SAD refund on DEPB debit remains subject to unjust enrichment and VAT or sales tax discharge under refund notification.

Refund of Special Additional Duty under Notification No. 102/2007-Cus. may be available where SAD is discharged by debit in a DEPB scrip, because such debit is treated as payment for refund purposes if the corresponding VAT or sales tax liability is also discharged. A refund cannot be denied solely on the footing that DEPB debit amounts to an exemption, when that objection was not the basis of the appeal and the Board circular recognises debit as payment. The claim remains subject to the separate requirement that the incidence of duty has not been passed on, and the matter must be examined on unjust enrichment before refund is granted.

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Issues: Whether refund of Special Additional Duty paid at import was admissible where duty was discharged through debit in DEPB scrip, and whether the question of unjust enrichment required reconsideration.

Analysis: The refund claim was made under Notification No. 102/2007-Cus., which permits refund of SAD where the importer establishes that the incidence of duty has not been passed on and the corresponding sales tax or VAT liability has been discharged. The appellate authority rejected the claim on a ground not taken in the appeal, namely that payment through DEPB scrip amounted to exemption and therefore the notification benefit was unavailable. The Board circular clarified that debit in the DEPB scrip constitutes payment for this purpose, and if SAD is so debited and the VAT or sales tax liability is discharged, refund cannot be denied on that ground alone. However, the question whether the burden of duty had been passed on was not examined by the lower appellate authority.

Conclusion: The rejection on the DEPB-based ground was unsustainable, but the matter had to be sent back for decision on the issue of unjust enrichment.

Final Conclusion: The dispute was restored to the appellate authority for a merits-based decision on refund eligibility after examining unjust enrichment, with opportunity of hearing to the appellant.

Ratio Decidendi: Debit of SAD in DEPB scrip may amount to payment for purposes of refund under Notification No. 102/2007-Cus., but refund remains subject to proof that the incidence of duty was not passed on.

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