2020 (12) TMI 805 - AT - Customs

Eligibility of SAD exemption - Blanks cleared from the SEZ Unit of the Appellant by way of stock transfers to its DTA Unit - benefit of Notification No.45/2005 as amended - time limitation - HELD THAT - The Notification exempts all goods cleared from a SEZ and brought to any other place in India . The nature of clearance, whether by way of sale or otherwise, is not qualified in any manner in the body of the Notification. The proviso which embodies the condition/test governing the exemption gets attracted only if the goods which are the subject matter of clearance, when sold in the DTA, are exempted from the payment of Sales Tax/VAT - In the instant case, it is undisputed that the clearance of blanks to the DTA is not by way of sale and that the underlying goods are not exempted by the State Government from the levy of VAT. The adjudicating Authority has himself accepted that such blanks attract VAT @ 5% as Ball Pen parts and the same is also evident from a sample Tax Invoice dated 20 April 2014 enclosed as part of the Appeal Paper Book. Therefore, the proviso is not attracted at all. There is no exemption from VAT/Sales Tax but just a deferral of the VAT/Sales Tax liability until the sale takes place. We are in complete agreement with the contention of the Appellant that the Circular cannot curtail the scope of an exemption notification which deserves to be interpreted strictly and on its own terms as held by the Hon'ble Supreme Court in the Tata Tele Services case 2005 (12) TMI 96 - SUPREME COURT . The impugned Order in the garb of recovering SAD also seeks to recover the CVD of ₹ 1,99,17,645/- by relying upon the proviso to Section 5A of the Central Excise Act and to that extent does travel beyond the scope of the Notice dated 3 October 2016 - In the present case, the impugned order itself records at para 12.11 that the subject goods as ball pen parts were generally exempted from central excise duty under S. No. 325(ii) of Notification No.12/2012 dated 17 March 2012. Even on the point of limitation the demand has to fail as the BOE‟s were countersigned by the customs official prior to clearance of goods from the Falta, SEZ. Therefore, the department was aware that the goods were cleared by way of stock transfers not attracting any VAT/Sales Tax. The Notice was issued only after the expiry of the normal period of limitation of 1 year and could not revive the demand, which had got time barred. The decision of the Tribunal in Baccarose Perfumes and Aveco Technologies case 2018 (2) TMI 1269 - CESTAT HYDERABAD fully supports the case of the Appellant. Time Limitation - HELD THAT - The bills of entry were filed and assessed by customs officers in charge of the SEZ; the issue involves interpretation of a notification; therefore, we find that no suppression and wilful misstatement etc with intent to evade payment of duty can be alleged and extended period cannot be invoked. In the instance case, the imports being undertaken for the period April-December 2014, normal period, as per the provision of law existing on that day, ends in October, 2015. Therefore, the issue is beyond normal period by the time the amendment came in to force - the department cannot issue Show cause notices for the normal period, of two years also, in the instant case. The appeal is allowed on merits and limitation.

Summary

Issues Involved:
1. Denial of Special Additional Duty (SAD) exemption.
2. Recovery of Countervailing Duty (CVD) beyond the scope of the notice.
3. Invocation of extended period of limitation.

Issue-wise Detailed Analysis:

1. Denial of Special Additional Duty (SAD) Exemption:
The primary issue is whether the benefit of Notification No. 45/2005, granting exemption from SAD, is available for "Blanks" cleared from the SEZ Unit to the DTA Unit by way of stock transfers. The Appellant argued that these clearances were stock transfers, not sales, and thus should not attract SAD as per the proviso to the notification, which exempts goods unless they are sold in the DTA and exempted from VAT by the state government. The adjudicating authority accepted that the blanks were not exempt from VAT, which is evident from a sample tax invoice showing VAT at 5%. The Tribunal agreed with the Appellant, citing the Tribunal's decision in the case of Serum Institute of India and the Advance Ruling Authority's decision in the GE India case, which supported the interpretation that the nature of clearance (sale or otherwise) is irrelevant for the exemption. The Tribunal emphasized that a circular cannot limit the scope of an exemption notification, as established in Tata Tele Services.

2. Recovery of Countervailing Duty (CVD) Beyond the Scope of the Notice:
The impugned order also sought to recover CVD of ?1,99,17,645/-, which was not part of the original notice. The Tribunal found this recovery beyond the scope of the notice, referring to the Gujarat High Court's decision in the Roxul Rockwool case. The Tribunal noted that legislative changes post-SEZ Act excluded SEZ units from CVD liability, aligning with the charging Section 3 of the Central Excise Act, which excludes SEZ-produced goods from Cenvat. The Tribunal concluded that the demand for CVD was unsustainable and beyond the notice's scope.

3. Invocation of Extended Period of Limitation:
The Tribunal addressed the issue of limitation, noting that the BOEs were countersigned by customs officers, indicating departmental awareness of the stock transfers. The notice was issued after the normal limitation period of one year had expired. The Tribunal referenced the Supreme Court's decision in Northern Plastics, which held that correct description of goods in BOEs does not constitute mis-statement or suppression. The Tribunal also cited Baccarose Perfumes and Aveco Technologies, which supported the view that demands time-barred under the old limitation period could not be revived by subsequent amendments. The Tribunal concluded that the extended period could not be invoked and the entire demand was time-barred.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal on merits and limitation, with consequential relief. The judgment emphasized strict interpretation of exemption notifications, the inadmissibility of demands beyond the notice's scope, and the non-retrospective application of extended limitation periods.