EOU to DTA exemption under Notification 23/2003-CE upheld where VAT exemption was not shown and disclosure defeated extended limitation.

Notification No. 23/2003-CE applied to EOU clearances to DTA where the goods were not shown to be exempted from sales tax or VAT by any State notification, and mere non-payment of VAT on stock transfers did not by itself establish such exemption. The assessee's disclosures in returns and correspondence with the Department also showed that the clearances were not suppressed, so the extended period of limitation could not be invoked. The demand based on extended limitation was therefore unsustainable, and the exemption benefit remained available on the facts stated.

---

---

Issues: Whether the appellant was entitled to the benefit of Notification No. 23/2003-CE dated 31.03.2003 on stock transfers to its own DTA units where VAT was not payable, and whether the demand was barred by limitation.

Analysis: The applicable exemption turned on whether the goods cleared from the EOU to DTA were exempted by the State Government from sales tax or VAT. On the facts, stock transfers were not shown to be covered by any State exemption notification, and non-payment of VAT on inter-unit transfers did not by itself establish that the goods were exempted from sales tax/VAT. The appellant had also intimated the Department through letters and returns about the clearances, which negatived invocation of the extended period of limitation.

Conclusion: The appellant was eligible for the benefit of Notification No. 23/2003-CE dated 31.03.2003, and the demand raised by invoking the extended period of limitation was unsustainable. The appeal was allowed in favour of the assessee.

Ratio Decidendi: For the purpose of Notification No. 23/2003-CE, exemption is available where the goods cleared from an EOU to DTA are not exempted by a State notification from sales tax or VAT, and mere non-liability of VAT on stock transfers does not amount to such exemption; timely disclosure in returns and correspondence also defeats extended limitation.

---