SAD not leviable on goods cleared as sample by availing exemption from payment of sales tax/ VAT

Moser Baer India Ltd Vs Commissioner of Customs (CESTAT Allahabad)

CESTAT Allahabad held that SAD (Special Additional Duty) is not leviable on the goods cleared in DTA as samples from EOU by availing of exemption from payment of Sales Tax/ VAT.

Facts- Appellant is a 100% EOU engaged in the manufacture of CDR, CD Rom, DVDR, DVD Rom, SSM Devices etc, falling under Chapter Heading 8523 of the Central Excise Tariff Act, 1985. They are clearing excisable goods for DTA sales as well as for export. On the goods cleared in DTA they are paying Central Excise duty as leviable in terms of Section 3(2) of the Central Excise Act read with the Notification No.23/2003-CE dated 31.03.2003. During the course of scrutiny of ER-2, it was noticed that appellant for the month of April, 2008 onwards were paying Central Excise duty on the goods cleared in DTA sales but were not showing payment of Additional duty of Customs (SAD) as they started payment of VAT on removals from the EOU, as declared and admitted by them in their letter dated 10.09.2008. It was assumed that on clearances of the samples vide Invoice No. AGLD 9922 dated 01.02.2008 under the numbers of CDRs were cleared/marked as sample and they had not charged CST/VAT in respect of these goods, this indicating that they were not charge VAT in respect of these clearances.

From the scrutiny of the ER-2 returns for the period January, 2011 to June, 2011, it was observed that appellant had paid additional duty of SAD @ 4% adv. amounting to Rs.73,565/- under protest on clearances effected from their EOU against the samples during the period 01.01.2011 to 30.06.2011.

Conclusion- In the present case the goods in dispute are not specified in schedule I or Schedule IV of the U P VAT Act hence are not exempt from payment of VAT, but the clearance of samples from EOU are not part of the taxable turnover as per the provisions of this Section 7. The transactions in respect of sample do not fall under the category of exempt goods as defined by the U P Vat Act, 2008. These clearances were not subjected to the VAT in view of the provisions contained in Section 7. We agree with the contention of the appellant that as these goods were not exempt from payment of VAT and sales tax but were not taxable under VAT being samples. The wordings of proviso of the Notification No.23/2003-CE dated 31.03.2003. as amended by Notification No 22/2006-CE dated 01.03.2006 are unambiguous and they refer to exempt goods under VAT Act. In the present case the goods are not specified as exempt goods as defined under the VAT Act, but are not the part of taxable turnover.

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