Challenge to Customs Tariff Act Grant Dismissed

The appeal challenging the grant of relief of special additional duties under Section 3(5) of the Customs Tariff Act, 1975 for clearances of medicinal products from a special economic zone to a domestic tariff area was dismissed. The Tribunal held that the goods were taxable under the revenue laws of the State, despite the deferral of value added tax liability until the actual sale transaction. The appeal was deemed misdirected as the goods were not exempt from value added tax, leading to the conclusion that the appeal had no merit.

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Issues:
Appeal against granting relief of special additional duties under Section 3(5) of Customs Tariff Act, 1975 for clearances of medicinal products from a special economic zone to a domestic tariff area as stock transfer.

Analysis:
The appeal by Revenue challenged the order-in-appeal granting relief of special additional duties under Section 3(5) of Customs Tariff Act, 1975 for clearances of medicinal products from a special economic zone to a domestic tariff area as stock transfer. The contention was that the clearances were liable for special additional duty as the goods were not exempted from value added tax when sold in the domestic tariff area. The Tribunal considered the exemption Notification No. 45/2005-Cus., dated 16th May, 2005, which stated that exemption would not apply if the goods, when sold in the domestic tariff area, were exempted from value added tax by the State Government. The Tribunal noted that in this case, the goods were not exempt from value added tax, and the tax liability was only deferred until the actual sale transaction took place. Therefore, the goods were still taxable under the revenue laws of the State, and the appeal against the order of the first appellate authority was deemed misdirected.

The Tribunal emphasized that the postponement or evasion of value added tax liability did not negate the taxability of the goods themselves. The temporary deferral of tax did not exempt the goods from being taxable under the relevant revenue laws of the State. The Tribunal concluded that since the goods were taxable, the appeal against the order of the first appellate authority had no merit and was dismissed. The judgment was pronounced in court on 20-3-2019.

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