Nil VAT can satisfy refund conditions for special additional duty where it is the applicable local tax under State exemption rules.

Refund of special additional duty was held admissible where the imported goods were sold under a State exemption notification attracting nil VAT, because the refund condition requiring payment of "appropriate sales tax or VAT" was satisfied by the applicable nil rate. The Tribunal followed its earlier view that the notification does not require the local tax rate to match or exceed the additional duty paid; it requires only that the appropriate local tax, as prescribed under State law, be paid. On that construction, nil VAT counted as appropriate sales tax or VAT, and the refund claim succeeded.

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Issues: Whether refund of special additional duty was admissible when the imported goods were sold on payment of nil value added tax under the applicable State exemption notification, and whether nil VAT could be treated as appropriate sales tax or VAT for the purpose of the refund notification.

Analysis: The Tribunal followed its earlier decision holding that the refund notification requires payment of appropriate sales tax or VAT, and that the condition is satisfied even where the applicable rate is nil. It relied on the clarification that the notification does not restrict refund only to cases where the local tax rate equals or exceeds the additional duty paid. The essential requirement is payment of the appropriate local tax, and where the notified rate is nil, the appropriate tax paid is also nil.

Conclusion: Nil VAT under the State exemption notification was treated as appropriate sales tax or VAT. The condition in the refund notification was therefore satisfied, and the assessee was entitled to refund of the special additional duty.

Ratio Decidendi: For refund of special additional duty, the phrase "appropriate sales tax or VAT" includes a nil rate where such nil rate is the applicable local tax under the governing State notification.

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