Custom, Excise & Service Tax Tribunal
M/S Vvf Ltd vs Commissioner Of Central Excise, ... on 13 September, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal No. E/1068/11 & E/656/12 (Arising out of Orders-in-Original No. Belapur/48/Taloja/R-VI/ Commr/10-11 dated 23.3.2011 and No. Belapur/61-62/Taloja/R-VI/ Commr/11-12 dated 31.1.2012 passed by the Commissioner of Central Excise, Belapur). For approval and signature: Honble Shri P.R. Chandrasekharan, Member (Technical) Honble Shri Anil Choudhary, Member (Judicial) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy : Seen of the order? 4. Whether order is to be circulated to the Departmental : Yes authorities? ====================================================== M/s VVF Ltd. Appellant Vs. Commissioner of Central Excise, Balapur Respondent Appearance: Shri Vishal Agarwal, Advocate with Shri Krishna Kumar, Advocate Ms. Manya Bhardwaj, Advocate for Appellant Shri Shobha Ram, Commissioner (AR) for Respondent CORAM: SHRI P.R. CHANDRASEKHARAN, MEMBER (TECHNICAL) SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) Date of Hearing: 13.09.2013 Date of Decision: 13.09.2013 ORDER NO. Per: Anil Choudhary
The appellant preferred these two appeals being aggrieved with Orders-in-Original passed by the Commissioner of Central Excise, Belapur, Navi Mumbai, wherein he has been pleased to confirm the amount of duty (SAD including Edu. Cess and SH Edu. Cess) in respect of clearances effected by the appellants EOU unit to its other units located in DTA by way of stock transfer under proviso to Section 11A(1) of the Central Excise Act, 1944 and thereafter under Section 11A(1)(a) of the Act besides the order to recover interest thereon under Section 11AB and also levied penalty under Rule 25 of the Central Excise Rules, 2002. The details of order in original are as under: -
OIO date Period Total demand Penalty 23.3.2011 February, 2009 to October, 2009 Rs.4,81,41,421/-
Rs.4,81,41,421/-
31.1.2012 November, 2009 to August, 2011 Rs.4,10,84,593/-
Rs.40,00,000/-
Being aggrieved, the appellant is in appeal before this Tribunal.
2. The brief facts of the case are that the appellant is a 100% EOU located at Taloja, Dist. Raigad, Maharashtra. The appellants are engaged in the manufacture and marketing of oleo chemicals and personal care products for domestic and international market including manufacture of distillate fatty acid, fatty alcohol, glycerin and soaps etc. The company is having several manufacturing units spread over in Maharashtra and also in other States. The appellant is registered under Central Excise and is also having permission to sell part of the goods manufactured by them in Domestic Tariff Area (DTA) on payment of Central Excise duty subject to the condition(s) specified in the Foreign Trade Policy. Section 3 of the Central Excise Act, 1944 provides that the excise duty of an amount equal to the aggregate of the duties of Customs, which is leviable under the Customs Act, 1962 or any other law for the time being in force on like goods produced or manufactured outside India, if imported into India, shall be levied on the goods manufactured or produced by an EOU and cleared into DTA. Thus, the duty of excise which is mandated to be levied and collected on the excisable goods which are produced or manufactured by an EOU and cleared to DTA, is the amount of aggregated duties of customs which is leviable on like goods when imported. The EOU is also allowed to clear the goods manufactured by them into DTA at concessional rate of duty under Notification No. 23/2003 CE dated 31.03.2006, as amended by Notification No. 22/2006-CE dated 01.03.2006, subject to the fulfillment of the conditions specified in the Notification and the Foreign Trade Policy. Additional Duty of Customs (herein after referred to as SAD) leviable under Section 3(5) of the Customs Tariff Act, 1975, is one of the components of customs duty which constitutes the aggregate of duties of customs leviable on the goods when imported into India. Under the provisions of Section 3(5) of CTA, 1975, SAD can be levied on any imported goods to counter balance the sales tax, VAT, local tax or any other charges for the time being leviable on like articles on its sale, purchase or transportation in India at the rate not exceeding 4% of the value of imported articles as notified by the Central Government. The Central Government by Notification No. 19/2006 - Cus dated 01.03.2006 has fixed the rate of 4% for levying SAD on the imported goods under Section 3(5) of the Customs Tariff Act, 1975. Notification No. 20/2006-Cus dated 01.03.2003 provides exemption from SAD on certain goods subject to certain specified conditions, when imported into India and inter-alia exempt all goods which are exempt from the whole of the duty of customs leviable thereon or in case of which Free or Nil rates of duty of Customs are specified in column (4) under the First Schedule of the Customs Tariff Act, 1975 (51 of 1975) and which are also exempt from the whole of additional duty of customs leviable thereon under Section (1) of section 3 of the said Act, or on which no amount of the said additional duties of customs is payable for any reason. In view of the aforesaid legal provisions, the EOU is required to pay SAD @ 4% or at the effective rate prescribed under Notification No. 20/2006-Cus, being part of the aggregate duties of Customs on sale of the goods manufactured by it and cleared into DTA under Section 3 of the Central Excise Act, 1944 and if the effective rate of SAD is NIL, then SAD will not be included in calculating the aggregate duties of Customs for purpose of levy of Central Excise duties under Section 3 of the Central Excise Act, 1944. Besides the above Notification No. 20/2006-Cus, the Central Government by Notification No. 23/2003 dated 31.03.2003, has exempted the goods manufactured and produced in an EOU and cleared to DTA from levy of SAD subject to the condition that the said goods cleared to DTA are not exempted by the State Government from payment of Sales tax/VAT.
