2014 (8) TMI 214 - AT - Customs

Missing Endorsement on Invoices Is Procedural, SAD Refund Allowed Under Notification 102/2007-Cus Para 2(b)

CHOWGULE & COMPANY PVT LTD Versus COMMISSIONER OF CUSTOMS & CENTRAL EXCISE

CESTAT Mumbai (LB) held that the absence of endorsement on commercial invoices, as required by Notification 102/2007-Cus paragraph 2(b), is a procedural ... Denial of refund of SAD - Notification 102/2007 - whether refund of SAD can be allowed when no endorsement was made on the commercial invoices as stipulated in paragraph 2 (b) while all other conditions stipulated in the notification stood satisfied - Held that:- Condition relating to endorsement on the invoice was merely a procedural one and the purpose and object of such an endorsement could be achieved when the duty element itself was not specified in the invoice. Since the object and purpose of the condition is achieved by non-specification of the duty element the mere non-making of the endorsement could not have undermined the purpose of the exemption. Thus we concur with the view taken by this Tribunal in the cases of Equinox Solution Ltd. and Nova Nordisk India Pvt. Ltd. [2013 (11) TMI 756 - CESTAT MUMBAI] - A trader-importer, who paid SAD on the imported goods and who discharged VAT/ST liability on subsequent sale, and who issued commercial invoices without indicating any details of the duty paid, would be entitled to the benefit of exemption under Notification 102/2007-Cus, notwithstanding the fact that he made no endorsement that 'credit of duty is not admissible' on the commercial invoices, subject to the satisfaction of the other conditions stipulated therein. The reference is returned to the referring bench for further action as necessary. Issues Involved:1. Whether the condition 2(b) of Notification No. 102/07 is mandatory for compliance by a trader who cleared the goods on the strength of a commercial invoice.Issue-wise Detailed Analysis:1. Context and Background:The appellant, a trader, imported goods and discharged special additional duty (SAD) under Section 3(5) of the Customs Tariff Act, 1975. These goods were sold under commercial invoices without indicating the SAD element separately or making any endorsement that no CENVAT credit of the SAD is admissible. The appellant claimed a refund under Notification 102/2007-Cus, which exempts goods imported for subsequent sale from SAD, provided certain conditions are met.2. Notification 102/2007-Cus Conditions:The exemption under Notification 102/2007-Cus is subject to the following conditions:- (a) Payment of all duties at the time of importation.- (b) Specific indication in the sale invoice that no credit of SAD is admissible.- (c) Filing a claim for refund with the jurisdictional customs officer.- (d) Payment of appropriate sales tax or VAT on the sale of the goods.- (e) Submission of documents evidencing payment of SAD, sales tax, or VAT, and sale invoices.3. Tribunal's Previous Decisions:The Tribunal had previously considered similar issues in Equinox Solution Ltd. and Nova Nordisk India Pvt. Ltd., where it was held that non-compliance with the endorsement requirement in paragraph 2(b) of the notification should not lead to denial of SAD refund if other conditions are met. The purpose of clause 2(b) is to prevent availing double benefits, and in cases where traders are not registered to issue CENVATable invoices, the question of taking credit does not arise.4. Contradictory View:In Astra Zeneca Pharma India Ltd., another bench held that non-compliance with the mandatory endorsement requirement in the invoices disqualifies the trader from availing the refund under Notification 102/2007.5. Arguments by Appellant's Counsel:The appellant's counsel argued that the purpose of the notification is to prevent double levy of SAD and VAT/sales tax. They cited Supreme Court decisions in Mangalore Chemicals & Fertilizers Ltd. and Bombay Chemical Pvt. Ltd., which held that procedural infractions should not deny substantive benefits. The counsel emphasized that the non-CENVATable nature of the invoices should suffice to meet the condition in clause 2(b).6. Revenue's Argument:The Revenue argued that the exemption notification's conditions must be strictly complied with, including the endorsement requirement in the sale invoices. They contended that the ratio in Astra Zeneca Pharma India Ltd. should be preferred, as the invoices issued by a trader-importer are prescribed documents for availing CENVAT credit.7. Tribunal's Analysis:The Tribunal analyzed the genesis of SAD, which aims to level the playing field between imported and domestically produced goods by counterbalancing local taxes. The Tribunal noted that non-declaration of duty in the invoice itself indicates that no CENVAT credit is available. They emphasized the distinction between procedural and substantive conditions, citing the Supreme Court's guidance on liberal interpretation of exemption clauses.8. Conclusion:The Tribunal concluded that a trader-importer who paid SAD and discharged VAT/ST liability on subsequent sale, and who issued commercial invoices without indicating duty details, is entitled to the exemption under Notification 102/2007-Cus, despite not making the endorsement that 'credit of duty is not admissible,' provided other conditions are met. This decision is specific to the case and does not imply that conditions of an exemption notification can be disregarded.9. Final Judgment:The reference was answered in favor of the appellant, and the case was returned to the referring bench for further action.Pronounced in Court on 24.6.2014.