2014 (2) TMI 207 - AT - Customs

Tribunal grants SAD exemption, rules demands time-barred.

M/s Micro Inks Versus CCE. & ST. Daman

M/s Micro Inks Versus CCE. & ST. Daman - 2014 (303) E.L.T. 99 (Tri. - Ahmd.) Issues Involved:1. Interpretation of Notification No. 23/2003-CE regarding exemption from Special Additional Duty (SAD).2. Applicability of SAD on stock transfers to sister units.3. Limitation and revenue neutrality in the context of SAD exemption.Detailed Analysis:1. Interpretation of Notification No. 23/2003-CE regarding exemption from Special Additional Duty (SAD):The core issue revolves around the interpretation of Notification No. 23/2003-CE, which provides an exemption from SAD if goods cleared from an Export Oriented Unit (EOU) to the Domestic Tariff Area (DTA) are subject to sales tax/VAT. The appellant contended that the goods cleared to their sister units in DTA were not exempt from sales tax by any state government notification, and thus should not attract SAD. They argued that the non-payment of sales tax on stock transfers does not equate to an exemption granted by the state government. The Tribunal agreed with this interpretation, stating that the absence of a state notification exempting sales tax on such transfers means the goods are not exempt from sales tax, and thus, the SAD exemption should apply.2. Applicability of SAD on stock transfers to sister units:The adjudicating authority had held that the appellant was liable to pay SAD on stock transfers to their sister units, as these transactions did not involve the payment of sales tax/VAT. The Tribunal, however, disagreed, stating that the lack of sales tax on inter-unit transfers does not constitute an exemption by the state government. The Tribunal emphasized that for the SAD exemption to be denied, there must be a specific state notification exempting the goods from sales tax, which was not present in this case. The Tribunal also referenced the Supreme Court's interpretation in similar cases, supporting the appellant's position that the mere non-payment of sales tax on stock transfers does not negate the exemption.3. Limitation and revenue neutrality in the context of SAD exemption:The appellant argued that the demand for SAD was time-barred and that there was no intention to evade duty, as they had regularly filed returns indicating the clearances to their sister units. The Tribunal found merit in this argument, noting that the revenue authorities had ample opportunity to question the appellant's claims during regular audits but failed to do so. The Tribunal also considered the concept of revenue neutrality, where the SAD paid by the appellant would be available as CENVAT credit to the sister unit, thus negating any revenue loss to the government. Consequently, the Tribunal held that the demands were unsustainable on the grounds of limitation as well.Conclusion:The Tribunal set aside the impugned orders, allowing the appeals in favor of the assessee on both merits and limitations. The Tribunal concluded that the goods cleared to the sister units were not exempt from sales tax by any state notification, and thus, the SAD exemption under Notification No. 23/2003-CE was applicable. Additionally, the demands were time-barred, and the concept of revenue neutrality further supported the appellant's case. All appeals were allowed with consequential relief.