EOU not liable for Additional Duty on stock transfers without VAT payment. Precedents support Tribunal decision.

The Tribunal held that a 100% EOU was not liable to pay Additional Duty of Customs on stock transfers to its sister units without VAT payment. Relying on precedents, the Tribunal determined that in cases of inter-unit stock transfers of final products, the demand for SAD cannot be sustained if no VAT or Sales Tax was paid. The appellant's appeal was allowed, setting aside the demand of approximately Rs. 3.77 crores, interest, and penalties, providing consequential relief.

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Issues:
1. Liability to pay Additional Duty of Customs on stock transfers to own units without VAT payment.

Analysis:
The appellant, a 100% EOU engaged in manufacturing anesthetic drugs, active pharmaceutical ingredients, and vitamins, cleared goods to their own units without paying VAT or Sales Tax. The Revenue contended that the appellant should pay Additional Duty of Customs under Section 3(5) of the Customs Tariff Act for these stock transfers. The dispute centered on whether the SAD was applicable to such transactions. The Notification No.23/2003-CE provided an exemption from excise duty equivalent to SAD on goods cleared in DTA by a 100% EOU, subject to payment of Sales Tax or VAT. The Revenue argued that since no Sales Tax or VAT was paid on the stock transfers, SAD should be included in the total duty payable under the Central Excise Act.

Subsequently, proceedings were initiated against the appellant through a show-cause notice, leading to the confirmation of a demand of approximately Rs. 3.77 crores, along with interest and penalties. The key issue for determination was whether the appellant was liable to pay SAD on stock transfers to their sister units without VAT payment. The Tribunal referred to previous decisions in similar cases, including STI Industries Vs. CCE, Daman and Micro Inks Vs. CCE, Daman. Relying on these precedents, the Tribunal held that in cases of inter-unit stock transfers of final products, the demand for SAD cannot be sustained even if no VAT or Sales Tax was paid on such transactions. Given the settled nature of the issue in favor of the assessee based on the Tribunal's previous decisions, the impugned order was set aside, and the appeal was allowed with consequential relief to the appellant.

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