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Judgment
Ramesh Nair, Member (J)
The issue involved in the present case is that whether the appellant are liable to pay special additional duty in case of DTA clearance from their 100% EOU when the goods were cleared as a stock transfer to their own unit. The case of the department is that since the appellant have cleared their goods to their own unit, they have not paid the VAT/Sales Tax which was construed by the department as exempted from VAT/Sales Tax. Hence, appellant is not entitled for the exemption Notification No. 23/2003-CE dated 31.03.2003 (Sr. No. 1) which prescribe that if the goods is cleared into the domestic tariff area are not exempted by the State Government from payment of VAT/Sales Tax. The contention of the department is that since the appellant have not paid the VAT/Sales Tax on the domestic clearance to their own unit, the said goods are exempted by the State Government from payment of VAT/Sales Tax hence, the Notification No. 23/2003-CE is not applicable.
Shri Anil Gidwani, learned counsel appearing on behalf of the appellant submits that Notification 23/03-CE is applicable for DTA clearance by 100% EOU in a case where the State Government has not exempted the VAT/Sales tax on the product. It is his submission that in the present case also the goods cleared by the appellant to their own unit is not exempted from VAT/ Sales Tax. It is very much liable to sales tax. However since the goods are cleared to their own unit, the nature of the transaction is a stock transfer and in case of stock transfer, no VAT/Sales Tax is payable not by virtue of any exemption but on the ground that such transaction does not involve sales of the goods and VAT/Sales Tax is payable only in a case where the sale of goods takes place, therefore, the Revenue is incorrect in their contention that merely because the clearance was made as a stock transfer to their own unit, the said transaction is exempted from VAT/Sales Tax. Accordingly, the appellant is rightly entitled for exemption under Notification 23/2003-CE as the goods cleared by them is not exempted from VAT/Sales Tax. He placed reliance on the following judgments:
• Micro Inks 2014-TIOL-258-CESTAT-AHM
• VVF Ltd. 2014-TIOL-04-CESTAT-MUM
• Sti Industries 2014-TIOL-2611-CESTAT-AHM
Shri R. Nathan, Learned Assistant Commissioner (Authorized Representative) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that for whatever reason if on the clearance of the goods by 100% EOU in DTA was not attracted VAT/Sales Tax, therefore, the nature of the transaction amounts to exempted and consequently the Notification No. 23/2003 is not applicable.
We have carefully considered the submissions made by both the sides and perused the records.
In the present case, the fact is not under dispute that the transaction of the goods from EOU is not a sale and it is only stock transfer, therefore, there is no VAT/ Sales tax applicable. The department considered this as exempted from Sales tax/ VAT which is not correct as a stock transfer within the same entity not being a sale is not attracting any service tax that does not mean the goods per se is exempted. Therefore, the denial of Exemption Notification No. 23/03-CE on the pretext that the supply of goods from EOU to their own unit is exempted is incorrect and illegal. This issue is no longer res-integra as the same has been decided in various judgment as cited by the learned counsel which are reproduced below:
• Micro Inks 2014-TIOL-258-CESTAT-AHM
“7. At the outset, it is to be recorded that the facts are not much in dispute inasmuch as the entire duty liability as has been confirmed is only in respect of clearances made by the appellant (100% EOU) to their sister concern in DTA. It is also undisputed that the goods which are cleared from EOU, independent buyers in DTA sales tax/VAT is levied as per the provisions of the State laws and are being discharged by the appellant. It is also undisputed that the same products are cleared by the appellant to independent buyers and their sister concern.
The entire dispute is correctly put forth by both sides regarding the interpretation of benefits of Notification No. 23/2003-Cus. as amended from time to time filtering out, shorn of unnecessary details, the said notification extends exemption from payment of SAD only if the products which are cleared from EOU to DTA, are cleared on payment of applicable sales tax or VAT.
The adjudicating authority in the case in hand has held that the clearance effected by the appellant herein to their own sister concern being stock transfer, has not passed the test of discharge of sales tax/VAT hence the appellant is required to pay SAD at the applicable rate on such clearances. The reasoning adopted by the adjudicating authority that as stated by the dept. representative, is that the notification specifically talks about the exemption of sales tax, which would mean that sales tax or stock transfer made from EOU to their sister concern needs to be discharged.
