DVAT on Imported Goods

[Asked by Guest]

My client has imported "vibrating body massager" from China. This "massager" classifies under 5% of DVAT. Everything was going smooth, when in one of his previous shipment, the customs changed the HS Code to "general machine equipment" and increased the custom duty. (They also believe that it could be a mistake from the side of the assessing officer and the item was misinterpreted, so they gave the speaking order to fight to get the duty difference reversed from the court)

Now what will be the applicable DVAT rate? As the item is Massager, will it continue to bill into 5% or rate should be revised to other VAT% under general machine?

[YAGAY and SUN]

In our view, if massager are classified under 5% tax schedule under DVAT Act, then, by changing the classification by the Appraiser/A.C. under Customs Tariff Act, there would not be any impact. Further, if you are selling as such, then, you may also seek refund of SAD under Notification no. 102/2007-Customs from the Customs Department as you are selling the massager on payment of VAT.

Further, you may also file an appeal against the impugned order of the Customs Authorities.

AI Summary

DVAT classification governs VAT liability despite customs reclassification; pursue SAD refund and appeal customs assessment.
If imported goods classifiable as a vibrating body massager fall under a 5% DVAT schedule, a customs appraiser's reclassification under the Customs Tariff Act does not change the seller's DVAT treatment; the seller may continue to charge VAT at the schedule rate, and may seek refund of SAD under the relevant customs notification and appeal the customs order to contest the reclassification.