SAD exemption on stock transfers upheld where no State tax exemption existed for the inter-unit clearances.

Special Additional Duty exemption on DTA clearances by a 100% EOU could not be denied merely because the transfer was to its own unit on stock transfer basis and no Sales Tax or VAT was paid. The operative test was whether the goods were exempted from State tax under a State notification or order; an inter-unit stock transfer, by itself, does not establish such exemption. In the absence of any State exemption, non-payment of Sales Tax or VAT on the stock transfer did not justify denial of the SAD benefit, and the exemption remained available.

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Issues: Whether Special Additional Duty exemption could be denied on DTA clearances made by a 100% EOU to its own unit on stock transfer merely because no Sales Tax or VAT was paid on such transfers.

Analysis: The exemption condition was examined in the light of the notification governing SAD on DTA clearances and the earlier Tribunal view. It was held that an inter-unit stock transfer is not, by itself, proof of an exemption from Sales Tax or VAT, and that the relevant test is whether the goods are exempted by a State notification or order. In the absence of any such State exemption, non-payment of tax on a stock transfer does not justify denial of the SAD benefit.

Conclusion: The exemption was held to be available and the denial of SAD benefit was not sustainable; the assessee succeeded.

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