2.1 Revenue issued show-cause notice to the appellant under the belief that non-payment of Sales Tax/VAT on stock transfer made by the appellant EOU to its other units amounts to exemption of Sales Tax/VAT. Accordingly, show-cause notices were issued as to why Central Excise duty equal to the aggregate of duty of customs under Section 3(1) of the Central Excise Act and specifically the element of Special Additional Duty (SAD) of Customs, which is a part of the composite duty in respect of clearance effected during the period as detailed in the show-cause notice should not be recovered under Section 11A of the Central Excise Act and further why should not interest at appropriate rate be levied under Section 11AB along with penalty under Section 11AC of the Act and also Rule 25 of the Central Excise Rules, 2002.
2.2 The appellant contested the show-cause notices by filing appropriate reply and mainly contested that Sales Tax/VAT is not exempted by the State Government, but the same is not leviable under the facts and circumstances due to stock transfer made to its other units located elsewhere. Thus, there being no element of sale (transfer of ownership), Sales Tax/VAT is not attracted although the same is chargeable in case of sale transaction.
2.3 On adjudication, the learned Commissioner confirmed the proposed demand along with interest thereon and imposed penalty holding that in the proviso to S. No. 2 of the table annexed to Notification No. 23/03-CE as amended, additional customs duty leviable under Section 3(5) of the Customs Tariff Act shall be included, if the goods cleared into DTA are exempted from payment of Sales Tax or VAT and the word exempt is not qualified by the word generally. The word exempt in the expression if the goods are cleared into DTA are exempted from payment of Sales Tax or VAT would cover unconditional general exemption as well as conditional area based exemption. Thus there cannot be two views or different interpretation on the aspect that the clearances to DTA in the nature of Stock Transfer which do not attract Sales Tax/VAT are construed to be exempted from such levy. Being aggrieved, the appellant is in appeal before the Tribunal.
3. The learned Counsel for the appellant contends the following grounds before this Tribunal: -
(i) Vide Notification No. 20/2006-Cus dated 1.3.2006, the Central Government in exercise of the powers conferred by Section 25(1) of the Customs Act, 1962 exempted the goods from the whole of the duty of customs leviable thereon or in case of which Free or Nil rates of duty of customs are specified in column (4) under the First Schedule of the Customs Tariff Act, 1975 (51 of 1975) and which are also exempt from the whole of additional duty of customs leviable thereon under sub-section (1) of Section 3 of the said Act, or on which no amount of the said additional duties of customs is payable for any reason. The goods may belong to any chapter heading.
(ii) Further, vide Notification No. 23/2003-CE dated 3.1.2003, the Central Government has exempted excisable goods (any chapter, all goods) to the First Schedule of the Central Excise Tariff Act, 1985, produced or manufactured in an EOU 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 Foreign Trade Policy and subject to the relevant conditions specified in the Annexure to the said notification and duty of excise leviable thereon as is equivalent to the additional duty of customs leviable on such goods under sub-section (5) of Section 3 of the Customs Tariff Act, 1975 read with the proviso to sub-section (1) of Section 3 of the said Central Excise Act, subject to condition No. 1, if the goods being cleared into the DTA are not exempt by the State Government from payment of Sales Tax or VAT.
(iii) It is further contended that undisputedly Sales Tax is leviable on the sale of goods in question when cleared to DTA (by way of sale), meaning thereby that there is no exemption from payment of Sales Tax/VAT. Thus, the exemption from payment of SAD on DTA clearances was admissible to the appellant even if stock transfer is made to its another unit located in the DTA, although no Sales Tax was attracted in the absence of element of sale. Accordingly, the benefit of Notification No. 23/03-CE will be available to the appellant while calculating the correct duty of customs for the purpose of levy of duty of Central Excise on DTA clearance, cleared otherwise than by way of sale.
