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2023 (11) TMI 1127 - AT - Central ExciseInterpretation of the word exemption - applicability of Notification No. 23/2003-CE was amended by Notification No. 22/2006-CE - exemption from SAD on the goods cleared from the factory in the shape of sample quoting not for sale in DTA - HELD THAT - Admittedly in the present case there is no ambiguity in the notification and the issue needs to be considered by interpreting the notification strictly not by referring to the context etc as stated by the impugned order. Undisputedly the goods in dispute were not taxable because only that turnover was subject to tax which was a commercial transaction and the clearance of the samples was excluded from the taxable turnover as per Section 7 of the U P Vat Act, 2008. In the present case the goods in dispute are not specified in schedule I or Schedule IV of the U P VAT Act hence are not exempt from payment of VAT, but the clearance of samples from EOU are not part of the taxable turnover as per the provisions of this Section 7. The transactions in respect of sample do not fall under the category of exempt goods as defined by the U P Vat Act, 2008. These clearances were not subjected to the VAT in view of the provisions contained in Section 7. The wordings of proviso of the notification No No 23/2003-CE dated 31.03.2003 as amended by Notification No 22/2006-CE dated 01.03.2006 are unambiguous and they refer to exempt goods under VAT Act. In the present case the goods are not specified as exempt goods as defined under the VAT Act, but are not the part of taxable turnover. The impugned order is without any merits - appeal allowed.
Issues Involved:
1. Applicability of Special Additional Duty (SAD) on goods cleared as samples from a 100% Export Oriented Unit (EOU) to Domestic Tariff Area (DTA). 2. Interpretation of the term 'exemption' under the VAT Act in relation to SAD. Issue-wise Comprehensive Details: 1. Applicability of SAD on Goods Cleared as Samples: The appellant, a 100% EOU engaged in the manufacture of various electronic storage devices, cleared goods as samples to the DTA without charging VAT. The Adjudicating Authority and Commissioner (Appeals) held that SAD is leviable on these goods as they were cleared without payment of VAT, citing Notification No. 23/2003-CE as amended by Notification No. 22/2006-CE. The Tribunal upheld this interpretation, noting that "the element of SAD should be taken into account" for determining excise duty payable when sales tax exemption is availed, as per the CESTAT larger bench decision in Misc. Order No. 411/09-EX (DB) dated 26.06.2009. 2. Interpretation of 'Exemption' under VAT Act in Relation to SAD: The Tribunal emphasized the need for strict interpretation of exemption notifications, referencing the Supreme Court's decision in Dilip Kumar & Co. [2018 (361) ELT 577 (SC)], which mandates that any ambiguity in exemption notifications must be interpreted in favor of the revenue. It was observed that the goods in question were not exempt under the VAT Act but were excluded from taxable turnover as samples. The Tribunal concluded that the clearances of samples did not fall under the category of exempt goods as per the VAT Act, and thus, the SAD was applicable. The decision in Dhiren Chemical Industries [2002 (139) E.L.T. 3 (S.C.)] was cited to support the interpretation that exemption notifications apply to goods made from duty-paid material. Conclusion: The appeal was allowed, with the Tribunal determining that the impugned order lacked merit. The Tribunal clarified that the goods cleared as samples were not exempt under the VAT Act but were not part of the taxable turnover, thus making SAD applicable on such clearances. The decision was dictated and pronounced in open court.
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