2019 (11) TMI 1286 - AT - Customs

Importer entitled to refund of Special Additional Duty under Notification No. 102/2007-CUS despite nil VAT rate

The Tribunal held that an importer, who imported goods paying Special Additional Duty (SAD) at 4% and sold them under a nil VAT rate, is entitled to a ... Refund of SAD - nil rate of VAT at the time of sale - goods are imported by the assessee after paying Special Additional Duty (SAD) of customs at the rate of 4% and sold thereafter under a tax/VAT invoice but where the rate of VAT applicable is nil - N/N. 102/2007-CUS or otherwise - HELD THAT:- In their own case with respect to the earlier appeals AGARWAL BROTHERS VERSUS COMMISSIONER OF CENTRAL TAX [2019 (10) TMI 180 - CESTAT HYDERABAD] an order was passed in their favour holding that they are entitled to refund of SAD relying on the order of Principal Bench of CESTAT in the case of M/S GAZAL OVERSEAS, M/S MAYANK ENTERPRISES, M/S ANAND ASSOCIATES VERSUS COMMISSIONER OF CUSTOMS, NEW DELHI [2015 (12) TMI 427 - CESTAT NEW DELHI]. Appeal allowed - decided in favor of appellant. Issues:Refund of Special Additional Duty (SAD) under Notification No. 102/2007-CUS when goods are imported, sold under a nil VAT rate, and whether the importer is entitled to the refund.Issue Analysis:1. Refund of SAD under Notification No. 102/2007-CUS:The appeal questioned whether an importer, who imported goods after paying SAD at 4% and subsequently sold them under a nil VAT rate, is entitled to a refund of the SAD paid. The appellant contended that they are eligible for a refund based on a previous order in their favor and the principles established in the case of Gazal Overseas. The Tribunal analyzed the purpose of SAD, which aims to create a level playing field for domestic manufacturers. It was argued that when imported goods are sold, both imported and domestic goods suffer the same VAT rate, justifying the eligibility for SAD refund under Notification No. 102/2007-CUS, irrespective of the VAT rate applied.2. Interpretation of Exemption Conditions:The Revenue argued that the exemption from SAD refund should be denied when VAT is exempted, citing a Supreme Court judgment regarding excise duty exemptions. However, the Tribunal differentiated between excise duty and VAT, emphasizing that the SAD refund eligibility is based on the payment of appropriate VAT after the sale of goods, not on the specific rate of VAT applied. The Tribunal highlighted that the Notification does not specify a VAT rate requirement for the refund, making the payment of any applicable VAT, including nil VAT, sufficient for the refund.3. Precedents and Clarifications:The Tribunal referred to previous decisions, including the case of Gazal Overseas and a Circular by CBEC, clarifying that the SAD refund under Notification No. 102/2007-CUS is not contingent on the VAT rate being equal to or higher than the SAD rate. The Tribunal emphasized that as long as the appropriate VAT is paid, the SAD refund is admissible, even if the VAT rate is lower or nil. This interpretation was supported by a decision in the case of Malhotra Imports & Exports Corporation, confirming that the refund is available regardless of the VAT rate applied.4. Conclusion and Relief Granted:After thorough analysis and considering the previous decisions on identical issues, the Tribunal concluded that the SAD refund under Notification No. 102/2007-CUS is available even if the applicable VAT rate is nil. Consequently, the appeals were allowed, and the impugned orders were set aside, granting consequential relief to the appellant based on the established legal principles and precedents.This comprehensive analysis outlines the key legal arguments, interpretations, precedents, and the final decision made by the Appellate Tribunal CESTAT Hyderabad regarding the refund of Special Additional Duty under Notification No. 102/2007-CUS in cases where goods are imported and sold under a nil VAT rate.