2018 (9) TMI 812 - AT - Central Excise

100% EOU - Benefit of N/N. 22/2006 CE - whether a 100% EOU, who clears the goods to domestic tariff area on payment of VAT, are entitled to benefit of N/N. 22/2006 CE which exempts goods cleared to domestic tariff area from the SAD? Held that - Para 6.8 (h) of FTP refers to full duties which would obviously, mean full duties as applicable. If an exemption notification is available, this para does not place any restriction on its applicability - the demand is not sustainable and neither are the interest and penalties - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Interpretation of Notification No. 23/2003-CE regarding exemption from Special Additional Duty (SAD) for 100% Export Oriented Units (EOUs) clearing goods to the domestic tariff area (DTA) after paying Value Added Tax (VAT).
2. Whether the Development Commissioner's permission for domestic clearance of goods on payment of full duties precludes the EOUs from availing exemptions under relevant notifications.
3. Applicability of Notification No. 22/2006-CE exempting goods cleared to DTA from SAD.
4. Assessment of duty for clearances made by 100% EOUs to DTA considering the payment of VAT.

Analysis:
1. The case involved a 100% EOU engaged in manufacturing pharmaceutical products, clearing goods to DTA after paying VAT. The issue revolved around the interpretation of Notification No. 23/2003-CE and whether the EOU was entitled to exemption from SAD under the notification.
2. The contention was that the Development Commissioner's permission for domestic clearance of goods on payment of full duties did not preclude the EOUs from availing exemptions under relevant notifications. The Department sought to recover differential duty, interest, and impose penalties based on this premise.
3. The Tribunal analyzed the applicability of Notification No. 22/2006-CE, which exempts goods cleared to DTA from SAD subject to certain conditions. The EOU argued that they were entitled to the exemption as they had paid VAT on the goods sold.
4. The judgment referred to various case laws and held that the EOU, clearing goods to DTA after paying VAT, should not be subjected to SAD. The Tribunal emphasized that the assessment of duty should consider whether sales tax is paid or exempted on the goods being cleared.
5. Ultimately, the Tribunal set aside the Order-in-Appeal, ruling in favor of the EOU, stating that the demand, interest, and penalties were not sustainable. The judgment clarified that if an exemption notification is available, the requirement to pay "full duties" does not restrict its applicability.