2017 (5) TMI 1371 - AT - Customs

Refund of SAD - rejection for the reason that as certified by the Chartered Accountant, VAT/Sales Tax has been paid on the sales of Rock Phosphate imported since this item is exempted vide the Kerala Finance Act, 2011 notified vide N/N. 4175/Leg.A2/2011/Law dt. 08/11/2011 - whether the appellant will be eligible for payment of refund of SAD, by considering the NIL rate of VAT as appropriate payment of VAT? - Held that - an identical issue came up before the Tribunal in the case of Gazal Overseas 2015 (12) TMI 427 - CESTAT NEW DELHI in which the Tribunal allowed payment on refund of SAD - the condition prescribed in N/N. 102/2007 is satisfied and the appellant will be eligible for the refund of the SAD paid at the time of input - appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund of Special Additional Duty (SAD) on imported goods due to payment of VAT/Sales Tax exemption under Kerala Finance Act, 2011.

Analysis:
The case involved a batch of appeals where the appellants imported Rock Phosphate and paid SAD at 4% as per Customs Notification No. 19/2006-Cus. Subsequently, they claimed a refund of the SAD, which was rejected by the original authority citing payment of VAT/Sales Tax on the sales of the imported goods exempted under the Kerala Finance Act, 2011. Appeals were filed before the Commissioner(Appeals) who upheld the rejection, leading to the challenge before the Tribunal.

The Tribunal heard arguments from both parties. The appellants contended that a previous Tribunal decision held that a nil rate of VAT could be considered as appropriate payment of VAT, making them eligible for a refund of SAD. They also referenced a decision in the case of Gazal Overseas Vs. CC, New Delhi [2016(332) ELT 767 (Tri. Del.)].

The main dispute was whether the appellants, who imported goods and paid SAD at 4%, were eligible for a refund considering they did not charge VAT on the supplies as per a Kerala State Government notification exempting the goods from VAT payment. The Tribunal referred to the Gazal Overseas case where it was held that as long as appropriate VAT/Sales tax was paid, the refund of SAD was admissible even if the VAT rate was nil. The Tribunal emphasized that the condition for refund was the payment of appropriate VAT/Sales tax, regardless of the rate.

Based on the precedent set by the Gazal Overseas case, the Tribunal concluded that a nil rate of VAT under the Kerala Finance Act, 2011 should be deemed as appropriate sales tax/VAT. Therefore, the appellants were deemed eligible for the refund of the SAD paid at the time of import. Consequently, the impugned orders were set aside, and all appeals were allowed with consequential relief. The miscellaneous applications were also disposed of accordingly.

In summary, the Tribunal held that a nil rate of VAT could be considered as appropriate payment of VAT, making the appellants eligible for the refund of SAD paid on imported goods exempted from VAT under the Kerala Finance Act, 2011. The decision was based on the interpretation of the Customs Notification and the precedent established in a previous Tribunal case.