2017 (6) TMI 565 - AT - Customs

Tribunal grants SAD refund for importers meeting VAT conditions to prevent unintended taxation

M/s. Kubota Agriculturall Machinery India Pvt. Ltd. And M/s. Acer India Pvt. Ltd. Versus Commissioner of Customs, Chennai-IV

The Tribunal allowed the appeals, granting the refund of Special Additional Duty (SAD) to the appellants. It held that the appellants met the conditions ... Refund of SAD - N/N. 102/2007-Cus. dated 14.9.2007 - denial on the ground of of non-payment of sales tax / VAT - whether for the purpose of 2(d) of the above Notification, whether such Nil rate of sales tax / VAT/CST can be considered as appropriate duty? - Held that: - what is required in terms of the said notification is payment of appropriate sales tax/VAT regardless of the rate thereof. It logically follows that if the appropriate rate of sales tax/VAT was NIL then the appropriate sales tax/VAT paid will also be NIL - When goods imported are otherwise, not fully exempted from VAT/sales tax, non-refund of 4% SAD paid on the concerned importers at the stage of import of these goods would amount to unintended taxation and uncalled for discrimination against the importer for no fault of theirs. Decision in the case of Vazir Sultan Tobacco Co. Ltd. [1996 (2) TMI 138 - SUPREME COURT OF INDIA], where it was held that nil rate is also an appropriate duty. Refund allowed - appeal allowed - decided in favor of assessee. Issues Involved:1. Refund of Special Additional Duty (SAD) under Notification No.102/2007-Cus.2. Non-payment of VAT/Sales Tax on certain invoices.3. Mis-match between the description of goods and sales invoices.4. Interpretation of 'appropriate duty' in the context of nil rate of VAT/Sales Tax.Detailed Analysis:1. Refund of Special Additional Duty (SAD) under Notification No.102/2007-Cus:The appellants, M/s. Kubota Agricultural Machinery India Pvt. Ltd. and M/s. Acer India Pvt. Ltd., sought refunds of SAD paid under section 3(5) of the Customs Tariff Act, 1975, as per Notification No.102/2007-Cus. The original authorities and Commissioner (Appeals) rejected these claims due to non-fulfillment of conditions, particularly the non-payment of VAT/Sales Tax.2. Non-payment of VAT/Sales Tax on certain invoices:The primary reason for rejecting the refund claims was the non-payment of VAT/Sales Tax on some invoices. The authorities held that the appellants did not meet the condition 2(d) of Notification No.102/2007, which requires payment of appropriate VAT/Sales Tax to qualify for the refund. The Tribunal, however, noted that SAD is imposed to counterbalance sales tax/VAT on similar goods sold domestically. The appellants argued that if no VAT/Sales Tax is payable, the refund of SAD should not be denied.3. Mis-match between the description of goods and sales invoices:In some appeals, the authorities also cited a mismatch between the description of goods in the import documents and the sales invoices. However, the Tribunal found that this issue was secondary to the primary condition of VAT/Sales Tax payment. The Tribunal observed that the adjudicating authority had already correlated VAT/Sales Tax with the goods sold and the Chartered Accountant certificates, thus the refund should not be denied solely on this ground.4. Interpretation of 'appropriate duty' in the context of nil rate of VAT/Sales Tax:The Tribunal extensively discussed the interpretation of 'appropriate duty' in the context of a nil rate of VAT/Sales Tax. They referred to the Tribunal's decision in Gazal Overseas Vs. Commissioner of Customs, which held that even if the VAT/Sales Tax rate is nil, it still qualifies as 'appropriate duty.' The Tribunal also cited the Supreme Court's judgment in Vazir Sultan Tobacco Co. Ltd., which stated that a nil rate of duty is still considered a rate of duty. The Tribunal concluded that the appellants had discharged the appropriate VAT/Sales Tax, even if it was at a nil rate, and thus were eligible for the refund of SAD.Conclusion:The Tribunal allowed the appeals, setting aside the impugned orders and granting the refund of SAD to the appellants. It was held that the appellants had fulfilled the conditions of Notification No.102/2007-Cus. by paying the appropriate VAT/Sales Tax, even if the rate was nil. The Tribunal emphasized that denying the refund would result in unintended taxation and discrimination against the importers. The appeals were allowed with consequential relief as per law.