Importer-trader entitled to SAD refund under Notification No.102/2007-Cus despite missing invoice endorsement if other conditions met

The CESTAT CHENNAI-AT allowed the appeal, setting aside the order that denied refund of SAD. Relying on a Larger Bench precedent of CESTAT, the Tribunal held that an importer-trader who paid SAD and discharged VAT/ST on resale is entitled to exemption under Notification No.102/2007-Cus even if commercial invoices lack an endorsement that "credit of duty is not admissible," provided other statutory conditions are satisfied. The refund rejection for non-fulfilment of condition 2(b) was therefore held improper.

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1. ISSUES PRESENTED AND CONSIDERED

i. Whether the sales invoices submitted contained the endorsement required by para 2(b) of Notification No. 102/2007-Customs.

ii. Whether an importer is eligible for refund under Notification No. 102/2007-Customs where the commercial/sales invoices do not carry the para 2(b) endorsement but (a) the SAD/Additional Duty was paid at import, (b) appropriate sales tax/VAT was discharged on sale, and (c) the invoices did not specify duty particulars.

2. ISSUE-WISE DETAILED ANALYSIS

Issue i - Existence of endorsement on sales invoices

Legal framework: Condition (b) of para 2 of Notification No. 102/2007-Customs requires that the importer, while issuing the invoice for sale of the imported goods, shall specifically indicate in the invoice that "no credit of the additional duty of customs ... shall be admissible."

Precedent treatment: The adjudicating authority and the appellate authority found on verification that some buyer-end invoices lacked the requisite endorsement; the Appellant asserted invoices bore the endorsement but did not produce copies or departmental acknowledgements in the appeal papers.

Interpretation and reasoning: Absence of the invoices or departmental acknowledgement in the appeal record meant the Appellant's assertion was unsubstantiated. The Tribunal relied on the factual record - the authorities' random verification showing missing endorsements - to conclude the contention of endorsement was baseless.

Ratio vs. Obiter: Ratio (fact-specific): Where the claim file does not contain the purported endorsed invoices or departmental acknowledgement, the assertion of compliance with para 2(b) cannot be accepted.

Conclusion: The record did not establish that the sales invoices bore the para 2(b) endorsement; the factual finding of non-compliance by the authorities stands on the record.

Issue ii - Eligibility for refund despite non-inclusion of para 2(b) endorsement

Legal framework: Notification No. 102/2007-Customs grants an exemption from Additional Duty of Customs (SAD) on goods imported for subsequent sale subject to specified conditions, including payment of duty at import, issuance of invoices with the para 2(b) endorsement, filing refund claim, payment of appropriate sales tax/VAT on sale, and production of supporting documents. Rule 9 of the CENVAT Credit Rules prescribes particulars required in invoices for claiming CENVAT credit (including quantum and nature of duties).

Precedent treatment (followed/distinguished): The Tribunal adhered to the decision of the Larger Bench in Chowgule & Co. (Larger Bench) which held that a trader-importer who paid SAD, discharged VAT/ST on sale and issued commercial invoices without indicating duty particulars would be entitled to refund under Notification 102/2007 notwithstanding absence of the para 2(b) endorsement, subject to satisfaction of other conditions. Earlier coordinate benches taking a similar view (Equinox Solution Ltd., Nova Nordisk India Pvt. Ltd.) were applied; contrary coordinate bench authority (Astra Zeneca) taking a strict view was distinguished by reference to the Larger Bench ruling and by analysis of purpose. Other cited decisions involving invoice-Bill of Entry mismatches or CA certificate particulars were distinguished on facts.

Interpretation and reasoning: The Court examined the genesis and object of SAD (to neutralize disparity between imported and domestic goods due to local taxes) and the purpose of the para 2(b) endorsement (to prevent double benefit - purchaser taking credit while seller obtains refund). It observed that where a commercial invoice does not indicate the duty element at all, such non-specification itself negates the possibility of the buyer availing CENVAT credit; Rule 9 requires duty particulars for taking CENVAT credit, and absence of such particulars means no credit can be taken. Thus the procedural endorsement requirement is intended to prevent unjust enrichment but the same objective is satisfied where the invoice omits duty particulars. The Larger Bench's reasoning that the endorsement is procedural and that its purpose can be fulfilled by non-declaration of duty particulars was accepted as consonant with the object of the notification and principles of liberal construction of exemptions.

Ratio vs. Obiter: Ratio: For trader-importers who (1) paid SAD at import, (2) discharged appropriate sales tax/VAT on sale, and (3) issued commercial invoices that do not indicate duty particulars (thus precluding taking of CENVAT credit by buyers), the absence of the para 2(b) endorsement does not preclude entitlement to refund under Notification 102/2007-Cus, subject to satisfaction of the other conditions of the notification. Obiter: Observations distinguishing other fact patterns (e.g., mismatch of descriptions, inadequacy of CA certificate) are fact-specific guidance rather than general propositions disapplying the endorsement requirement in all contexts.

Conclusion: Following the Larger Bench, the Court held that the Appellant (a trader-importer meeting the remaining conditions of the notification and whose invoices did not specify duty particulars) is eligible for the refund despite the absence of para 2(b) endorsements. The impugned order rejecting the refund on the ground of missing endorsement was therefore set aside and the refund claim ordered to be settled in accordance with law.

Cross-references and scope

Where the factual matrix differs (for example, buyer-end invoices bear endorsements, material mismatches between invoices and bills of entry, or where a CA certificate does not address unjust enrichment adequately), the conclusions in this judgment may be distinguished; the present ratio is expressly limited to the facts where non-specification of duty in commercial invoices achieves the objective of para 2(b) by precluding downstream credit.

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