Special additional duty refund remains admissible where imported goods are sold in a nil-VAT State, subject to eligibility conditions.

Refund of special additional duty under Notification No. 102/2007-Cus was held admissible even where imported goods were sold in a State with VAT exemption or nil VAT. The Tribunal applied the CBEC clarification in Circular No. 06/2008, which states that refund cannot be denied merely because the sales tax or VAT rate is below 4%, and that full refund remains available if the claim is otherwise eligible. On that basis, payment of nil-rate VAT was treated as satisfying the requirement to pay appropriate sales tax or VAT on the subsequent sale, and the Revenue's appeals were dismissed.

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Issues: Whether refund of special additional duty under Notification No. 102/2007-Cus dated 14.09.2007 is admissible where the imported goods are sold in a State where VAT is exempted and therefore payable at nil rate.

Analysis: The Notification required the importer to pay appropriate sales tax or VAT on the subsequent sale of the imported goods. The Tribunal noted the CBEC clarification in Circular No. 06/2008 dated 28.04.2008, which stated that refund is not to be restricted merely because the sales tax or VAT rate is below 4%, and that the full duty remains refundable if otherwise eligible. Applying that clarification, the Tribunal held that where the applicable VAT is nil, the condition of paying appropriate sales tax or VAT is still satisfied, and the refund claim cannot be denied on that ground.

Conclusion: Refund of special additional duty was held admissible even when VAT was exempted or nil, and the Revenue's appeals were dismissed.

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