from a place located in an area where no tax is chargeable on sale or purchase of goods . The area of Dadra in question from where the goods were sold is not an area exempted from Sales Tax. It is liable for sales tax but only under certain conditions the Appellant-assessee can sell the goods without payment of sales tax. An exemption from sales tax thus would not make the place of Dadra as the area where no sales tax is chargeable on sale or purchase of goods. Time limitation - Held that - since the issue involved is of interpretation and has been subject of matter of dispute in many cases which were settled by the Tribunal, therefore no malafide intention can be attributed to the Appellant-assessees - demand is time barred. Enhancement of Penalty u/s 114A - Held that - since the demand itself is set aside, the Revenue s appeal, which is for penalty which is consequent to the demand, will not sustain - penalty set aside. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Interpretation of exemption notifications (Notification No. 56/98-Cus and Notification No. 22/99-Cus) regarding Special Additional Duty (SAD).
2. Applicability of sales tax exemption in Dadra and Nagar Haveli.
3. Validity of the demand for SAD along with interest and penalty.
4. Limitation period for raising the demand.
5. Revenue's appeal for enhancement of penalty under Section 114A of the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Interpretation of Exemption Notifications:
The appellant-assessees claimed exemption from SAD under Notification No. 56/98-Cus and Notification No. 22/99-Cus, asserting that Dadra is not a tax-free area. They argued that the exemption should apply as the goods were sold in an area where sales tax is applicable under certain conditions. The Tribunal noted that the notifications intend to prevent double taxation, and the term "area" should be interpreted as a place where no tax is chargeable on the sale or purchase of goods. The Tribunal concluded that Dadra is not a tax-free area and thus, the exemption notifications were applicable.

2. Applicability of Sales Tax Exemption in Dadra and Nagar Haveli:
The appellant-assessees contended that the sales tax was not paid because the buyers purchased goods under Form 11-C, which exempts them from paying tax as per the Dadra & Nagar Haveli Sales Tax Act, 1978. The Tribunal found that the goods sold in Dadra were liable to sales tax but were exempted under specific conditions. This exemption did not render Dadra a tax-free area, aligning with the Tribunal's previous decisions in Jindal Photofilms Ltd. and G.H. Shaikh.

3. Validity of the Demand for SAD Along with Interest and Penalty:
The Tribunal examined whether the appellant-assessees had violated the conditions of the exemption notifications by selling goods without paying sales tax. It concluded that the appellant-assessees were eligible for the exemption as Dadra is not a tax-free area and the goods were sold under specific conditions exempting them from sales tax. Consequently, the demand for SAD, interest, and penalties was deemed unsustainable.

4. Limitation Period for Raising the Demand:
The appellant-assessees argued that the demand was time-barred as there was no intention to evade payment of duty. The Tribunal agreed, noting that the issue involved interpretation and had been a matter of dispute in several cases settled by the Tribunal. Thus, no malafide intention could be attributed to the appellant-assessees, and the demand was considered time-barred.

5. Revenue’s Appeal for Enhancement of Penalty:
The Revenue sought to enhance the penalty imposed under Section 114A from ?20 lakhs to an amount equal to the duty. Since the Tribunal set aside the demand itself, the appeal for penalty enhancement was dismissed. The Tribunal emphasized that the penalty is consequent to the demand, and without a valid demand, the penalty could not be sustained.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeals filed by the appellant-assessees with consequential reliefs. It also dismissed the Revenue's appeal for enhancement of the penalty. The judgment emphasized that the interpretation of the exemption notifications and the specific conditions under which sales tax exemptions were granted in Dadra were crucial in determining the applicability of SAD.

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