SEZ clearance and anti-dumping duty: duty incidence affects VAT turnover, but penalty fails without wilful suppression.

Anti-dumping duty on imported components was held to form part of the sale price for VAT purposes where the SEZ clearance regime caused the duty to attach on removal to the Domestic Tariff Area, and contractual allocation of payment to the buyer did not change its incidence. Penalty under the Tamil Nadu VAT Act was set aside because it required a finding of wilful non-disclosure of assessable turnover, which was absent in a bona fide dispute on taxability. The refund claim for tax paid on customs or countervailing duty was rejected because the statutory protection ceased on SEZ removal and the duty could not be treated as wrongly paid.

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Issues: (i) Whether anti-dumping duty paid on imported components and borne by the buyer could form part of the sale price of goods manufactured and sold by an SEZ unit under the Tamil Nadu VAT Act, 2006; (ii) Whether penalty under the Tamil Nadu VAT Act, 2006 was sustainable; (iii) Whether refund of tax paid on customs/countervailing duty was admissible.

Issue (i): Whether anti-dumping duty paid on imported components and borne by the buyer could form part of the sale price of goods manufactured and sold by an SEZ unit under the Tamil Nadu VAT Act, 2006.

Analysis: Anti-dumping duty is levied under Section 9A of the Customs Tariff Act, 1975 upon importation into India. The SEZ exemption under Section 26 of the Special Economic Zones Act, 2005 and the corresponding domestic clearance provisions under Section 30 of that Act and Section 15 of the Tamil Nadu Special Economic Zones Act, 2005 operate only while the goods remain within the SEZ. Once the goods are removed to the Domestic Tariff Area, the duty attaches by force of the statutory scheme. The contractual allocation of payment to the buyer does not alter the incidence of duty. The amount therefore forms part of the sale price for VAT purposes.

Conclusion: The issue is decided against the assessee and in favour of Revenue.

Issue (ii): Whether penalty under the Tamil Nadu VAT Act, 2006 was sustainable.

Analysis: Penalty under Section 27(3) of the Tamil Nadu VAT Act, 2006 requires satisfaction that escape from assessment was due to wilful non-disclosure of assessable turnover. The record showed a bona fide controversy on the taxability of anti-dumping duty, the assessee itself had sought clarification, and no proper finding of wilful non-disclosure was recorded by the assessing authority or the appellate fora.

Conclusion: The issue is decided in favour of the assessee and the penalty is unsustainable.

Issue (iii): Whether refund of tax paid on customs/countervailing duty was admissible.

Analysis: The goods moved from the SEZ to the Domestic Tariff Area in a sequence that involved prior import and subsequent clearance. The statutory protective cover was withdrawn on removal from the SEZ, and the duty component could not be treated as wrongly paid merely because the buyer also cleared the goods. The refund claim therefore did not survive.

Conclusion: The issue is decided against the assessee and in favour of Revenue.

Final Conclusion: The revision succeeded only to the limited extent of setting aside the penalty, while the turnover addition on account of anti-dumping duty and the refusal of refund were upheld.

Ratio Decidendi: Where a duty is statutorily attached to goods by operation of the SEZ clearance regime, its contractual payment by another party does not alter its incidence or prevent inclusion in turnover, but penalty can be imposed only on a clear finding of wilful suppression or non-disclosure.

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