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2017 (2) TMI 522 - AT - CustomsRefund of SAD - procurement of goods from SEZ units - Notification No. 102/07-Cus dated 14-9-2007 - 100 % EOU - Held that - In the case of Adinath Trade Link Vs. Commissioner of Customs, Kandla 2013 (8) TMI 430 - CESTAT AHMEDABAD wherein it was held that The intention of the legislature by promulgating Notification No.102/2007-Cus. was to give refund of SAD paid by the importer on goods, on subsequent sale subject that conditions are fulfilled - the appellants had discharged the SAD leviable on the goods when procured from SEZ, and have subsequently sold the same, benefit of refund of the said SAD as per Notification No.102/2007-Cus cannot be denied to them only on the ground that movement of goods is from SEZ and it cannot be construed as import of goods - Appeal allowed - decided in favor of the assessee.
Issues Involved:
1. Refund claim of additional duty under Notification No. 102/07-Cus. 2. Timing of duty payment (at import vs. domestic clearance). 3. Admissibility of refund despite the timing of duty payment. Issue-wise Detailed Analysis: 1. Refund Claim of Additional Duty Under Notification No. 102/07-Cus: The appellant, a 100% Export Oriented Unit (EOU), imported goods without paying duty for manufacturing final products. Some of these goods were sold domestically, and the appellant paid the custom duty, including the 4% additional duty under Section 3(5) of the Customs Act, 1962. They later claimed a refund of this additional duty as per Notification No. 102/07-Cus dated 14-9-2007. The adjudicating authority rejected the refund, stating that the additional duty was not paid at the time of import, violating the conditions of the notification. The Commissioner (Appeals) upheld this rejection, leading the appellant to appeal further. 2. Timing of Duty Payment (at Import vs. Domestic Clearance): The appellant argued that the timing of duty payment is irrelevant, particularly for EOUs. Goods imported by EOUs are under bond and remain so until cleared domestically. At this point, the clearance is treated as an import into India, necessitating duty payment. The appellant contended that denying the refund solely because the duty was not paid at the import time is unjustified. They cited previous judgments (Adinath Trade Link vs. Commissioner of Customs, Kandla and Meneta Automotive Components Pvt Ltd. vs. Commissioner of Customs and Service Tax, Rohtak) supporting their claim. 3. Admissibility of Refund Despite the Timing of Duty Payment: Upon review, it was found that EOUs are not required to pay customs duty at import as the goods are covered under bond and deposited in customs bonded premises. Duty liability arises when goods are cleared domestically. The clearance from the EOU is treated as an import into India, and thus, the duty payment timing aligns with statutory provisions. The objective of the additional duty under Section 3(5) of the Customs Act is to substitute sales tax/VAT. Refund under Notification 102/07 is applicable if the goods sold domestically on which additional duty was paid also incur VAT. In this case, the appellant paid VAT, avoiding double taxation, thus making them eligible for the refund. The Tribunal referenced the case of Meneta Automotive Components Pvt Ltd., which dealt with similar issues, including duty payment methods and exemption applicability. The Tribunal found that the conditions for refund under Notification No. 102/07-Cus were met, as the appellant paid VAT on domestic sales. The Tribunal also referenced the Adinath Trade Link case, where the benefit of the notification was extended to goods sold domestically from an SEZ unit. Conclusion: The Tribunal concluded that the appellant is entitled to the refund under Notification No. 102/07-Cus. It set aside the impugned order, allowing the appeal with consequential relief in accordance with the law. The judgment emphasized that the refund mechanism aims to prevent double taxation and that the appellant fulfilled the necessary conditions by paying VAT on domestic sales. (Order pronounced in Court on 20/01/2017)
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