Special additional duty inclusion in DTA clearance duty turns on sales tax or VAT exemption under the notification.

For DTA clearances by a 100% EOU, the exemption notification requires special additional duty under Section 3(5) of the Customs Tariff Act to be included in excise duty computation where the clearances are exempt from sales tax or value added tax. The notification was construed strictly and its condition applied clearance-wise, so the actual tax position on each clearance determines whether the SAD component enters the assessment. Clearances on which sales tax or VAT is actually paid do not attract that component, but exempt clearances do. The reference was answered in favour of inclusion for exempt clearances and against the assessee.

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Issues: Whether, for determining the excise duty payable by a 100% EOU on DTA clearances under the relevant exemption notification, the element of special additional duty payable under the Customs Tariff Act must be included where the clearances are exempt from sales tax or value added tax.

Analysis: The levy of special additional duty under Section 3(5) of the Customs Tariff Act is a duty on imported goods imposed by the Central Government by notification, with the rate fixed having regard to the general incidence of sales tax, value added tax, local tax and similar charges. The duty is not to be worked out assessor-wise or area-wise by reference to the actual tax position in the place of sale. The exemption notification governing DTA clearances of a 100% EOU makes inclusion of the special additional duty dependent on whether the goods cleared into DTA are exempt from sales tax or value added tax. Since exemption notifications must be strictly construed, the condition in the notification has to be given effect according to its terms. The earlier precedents relied upon by the assessee were distinguished on the basis that they concerned different statutory settings or did not address the same proviso. The assessment, however, has to be applied clearance-wise, and where sales tax is actually paid on particular clearances, the special additional duty component is not to be added for those clearances.

Conclusion: The special additional duty is to be included while determining the excise duty payable on DTA clearances of a 100% EOU to the extent the clearances are exempt from sales tax or value added tax; the answer to the reference is in the affirmative against the assessee.

Final Conclusion: The reference was answered by holding that sales tax exemption on DTA clearances attracts inclusion of special additional duty in the excise duty computation, while clearances on which sales tax is paid do not attract that component.

Ratio Decidendi: Where the governing exemption notification conditions inclusion of special additional duty on the absence of sales tax or value added tax exemption, the duty must be included for exempt clearances and excluded only for clearances on which such tax is actually paid.

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