SAD refund on imported used tyres denied where VAT on crumb rubber did not neutralise tax on the imported input.

Refund of Special Additional Duty on imported used tyres was held unavailable where the tyres were consumed in processing into crumb rubber and VAT was paid only on the sale of the finished product. The refund scheme was construed as applying to trading imports meeting its conditions, and mere VAT payment on the processed output did not neutralise the tax incidence on the imported input. The relevant inquiry was whether the SAD burden on the imported goods was offset in the domestic market; on these facts, it was not. The restrictive reading was reinforced by the circular addressing fraudulent SAD refund claims, and the refund rejection was sustained.

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Issues: Whether refund of Special Additional Duty on imported used tyres was admissible when the goods were consumed in the process of converting them into crumb rubber and VAT was paid only on the sale of the resultant product.

Analysis: The refund notification was intended for trading imports satisfying its conditions, and the importer's consumption of the goods did not by itself establish entitlement to refund. The crucial inquiry was not whether the process amounted to manufacture, but whether the levy of Special Additional Duty on the imported used tyres was offset by tax treatment in the domestic market. Since a domestic producer using locally procured used tyres would bear tax on purchase of the tyres and on sale of the finished crumb rubber, payment of VAT on crumb rubber did not extinguish the liability attached to the imported used tyres. The cited circular on fraudulent 4% SAD claims also supported a restrictive reading of the refund scheme.

Conclusion: The refund was not admissible and the denial of refund was in law; the appeal failed.

Final Conclusion: The importer was held not entitled to SAD refund on the imported used tyres, and the order rejecting the refund was sustained.

Ratio Decidendi: Refund of Special Additional Duty under the notification is not available merely because VAT is paid on the sale of the processed product when the imported goods are consumed in the process and the tax incidence on the imported input is not otherwise neutralised.

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