SAD on EOU stock transfers: Tribunal found a strong prima facie case for waiver of pre-deposit and recovery stay.

CESTAT, Mumbai held that the appellant had made out a strong prima facie case for waiver of pre-deposit and stay of recovery in a dispute over SAD on stock transfers from a 100% EOU to its domestic unit. The Tribunal noted that the goods were admittedly liable to sales tax/VAT, and applied Notification No. 23/2003-C.E., which covered DTA clearances by an EOU where the State Government had not exempted the goods from sales tax or VAT. It distinguished the cited larger bench ruling on the basis that the present goods were not exempt from such state taxes, and therefore granted waiver of duty, interest and penalty during the appeal.

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Issues: Whether the appellant had made out a prima facie case for waiver of pre-deposit and stay of recovery in respect of the demand of SAD on clearances from a 100% EOU to its domestic unit.

Analysis: The demand arose from clearances from the EOU to the appellant's own unit by way of stock transfer, and the goods were admittedly liable to sales tax/VAT. The exemption under Notification No. 23/2003-C.E. applied where DTA clearances of goods manufactured by an EOU were not exempted by the State Government from sales tax or VAT. On the facts found, the Tribunal held that the appellant had a strong prima facie case and distinguished the cited larger bench ruling on the basis that the present goods were not exempt from sales tax/VAT.

Conclusion: The requirement of pre-deposit of the duty, interest and penalty was waived and recovery was stayed during pendency of the appeal.

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