We are unable to accept the contentions raised by the ld. Departmental Representative and the findings recorded by the adjudicating authority for more than one reason. Firstly, it is the fact 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 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. It is an admitted fact that whenever there is an inter unit transfer, it is not sales transacations and hence the sales tax/CST/VAT may not get attracted does not mean ipso facto, it is an exemption granted by the State Government. In the absence of any notification granting exemption for specified products by the State Government from levy of sales tax on the finished goods cleared from 100% EOU, it would be incorrect to hold that the goods were exempted from sales tax, more so when the appellant has discharged the sales tax on the same products which were cleared to independent buyers. Secondly, we find that the lower authority seems to have been guided by the argument that inter unit clearance are not taxed by the State Government and is to be construed as an exemption granted. This is totally a wrong perception of the law inasmuch as that exemption, if any, under statute needs to be granted in accordance with law i.e., by issuance of notification by the concerned authorities. It is nobody’s case that the State Government has no power to exempt sales tax/VAT on specific products. In our view, the only question which needs to be addressed is whether the goods cleared into DTA to appellants sister units are exempted or not exempted, which in our considered view due to foregoing reasons, has to be held in favour of assessee, in the absence of any evidence on record to show that the said products if cleared to DTA is exempt from payment of sales tax. It is to be noted that provisions of Central Sales Tax, 1956 recommends movements of goods inter State by raising stock transfer notes even to independent buyers/own units by non-payment of CST/VAT on such clearances, cannot be construed as an exemption granted by the State Government. We find that for the purpose of taking benefit of Notification 23/2003-C.E., 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. It is to be held that plain reading of Notification No. 23/2003-C.E. as amended is applicable ‘Qua Goods” and exemption is across the Board and is applicable to all such goods which are not exempted by the State Government by issue of notification or an order from payment of sales tax/CST/VAT. We also find that large emphasis placed upon, by the lower authorities as well as departmental representative on the decision of the Larger Bench in the case of Moser Baer (I) Ltd. (supra). In our view, the reliance on the ratio seems to be erroneous since the question which was raised before the Larger Bench was not the question that is before the Bench in the proceedings in these appeals. The Larger Bench was specifically referring to the issue which was in respect of a 100% EOU availing sales tax exemption, for determining the Excise duty payable on aggregate value of customs duty by inclusion of SAD, whether should be taken into account or not while answering such a reference, Larger Bench has held that the assessee in that case was availing sales tax exemptions in respect of sales from their unit located in the notified backward area, as has been specified in the order of exemption granted to them by the State Government of U.P. It would be not out of place to note that the State Government of U.P. had specifically granted exemption from leviable of sales tax on the goods which were manufactured in a notified area, hence the Larger Bench came to the conclusion that for discharge of excise duty, the SAD has to be included. The terms of reference to the Larger Bench being totally different than the facts of the issue which is raised in these appeals; in our view the reliance placed by the Revenue on the ratio of the Larger Bench decision will not carry their case any further.
As regards the limitation issue, we have verified returns filed by the assessee to the revenue authorities. On perusal of such returns which are filed regularly by the appellant, we found that 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.
In view of the foregoing, on merits as well as on limitation we find that impugned orders are not sustainable.
Since we have disposed of all the appeals in favour of the assessee on merits as well as in limitations, we are not recording any finding on various other submissions made by both sides.
The impugned orders are set aside and all the appeals allowed with consequential relief, if any.”
• VVF Ltd. 2014-TIOL-04-CESTAT-MUM
“5. Having considered the rival contentions, it is held that the ruling relied upon by the Revenue is of no help being clearly distinguishable in view of the additional exemption of Sales Tax in respect of the concerned goods in the case of Moser Baer. Whereas in the present case, it is admitted position that the goods are not exempted from the Sales Tax in the DTA to which they have been cleared from EOU unit of the appellant. Thus, we hold that the appellant is entitled to the benefit of exemption from levy of SAD leviable under Section 3(3) of the Customs Tariff Act, 1975 in view of the specific exemption granted under Notification No. 23/2003-C.E., as amended.”
• Sti Industries 2014-TIOL-2611-CESTAT-AHM
“10. We find that the issue of demand of SAD on the goods cleared by 100% EOU to their own DTA Unit, is decided in favour of the assessee by this Bench in the case of M/s. Micro Inks v. CCE, Daman - 2013 (303) E.L.T. 99 (Tri. - Amd.) wherein the demands were set aside. In our considered view, the ratio of the decision of this Bench in the case of Micro Inks (supra) squarely settles the law in so far as this point. We are of the view that the demand of SAD on goods cleared to its own DTA Unit does not survive, accordingly, we do not find any merit in appeal of the revenue.”
From the above judgments, it can be seen that the Tribunal has taken a consistent view that the stock transfer from EOU to their other unit is not falling under category of sale. The said supplier will not be treated as exempted from payment of VAT/ Service Tax. Therefore, there is no violation of condition of Notification 23/2003-CE. Accordingly, the demand of SAD confirmed by the adjudicating authority is not sustainable. Hence, the impugned order is set aside. Appeals are allowed.