2020 (10) TMI 448 - HC - Customs

High Court rules importer entitled to SAD refund if VAT/Sales Tax paid, quashes challenged orders

The High Court of Madras ruled in favor of the importer in a case concerning the refund of Special Additional Duty (SAD) of Customs. The Court held that ... Refund of Special Additional Duty - eligibility for refund upon payment of VAT/Sales Tax - quashing of recovery orders - binding effect of precedentRefund of Special Additional Duty - eligibility for refund upon payment of VAT/Sales Tax - binding effect of precedent - quashing of recovery orders - Refund of Special Additional Duty (SAD) under Notification No.102/2007 is admissible where appropriate VAT/Sales Tax has been paid and earlier refunds granted cannot be recovered; impugned review and recovery orders are liable to be quashed in view of precedent and concession. - HELD THAT: - The Court noted that refunds of the 4% Special Additional Duty were originally sanctioned under Notification No.102/2007 upon establishment of VAT payment. Those sanctions were thereafter reviewed and set aside, leading to recovery orders. Having regard to earlier decisions of this Court (Goyel Impex and M/s. Aditya International Ltd. & Others) and the concession by the departmental counsel that the legal position in favour of refund remains applicable where appropriate VAT/Sales Tax is paid, the Court concluded that the review and consequent recovery were incorrect. On that basis the Court quashed the impugned orders and allowed the writ petitions. The Court's decision rests on application of the established principle that entitlement to SAD refund arises on proof of VAT/Sales Tax payment and on the binding effect of the earlier rulings relied upon by the parties. [Paras 2, 3, 4, 5]Impugned orders set aside; writ petitions allowed and refunds sustained; connected miscellaneous petitions closed.Final Conclusion: All impugned orders denying or recovering earlier sanctioned SAD refunds are quashed and the writ petitions are allowed, with no order as to costs; connected miscellaneous petitions are closed. Issues:1. Refund of Special Additional Duty (SAD) of Customs based on payment of VAT on subsequent sale of imported goods.2. Review of sanctions under Section 129D(2) of the Customs Act.3. Challenge to orders of recovery of refunds granted earlier.4. Admissibility of SAD refund based on payment of appropriate VAT/Sales Tax.5. Concession by the Standing Counsel for the department regarding the issue of refund of SAD.Analysis:The High Court of Madras addressed multiple issues related to the refund of Special Additional Duty (SAD) of Customs in the present judgment. Initially, the Court noted that refunds of the 4% Special Additional Duty of Customs were sanctioned based on the importer establishing payment of VAT on the subsequent sale of the imported goods, in accordance with Notification No.102/2007. However, these sanctions were later reviewed under Section 129D(2) of the Customs Act, leading to the Customs authorities challenging the refund sanctions, resulting in orders of recovery of the refunds granted earlier. This aspect formed the basis of the challenge in the Writ Petitions (W.P.Nos.246 to 253 of 2017).The Court considered the decisions of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in favor of the dealers, emphasizing that as long as appropriate VAT/Sales Tax was paid, the SAD refund was admissible. The learned Standing Counsel for the department acknowledged the favorable nature of the issue of refund of SAD for the importer, referencing earlier decisions of the Court in similar cases. Notably, the Court had previously ruled in cases such as Goyel Impex and Industries Limited vs. The Assistant Commissioner of Customs, Chennai and M/s. Aditya International Ltd. & Others vs. The Commissioner of Customs (Appeals-II) & Others, where writ petitions were allowed, ordering the refund of SAD in favor of the importer.Consequently, the Standing Counsel for the respondents also conceded that the issue of refund of SAD was in favor of the petitioner in the present case, aligning with the earlier decisions of the Court. As a result, the Court quashed all the impugned orders and allowed the Writ Petitions, without imposing any costs. The judgment brought closure to the connected miscellaneous petitions, concluding the legal proceedings on the matter.