Exemption from Special Additional Duty of Customs (SAD) on goods cleared from SEZ/FTWZ into the DTA - CBEC Clarifies
NOTIFICATION No. 45/2005-Customs, dated 16.05.2005 exempts from SAD, goods cleared from SEZ / FTWZ and brought into DTA. The notification clearly states that the exemption shall not be available if such goods, when sold in DTA, are exempt from payment of sales tax / VAT. Prior to the issue of notification, it was brought to the notice of the Ministry that in some States sales tax is exempted in respect of DTA clearances by SEZ units. Further, in certain cases, such as stock transfer of goods from an SEZ unit to its unit in the DTA, no sales tax is levied. Hence, a condition was imposed that the exemption from SAD would be available only if such goods, when sold in the DTA, are not exempted from VAT/ sales tax. The intention was to avoid double taxation.
It has been brought to the notice of the Board that varying practices are being followed by the field formations regarding exemption from SAD on goods cleared from SEZs / Free Trade Warehousing Zones (FTWZ) into the DTA under notification No.45/2005-Customs, dated 16.05.2005. The issue raised is whether the benefit of exemption from SAD under this notification would be available when a DTA unit imports goods and routes it through SEZ / FTWZ for self-consumption i.e. in the nature of stock transfer from SEZ / FTWZ.
Board notes:
In the case of clearances which are in the nature of stock transfer from SEZ/FTWZ unit to the DTA unit for self-consumption i.e. otherwise than for sale as such, no sales tax / VAT is leviable on such a transaction. As no sales tax / VAT is leviable on the said transaction, SAD is payable.
Board Clarifies:
The benefit of SAD exemption on goods cleared from the SEZ/FTWZ unit into DTA unit on stock transfer basis for self-consumption i.e. otherwise than for sale as such, is not available under notification No.45/2005-Customs, dated 16.05.2005. In such cases, SAD would be leviable.
Board seems to have forgotten the fact that the goods cleared on stock transfer are not exempted from Sales Tax/VAT, but there is no Sales Tax/VAT, because there is no sale.The bar in the notification is only when there is exemption from VAT. When an SEZ unit transfers goods to its own DTA unit especially for manufacture, it pays VAT on the final product on a value added price.
So, now the departmental officers are going to storm the assessees with demand notices by invoking the extended period for denying the benefit of the SAD exemption. Interestingly, the notification in question is 45/2005-Cus dated 16.06.2005 and in case the Circular is given a retrospective effect the department has already lost a lot of revenue for the period from 2005 to 2008.
By the way, will this interpretation that SAD exemption is not available when goods are cleared into DTA unit on stock transfer basis apply all across the board - meaning there are some more notifications, some dead and some alive, which provide SAD exemption on a similar terms when goods are cleared from an EOU/EHTP/STP to a DTA? The CBEC may like to take a look at the notifications 20/2006-Cus, dated 01.03.2006 and 23/2003-CE, dated 31.03.2003 in this regard.
Netizens may also await our Jurisprudentiol case being reported tomorrow.
Circular No. , Dated: December 30, 2013