Setback for Sun Pharmaceuticals: CESTAT Rules SAD Applicable on Stock Transfers to DTA Units Even Without VAT Payment

CESTAT ruled that Special Additional Duty (SAD) applies to stock transfers to Domestic Tariff Area (DTA) units, even without actual VAT payment. The judgment dismissed Sun Pharma's appeal against ₹42 crore SAD demand, clarifying that the duty triggers upon DTA clearance, not subsequent VAT liability. This interpretation closes a common planning avenue where companies argued SAD wasn't payable if VAT wasn't ultimately charged. The ruling impacts pharmaceutical and manufacturing sectors with significant DTA transfers. Tax costs may rise for units relying on this planning, potentially affecting pricing strategies. Companies must now ensure proper SAD accounting on all DTA movements regardless of ultimate VAT incidence.