(iv) The appellant further contends that the Commissioner has erred in considering that in all cases where Sales Tax/VAT is not payable, it can be consequently held that the State Government has granted the exemption from payment of Sales Tax. The exemption from Sales Tax and/or Sales Tax being not leviable in absence of sale is very different and cannot be equated as exempt transaction. Thus, no SAD is leviable on goods cleared to DTA wherein the State Government have not given any exemption from levy of Sales Tax, the chargeability is not attracted in absence of sale, there being only stock transfer.
(v) Further, the appellant relies on the ruling by the Authority for Advance Ruling in the case of GE India Industrial Pvt. Ltd. Vs. CC (Exp.) 2013-TIOL-01-ARA-CUS, wherein the issue was appellant proposed to clear goods by way of stock transfer to their own manufacturing unit and pay the duty of customs in terms of Section 30 of SEZ Act and proposed to avail the benefit of exemption Notification No. 45/2005-Cus dated 16.5.2005, which exempt goods cleared from the SEZ to DTA from payment of whole of the additional duty of customs (SAD) under Section 3(5) of the Customs Tariff Act, 1975 subject to the fulfillment of the conditions mentioned in the proviso of the aforesaid notification. The question formulated by the Authority was whether the goods/stock transferred by the applicant from the SEZ unit to its DTA unit would be eligible for exemption from the payment of SAD under Notification No. 45/2005-Cus dated 16.5.2005? The Authority held that the position is clear, Notification No. 45/2005-Cus exempts all goods cleared from SEZ and brought to any of the place in India from the SAD levied thereon under Section 3(5) of the Customs Tariff Act, 1975. However, when such goods are sold in DTA and/or exempted by the State Government from the payment of Sales Tax/VAT, such exemption is not available.
(vi) Further reliance is placed on the ruling of the Honble Andhra Pradesh High Court in the case of Bharat Electronics Ltd. Vs. Dy. Commissioner (CT) - 2011 (46) VST 170 (AP), wherein in para 8, the definition of sale under Section 2(g) of the CST Act has been noticed that there must be a transfer of property in goods for consideration by one person to another to constitute a sale. Further, it was held that transfer of goods from one unit of the assessee to another is in the nature of stock transfer and would not, by itself and without anything more, constitute sale as the petitioner company cannot be said to have sold goods to itself.
(vii) Further reliance has been placed on the ruling of Peekay Re-rolling Mills Vs. AC 2007 (219) ELT 3 (SC), wherein at para 35 of its order, the Hon'ble Supreme Court have observed as follows: -
35. The first aspect of the argument of the respondent is with respect to the impact of exemption upon the liability to tax. In our opinion, exemption can only operate when there has been a valid levy, for if there was no levy at all, there would be nothing to exempt.
(viii) Further reliance has been placed on the ruling of the Hon'ble Apex Court in the case of Goodyear India Ltd. Vs. State of Haryana AIR 1990 SC 781, wherein at para 37, it is observed as follows: -
37. The mere consignment of goods by a manufacturer to his own branches outside the State does not in any way amount to a sale or disposal of the goods as such. The consignment or dispatch of goods is neither a sale nor a purchase.
4. Learned Commissioner (AR) appearing for the Revenue reiterates the findings of the Commissioner and further relies on the ruling of the Larger Bench of this Tribunal in the case of Moser Baer India Ltd. Vs. Commissioner of Central Excise, Noida 2009 (240) ELT 25 (Tri-LB), wherein it was held that in respect of a 100% EOU availing Sales Tax exemption, for determining the excise duty payable based on aggregate value of customs duty, the element of SAD should be taken into account. This decision was rendered in view of the fact that the goods in question being CDs manufactured by the appellant M/s Moser Baer India Ltd. were exempted from Sales Tax in the State of UP and further such removal was by way of sale and not stock transfer.
5. Having considered the rival contentions, it is held that the ruling relied upon by the Revenue is of no help being clearly distinguishable in view of the additional exemption of Sales Tax in respect of the concerned goods in the case of Moser Baer. Whereas in the present case, it is admitted position that the goods are not exempted from the Sales Tax in the DTA to which they have been cleared from EOU unit of the appellant. Thus, we hold that the appellant is entitled to the benefit of exemption from levy of SAD leviable under Section 3(3) of the Customs Tariff Act, 1975 in view of the specific exemption granted under Notification No. 23/2003-CE, as amended.
6. Thus, the appeal is allowed with consequential relief, if any.
(Dictated and pronounced in Court)
(P.R. Chandrasekharan) (Anil Choudhary)
Member (Technical) Member (Judicial)
Sinha
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