Special Additional Duty refund remains available on resale of imported goods even when the applicable VAT rate is nil.

Refund of Special Additional Duty under Notification No. 102/2007-Customs is admissible on subsequent sale of imported goods even where the applicable VAT rate is nil. The notification requires payment of the appropriate sales tax or VAT on the sale, but it does not prescribe any minimum VAT rate or make refund contingent on VAT matching the Special Additional Duty rate. Payment of nil VAT satisfies the condition where that is the applicable tax under the sale transaction, so the refund remains available to the importer.

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Issues: Whether refund of Special Additional Duty under Notification No. 102/2007-Customs dated 14.09.2007 is admissible when imported goods are sold on invoice but the applicable VAT rate is nil.

Analysis: The refund notification requires the importer to pay the appropriate sales tax or VAT on subsequent sale of the imported goods. The notification does not prescribe any minimum rate of VAT, and the entitlement to refund is not made dependent on VAT being equal to or higher than the rate of Special Additional Duty. Where the applicable VAT itself is nil, payment of nil VAT satisfies the condition of payment of the appropriate tax. The reasoning adopted also follows the earlier view that the notification permits refund so long as the sale transaction suffers the applicable VAT regime, irrespective of its rate.

Conclusion: Refund of Special Additional Duty is admissible even where the applicable VAT rate is nil, and the issue is decided in favour of the assessee.

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