2014 (2) TMI 207 - AT - Customs

Duty demand - Levy of 4% SAD on clearance of goods from 100% EOU to sister concern in DTA - Audit party took an objection to non-payment of SAD on the ground that clearance made to their sister concern would fall under the category of exempted from payment of sales tax hence they are liable to pay SAD - Interpretation of benefits of Notification No. 23/2003-cus - 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. The purpose of taking benefit of Notification 23/2003/CE, as amended, the one and only condition specified in respect of the goods being cleared into DTA, is if the said goods are exempted by the state government from payment of sales tax/VAT; in the present case there is no such notification or order issued by the state government exempting impugned goods from the payment of sales tax/VAT Appellant has specifically stated in such returns that they are clearing goods to their sister units and claiming the benefit of exemption of SAD. It was for the lower authorities to call for any explanation from the appellant, which they have not done so, that being so ,revenue authorities cannot turn around and say that they were not informed about the clearance made by the appellant to their sister unit - Decided in favour of assessee.

Issues Involved:
1. Interpretation of Notification No. 23/2003-CE regarding exemption from Special Additional Duty (SAD).
2. Applicability of SAD on stock transfers to sister units.
3. Limitation and revenue neutrality in the context of SAD exemption.

Detailed Analysis:

1. Interpretation of Notification No. 23/2003-CE regarding exemption from Special Additional Duty (SAD):
The core issue revolves around the interpretation of Notification No. 23/2003-CE, which provides an exemption from SAD if goods cleared from an Export Oriented Unit (EOU) to the Domestic Tariff Area (DTA) are subject to sales tax/VAT. The appellant contended that the goods cleared to their sister units in DTA were not exempt from sales tax by any state government notification, and thus should not attract SAD. They argued that the non-payment of sales tax on stock transfers does not equate to an exemption granted by the state government. The Tribunal agreed with this interpretation, stating that the absence of a state notification exempting sales tax on such transfers means the goods are not exempt from sales tax, and thus, the SAD exemption should apply.

2. Applicability of SAD on stock transfers to sister units:
The adjudicating authority had held that the appellant was liable to pay SAD on stock transfers to their sister units, as these transactions did not involve the payment of sales tax/VAT. The Tribunal, however, disagreed, stating that the lack of sales tax on inter-unit transfers does not constitute an exemption by the state government. The Tribunal emphasized that for the SAD exemption to be denied, there must be a specific state notification exempting the goods from sales tax, which was not present in this case. The Tribunal also referenced the Supreme Court's interpretation in similar cases, supporting the appellant's position that the mere non-payment of sales tax on stock transfers does not negate the exemption.

3. Limitation and revenue neutrality in the context of SAD exemption:
The appellant argued that the demand for SAD was time-barred and that there was no intention to evade duty, as they had regularly filed returns indicating the clearances to their sister units. The Tribunal found merit in this argument, noting that the revenue authorities had ample opportunity to question the appellant's claims during regular audits but failed to do so. The Tribunal also considered the concept of revenue neutrality, where the SAD paid by the appellant would be available as CENVAT credit to the sister unit, thus negating any revenue loss to the government. Consequently, the Tribunal held that the demands were unsustainable on the grounds of limitation as well.

Conclusion:
The Tribunal set aside the impugned orders, allowing the appeals in favor of the assessee on both merits and limitations. The Tribunal concluded that the goods cleared to the sister units were not exempt from sales tax by any state notification, and thus, the SAD exemption under Notification No. 23/2003-CE was applicable. Additionally, the demands were time-barred, and the concept of revenue neutrality further supported the appellant's case. All appeals were allowed with consequential relief.

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