2015 (10) TMI 839 - AT - Central Excise

Levy of SAD - 100% EOU - DTA Clearances - whether in respect of stock transfers of goods to the appellant s sister units, where no VAT has been paid, the SAD would be liable to be paid by them or not - Held that - An identical issue was considered by the Tribunal in the case of STI Industries Vs. CCE, Daman 2014 (2) TMI 405 - CESTAT AHMEDABAD and by taking note of the precedent decision of the Tribunal in the case of Micro Inks Vs. CCE, Daman 2014 (2) TMI 207 - CESTAT AHMEDABAD , it was held that in case of inter-unit stock transfers of the final product, the demand of SAD cannot be held sustainable even though no VAT or Sales Tax was paid on such transactions. Inasmuch as the issue is fully settled in favour of the assessee by the above referred decisions of the Tribunal, we set aside the impugned order - Decided in favour of assessee.

Summary

Issues:
1. Liability to pay Additional Duty of Customs on stock transfers to own units without VAT payment.

Analysis:
The appellant, a 100% EOU engaged in manufacturing anesthetic drugs, active pharmaceutical ingredients, and vitamins, cleared goods to their own units without paying VAT or Sales Tax. The Revenue contended that the appellant should pay Additional Duty of Customs under Section 3(5) of the Customs Tariff Act for these stock transfers. The dispute centered on whether the SAD was applicable to such transactions. The Notification No.23/2003-CE provided an exemption from excise duty equivalent to SAD on goods cleared in DTA by a 100% EOU, subject to payment of Sales Tax or VAT. The Revenue argued that since no Sales Tax or VAT was paid on the stock transfers, SAD should be included in the total duty payable under the Central Excise Act.

Subsequently, proceedings were initiated against the appellant through a show-cause notice, leading to the confirmation of a demand of approximately Rs. 3.77 crores, along with interest and penalties. The key issue for determination was whether the appellant was liable to pay SAD on stock transfers to their sister units without VAT payment. The Tribunal referred to previous decisions in similar cases, including STI Industries Vs. CCE, Daman and Micro Inks Vs. CCE, Daman. Relying on these precedents, the Tribunal held that in cases of inter-unit stock transfers of final products, the demand for SAD cannot be sustained even if no VAT or Sales Tax was paid on such transactions. Given the settled nature of the issue in favor of the assessee based on the Tribunal's previous decisions, the impugned order was set aside, and the appeal was allowed with consequential relief to the appellant.