Custom, Excise & Service Tax Tribunal
Skipperseil Limited (Unit Ii) vs Commissioner Of Central Goods And ... on 25 July, 2022
Author: Dilip Gupta
Bench: Dilip Gupta
1
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. 1
EXCISE APPEAL NO. 52673 OF 2018
[Arising out of Order-in-Appeal No. 229-230(SM)CE/JPR/2018 dated 11.05.2018
passed by the Commissioner (Appeals), Central Excise & CGST, Jaipur]
M/s Skipperseil Limited (Unit-II) Appellant
(formerly known as M/s Skipper Electricals
India Limited)
B-825, RIICO Industrial Area,
Phase-II, Bhiwadi
Versus
The Commissioner, Central Tax Respondent
Commissionerate, Alwar 'A' Block, Surya Nagar, Alwar AND EXCISE APPEAL NO. 52681 OF 2018 [Arising out of Order-in-Appeal No. 229-230(SM)CE/JPR/2018 dated 11.05.2018 passed by the Commissioner (Appeals), Central Excise & CGST, Jaipur] M/s Skipperseil Limited (Unit-II) Appellant (formerly known as M/s Skipper Electricals India Limited) B-825, RIICO Industrial Area, Phase-II, Bhiwadi Versus The Commissioner, Central Tax Respondent Commissionerate, Alwar 'A' Block, Surya Nagar, Alwar APPEARANCE:
Shri Dhruv Tiwari Advocate - for the Appellant Shri Sanjay Kumar Singh, Authorised Representative for the Respondent CORAM:
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MR. P.V. SUBBA RAO, MEMBER (TECHNICAL) DATE OF HEARING/DECISION: 25.07.2022 FINAL ORDER NOs. 50691-50692/2022 2 P. V. Subba Rao These two appeals are filed on the same issue and hence are being disposed of together. The issue which falls for consideration is in a case where a 100% EOU transfers goods which are chargeable to VAT to its own Domestic Tariff Area Unit, does the Central Excise Duty have to paid including Special Additional Duty (SAD) of Customs or otherwise.
2. During the period 2007-2008 to 2011-2012 the appellant cleared its final products to its own unit located in Domestic Tariff Area 1 on stock transfer basis. As per the proviso to sub-section (1) of section 3 of the Central Excise Act, 1944 if goods manufactured by a 100% EOU are cleared into DTA, excise duty is leviable of an amount equivalent to Customs duty if such goods are imported into India.
4. Goods which are imported into India are chargeable to Basic Customs Duty, Additional Duty of Customs and Special Additional Duty 2 and other forms of duties as applicable. SAD is levied under Section 3(5) of the Customs Tariff Act, 1975 at a rate equivalent to 4% of the value of the goods. The purpose of levying SAD is to providing a level playing field to the domestic manufacturers whose products suffer VAT under the State VAT Acts. However, since States cannot levy VAT on sale and purchase of goods in the course of international trade, no VAT is leviable on imports. In order to remedy this situation, SAD is imposed on some goods. If the importer uses the imported goods he will have to bear the burden of SAD. On the other hand, if the importer sells the 1 DTA 2 SAD 3 imported goods and pays VAT, he can claim refund of the SAD paid at the time of import. A level playing field is thus created for the domestic manufacturer of the goods.
5. As far as the 100% EOU are concerned, when the goods are cleared to a unit in DTA, Central Excise duty is paid equivalent to the amount of Customs duties payable on similar products if they were imported. However, Notification No. 23/2003-CE dated 31.3.2003 provides that no additional duty of Customs leviable under sub-section (5) of Section 3 of Customs Tariff Act shall be reckoned while calculating the aggregate duties of Customs leviable on like goods. However, it further provides that if the goods are exempt from VAT or Sales Tax, SAD under sub-section (5) of Section 3 of the Customs Tariff Act i.e., SAD shall be payable. The relevant portion of this exemption notification is as follows:
"Exemption to DTA clearances of specified goods produced in EOU/EHTP/STP - "In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) ( hereinafter referred to as the Central Excise Act), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts excisable goods of the description specified in column (3) of the Table below, and falling within the Chapter, heading No. or sub-heading No. of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the Central Excise Tariff Act), specified in the corresponding entry in column (2) of the said Table, produced or manufactured in an export oriented undertaking or an Electronic Hardware Technology Park (EHTP) Unit or a Software Technology Park ( STP) Unit and brought to any other place in India in accordance with the provisions of Export and Import Policy and subject to the relevant conditions specified in the Annexure to this notification, and referred to in the corresponding entry in column (5) of the said Table, from so much of the duty of excise leviable thereon under section 3 of the Central Excise Act as specified in the corresponding entry in column (4) of the said Table.
