SAD not leviable on Clearance of ‘Sample’ of CD or DVD devices in DTA which is not subjected to VAT: CESTAT [Read Order]

The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the Special Additional Duty (SAD) cannot be levied on the clearance of sample of Compact Disc (CD) or Digital Video Disc (DVD) devices in Domestic Tariff Area (DTA) which was not subjected to Value Added Tax (VAT). 

Moser Baer India Ltd, the appellant assessee was a a 100% Export Oriented Unit (EOU )engaged in the manufacture of CDR, CD Rom, DVDR, DVD Rom, SSM Devices, etc, falling under the Central Excise Tariff Act, 1985 and they are clearing excisable goods for DTA sales as well as for export and on the goods cleared in DTA they are paying Central Excise duty is leviable in terms of Section 3 (2) of the Central Excise Act. 

The assessee appealed against the order passed by the Commissioner (Appeals) Customs, Central Excise, and Service Tax for confirming the demand of SAD against the assessee on clearance of the goods. 

Manish Raj, the counsel for the department contended that SAD was to be included in the aggregate of Customs duty if the goods cleared were exempt from payment of sales tax and here the goods on which no VAT was paid are exempt from payment of VAT, hence this value was to be included. 

Also submitted that in the absence of levy of sales tax/VAT, the SAD was applicable on all the goods cleared and the samples cleared without payment of VAT is liable for ‘Payment of SAD as per provision of Foreign Trade Policy. 

The Bench observed that the goods had been cleared in the DTA as sample that had not been sold and Sales Tax / VAT not payable and the SAD was not leviable on the goods cleared as sample by availing of exemption from payment of Sales Tax / VAT and in the present case the goods are not specified as exempt goods as defined under the VAT Act, but are not part of taxable turnover.  The two-member bench comprising P K Choudhary (Judicial) and Sanjiv Srivastava (Technical) quashed the SAD demand against the assessee while allowing the appeal filed by the assessee.

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