The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) while remanding the case of expired medicines duty has clarified that excise duty not payable if reasonable time was given for destruction approval.
The bench of Somesh Arora (Judicial Member) and Satendra Vikram Singh (Technical Member) has observed that for expired medicines, if despite waiting for long for permission to destroy the goods, no permission is received and the destruction is carried out by party on its own in their premises, then the demand of duty cannot be sustained. It is not coming out from the records in this case as to whether permission was sought for by the appellant and still the party had destroyed the goods circumventing requirement of grant of some reasonable period to the department or not. If reasonable time was not allowed by the party, the duty shall be demandable otherwise not.
The appellant/assessee, Sun Pharmaceuticals Industries Limited is an 100% EOU who are engaged in both exports as well as sales in DTA. The Notification No. 23/2003-CE granted exemption from payment of SAD if goods being cleared to DTA are not exempted by the state Government from payment of Sales Tax/VAT.
The appellant also availed the benefit of this exemption notification did not pay SAD and on stock transfer of goods to sister units without payment of VAT/CST as for stock transfers, no sales tax was applicable Against Department’s allegation of non payment of SAD on stock transfer to the sister concern units, the Appellant explained that SAD is not payable on goods sold on stock transfer basis.
However, on insistence of the Department, they paid the duty under protest. Another issue is that the Appellant destroyed some goods on being found unfit for consumption but department required payment of duty on the said destroyed goods.
Department, however, viewed that the Appellant have neither paid Central Excise Duty (equal to 4% Addl. Duty of Customs) nor sales tax/VAT on DTA clearances and have thus wrongly availed benefit of Notification No: 23/2003-CE.
The basic condition for eligibility of exemption under the said notification is that if the goods being cleared into the domestic Tariff Area are not exempt by the State Government from payment of Sales Tax or value added tax SAD has been imposed vide Section 3(5) of the Customs Tariff Act. 1975 and rate of 4% has been prescribed on all goods imported into India vide Notification 19/2005 dated 1/3/2005.
From a reading of Section 3(5), it is clear that levy of SAD under this sub-section on import of any article is not dependent on the sales tax payable, but whether sales tax are leviable on it. Therefore, if an article on which sales tax/Value Added Tax are leviable, has been notified by the Central Government by a notification issued under Section 3(5) as attracting SAD @ 4% then SAD would be chargeable on import of that article even if some State Governments or in some areas of a particular State Government, that article has been fully exempted from the payment of sales tax/VAT.
The Department alleged that whenever sales tax is not paid, SAD has to be paid. On destruction of expired tablets/capsules, remnants and raw materials, the appellant had taken permission from the local authority of Food and Drugs Administration, Silvasa for the destruction for destruction of finished goods only and did not obtain any prior permission from the Central Excise/Customs Authorities. For the destruction of the raw-materials they had not obtained any permission either from FDA or Central Excise/Customs Authorities.
The tribunal held that if reasonable time was not allowed by the party, the duty shall be demandable otherwise not. On the issue of destruction of goods, further details are warranted. These aspects need to be looked into by the adjudicating authority with all the relevant details along with limitation issues.
The tribunal remanded the matter to the original authority to decide the issues regarding the duty demand and also about the period allowed by the party for the department to act on their request for destruction, if any.
Case Details
Case Title: Sun Pharmaceuticals Industries Limited Versus C.C.E & S.T.-Silvasa
Case No.: Excise Appeal No. 11451 of 2015
Date: 05.05.2025
Counsel For Appellant: A.B. Nawal, Cost Accountant
Counsel For Respondent: Rajesh R Kurup, Superintendent (AR)