Table Chapter or heading Description Sr.No. Amount of Duty Conditions No. or sub- of Goods heading 4 No. (1) (2) (3) (4) (5) Duty of excise leviable thereon as is equivalent to the special additional duty of customs leviable on such goods under sub-
1. Any Chapter All goods section 5 of Section 3 of the Customs Tariff 1 Act, 1975 (51 of 1975) read with proviso to sub-section (1) of section 3 of the said Central Excise Act.
In excess of the amount equal to the aggregate of duties of Customs leviable on like goods, as if:
(a) Duty of customs specified in the First Schedule to the Customs Tariff Act, 1975n (51 of 1975), read with any other notification in force was reduced by 50%, and
(b) No additional duty of customs was leviable under sub-section (5) of section 3 of the said Customs Tariff Act.
Provided that while calculating the aggregate of customs duties, additional duty of customs leviable under sub-section (5) of the section 3 of the Customs Tariff Act shall be included if the goods cleared into Domestic Tariff Area are exempt from payment of sales tax or value added tax.
Illustration.- Assuming product X has the value Rs. 100 under section 14 of the Customs Act,1962 and is chargeable to basic custom duty of 25% ad valorem, additional duty of 16% ad valorem and special additional duty of 4% ad valorem. The computation of duty required to be paid would be as follows:
Basic Customs duty but for this exemption = Rs. 10/-
Basic Customs duty because of this
exemption = Rs. 5/-
Value for the purpose of special additional duty = Rs. 100/- + Rs. 5/- + Rs. 105/-
Additional duty = 20% of Rs. 105/-= Rs.
21/-
Total duty payable after this exemption = Rs. 5/- + Rs. 21/- = Rs. 26/-
6. It is undisputed that in this case the appellant's goods were leviable to SAD and they were not exempted from payment of VAT under any exemption notification. However, the appellant had not paid any VAT while clearing its goods to its own DTA unit for the 5 reason that no sale was involved and it was only a stock transfer.
For this reason, the appellant has paid Central Excise duty without reckoning the SAD. According to the Revenue, SAD must be reckoned for calculating the Central Excise duty because no VAT was being paid while transfer the goods to the DTA unit of the appellant.
7. Demand notices were issued and orders in original dated 24.5.2017 and 25.5.2017 were passed by the lower authorities which were appealed against and they culminated into the issue of impugned order dated 11.05.2018.
8. Learned Counsel for the appellant submits that the short issue to be decided is whether non-payment of VAT by the appellant while stock transfering goods to its own DTA unit should be construed as an exemption from VAT or otherwise. He submits that the issue is no longer res integra it has been decided in the case of Micro Inks Vs. Commissioner of Central Excise & Service Tax 3 and further followed in the following decisions:
(i) STI Industries Vs. Commissioner of Central Excise, Daman 4;
(ii) Jindal Saw Ltd. Vs. Commissioner of Central Excise, Ahmedabad-I 5;
(iii) VVF Ltd. Vs. Commissioner of Central Excise, Belapur 6;
(iv) Behr India Ltd. Vs. Commissioner of Central Excise, Pune 7
(v) TFL Quinn India Pvt. Ltd. Vs. CCE & ST, Hyderabad-IV 8 3 2014 (303) ELT 99 (Tri.-Ahmd.) 4 2015 (327) ELT 514 (Tri.-Ahmd.) 5 2016 (334) ELT 172 (Tri.Ahmd.) 6 2015 (315) ELT 303 (Tri.-Mumbai) 7 2016 (6) TMI 315-CESTAT Mumbai 6
9. He submits that in all the above cases it has been decided by the Tribunal that not paying VAT while transferring the goods does not mean that the goods are exempt from VAT. Even in the present case, there is no exemption notification by the State Government from VAT with respect to the goods which have been transferred to the DTA unit. He further submits that once the DTA unit further sells the product appropriate VAT will be paid. Since there is no sale during stock transfer no VAT was paid but it does not mean there is an exemption of VAT on the goods.
