2018 (1) TMI 175 - AT - Customs

Refund of SAD - N/N. 102/2007-Cus. as amended - denial on the ground that no VAT/CST was paid against the imported goods at the time of sale, hence condition 2(d) was not fulfilled - Held that - similar issue decided in the case of M/s. Kubota Agricultural Machinery India Pvt. Ltd. And M/s. Acer India Pvt. Ltd. Versus Commissioner of Customs, Chennai-IV 2017 (6) TMI 565 - CESTAT CHENNAI , where it was held that if the appropriate rate of Sales Tax/VAT was Nil, then the appropriate Sales Tax / VAT will also to be Nil and the importers concerned would be very much eligible for the refund in such cases - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Refund of Special Additional Duty (SAD) under Notification No. 102/2007-Cus.
2. Non-payment of VAT/CST on imported goods at the time of sale.
3. Eligibility for refund when VAT/CST rate is Nil.

Detailed Analysis:

1. Refund of Special Additional Duty (SAD) under Notification No. 102/2007-Cus:
The core issue in these appeals is the disallowance of the refund of SAD under Notification No. 102/2007-Cus. The lower authorities rejected the refund claims on the grounds that no VAT/CST was paid on the imported goods at the time of sale, thus not fulfilling condition 2(d) of the notification. The Tribunal referenced the case of Kubota Agricultural Machinery India Pvt. Ltd. and Acer India Pvt. Ltd. Vs CC Chennai-IV, where it was established that if the appropriate rate of Sales Tax/VAT was Nil, then the appropriate Sales Tax/VAT would also be Nil, making the importers eligible for the refund.

2. Non-payment of VAT/CST on imported goods at the time of sale:
The lower authorities argued that the refund is only eligible if the importer has paid appropriate VAT for the sale invoices. Since the imported goods were exempted from VAT/CST, the authorities contended that the payment of VAT/CST did not arise. However, the Tribunal found that the matter was no longer res integra, citing the Kubota Agricultural Machinery decision which clarified that the term "appropriate" VAT/Sales Tax includes a Nil rate.

3. Eligibility for refund when VAT/CST rate is Nil:
The Tribunal examined the legislative intent behind the imposition of SAD, which was to counterbalance the element of sales tax/VAT on like articles sold domestically. It was noted that the SAD was introduced to provide a level playing field for domestic producers by neutralizing the tax burden on imported goods. The Tribunal referenced the Finance Minister’s Budget Speech and the relevant sections of the Customs Tariff Act, 1975, which supported the argument that a Nil rate of VAT/Sales Tax is considered appropriate duty.

The Tribunal also referred to the Supreme Court judgment in Vazir Sultan Tobacco Co. Ltd., which held that a Nil rate is also an appropriate duty. The Tribunal concluded that non-refund of 4% SAD on the grounds of Nil VAT/Sales Tax would result in unintended taxation and discrimination against the importer.

In conclusion, the Tribunal found that the appellants had discharged the appropriate sales tax/VAT for the sale of imported goods, and therefore, the refund claims under Notification No. 102/2007-Cus. could not be denied. The impugned orders were set aside, and the appeals were allowed with consequential relief as per law.

Final Judgment:
The Tribunal allowed the appeals, setting aside the impugned orders and granting consequential relief as per law, following the ratio laid down in the Kubota Agricultural Machinery decision.

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