10. Learned Authorised Representative reiterates the findings of the lower authority.
11. We have heard both sides and perused the records.
12. The undisputed facts are that the appellant's goods were leviable to VAT and no VAT was paid because there was no sale of the goods but only stock transfer to its DTA unit. The point of taxation in respect of Central Excise duty and VAT are different. As far as the Central Excise duty is concerned, it becomes payable when the goods are cleared from the factory whether or not there is a sale because the taxable event is manufacture itself and not sale. On the other hand, the VAT is payable only when there is a sale or purchase. The taxable event is sale or purchase. Therefore, in cases such as this where the goods are transferred to the appellant's own units they are removed from the factory and, therefore, the Central Excise duty is payable. However, since there is no sale at that stage VAT is not payable. Subsequently, when 8 2018 (9) TMI 732-CESTAT-Hyderabad 7 the goods are sold by the DTA unit of the appellant VAT becomes payable. What is important for the Notification No. 23/2003 to be applicable is that VAT should not be exempted on those goods. Undisputedly, there was no exemption from VAT in this case. The mere fact that the payment of VAT does not happen concomitantly with the clearance of the goods does not mean that the VAT is exempted. This issue was discussed at length by the Bench of this Tribunal in the case of Micro Inks and paragraph 10 is reproduced below:
"10. We are unable to accept the contentions raised by the ld. Departmental Representative and the findings recorded by the adjudicating authority for more than one reason. Firstly, it is the fact that the inter unit clearance from EOU to DTA are not exempted from payment of sales tax by the State Government by any notification and revenue unable to bring on record any notifications issued by the State Government or otherwise to indicate that inter unit transfers from EOU to DTA are exempted. It is an admitted fact that whenever there is an inter unit transfer, it is not sales transactions and hence the sales tax/CST/VAT may not get attracted does not mean ipso facto, it is an exemption granted by the State Government. In the absence of any notification granting exemption for specified products by the State Government from levy of sales tax on the finished goods cleared from 100% EOU, it would be incorrect to hold that the goods were exempted from sales tax, more so when the appellant has discharged the sales tax on the same products which were cleared to independent buyers. Secondly, we find that the lower authority seems to have been guided by the argument that inter unit clearance are not taxed by the State Government and is to be construed as an exemption granted. This is totally a wrong perception of the law inasmuch as that exemption, if any, under statute needs to be granted in accordance with law i.e., by issuance of notification by the concerned authorities. It is nobody's case that the State Government has no power to exempt sales tax/VAT on specific products. In our view, the only question which needs to be addressed is whether the goods cleared into DTA to appellants sister units are exempted or not exempted, which in our considered view due to foregoing reasons, has to be held in favour of assessee, in the absence of any evidence on record to show that the said products if cleared to DTA is exempt from payment of sales tax. It is to be noted that provisions of Central Sales Tax, 1956 recommends movements of goods inter State by raising stock transfer notes even to independent buyers/own units by non- payment of CST/VAT on such clearances, cannot be construed as an exemption granted by the State Government. We find that for the purpose of taking benefit of Notification 23/2003-C.E., as amended, the one and only condition specified in respect of the goods being cleared into DTA, is if the said goods are exempted by the State Government from payment of sales tax/VAT, in the present case there is no such notification or order issued by the State Government exempting impugned goods from the payment of sales tax/VAT. It is to be held that plain reading of Notification 8 No. 23/2003-C.E. as amended is applicable 'Qua Goods" and exemption is across the Board and is applicable to all such goods which are not exempted by the State Government by issue of notification or an order from payment of sales tax/CST/VAT. We also find that large emphasis placed upon, by the lower authorities as well as departmental representative on the decision of the Larger Bench in the case of Moser Baer (I) Ltd. (supra). In our view, the reliance on the ratio seems to be erroneous since the question which was raised before the Larger Bench was not the question that is before the Bench in the proceedings in these appeals. The Larger Bench was specifically referring to the issue which was in respect of a 100% EOU availing sales tax exemption, for determining the Excise duty payable on aggregate value of customs duty by inclusion of SAD, whether should be taken into account or not while answering such a reference, Larger Bench has held that the assessee in that case was availing sales tax exemptions in respect of sales from their unit located in the notified backward area, as has been specified in the order of exemption granted to them by the State Government of U.P. It would be not out of place to note that the State Government of U.P. had specifically granted exemption from leviable of sales tax on the goods which were manufactured in a notified area, hence the Larger Bench came to the conclusion that for discharge of excise duty, the SAD has to be included. The terms of reference to the Larger Bench being totally different than the facts of the issue which is raised in these appeals; in our view the reliance placed by the Revenue on the ratio of the Larger Bench decision will not carry their case any further."
13. Respectfully following Micro Inks and other decisions which followed it, we hold that the appellant is not liable to pay Central Excise duty reckoning the SAD payable on goods cleared by the appellant if they were imported into India. Consequently, both appeals are allowed and impugned orders are set aside.
(Pronounced in open Court) (Justice Dilip Gupta) President (P.V. Subba Rao) Member (Technical) RM