2019 (10) TMI 180 - AT - Customs

Refund of SAD - N/N. 102/2007 Cus dated 14.09.2007 - whether in a case where the goods are imported by the assessee after paying Special Additional Duty of customs @ 4% and sold thereafter under a tax/VAT invoice but where the rate of VAT applicable is nil , the appellant is entitled to refund of SAD paid under N/N. 102/2007-Cus or otherwise? HELD THAT - When the imported goods are subsequently sold, such sale brings the imported goods at par with the domestic goods because both suffer the same rate of VAT. Therefore, the SAD which is levied is refundable as per the Notification No. 102/2007 Cus. This parity between the imported goods and the domestic goods when the imported goods are sold does not change with the rate of VAT. The exemption notification nowhere specifies the rate at which VAT on the imported goods to be paid when the goods are subsequently sold. While the SAD is uniformly levied at 4%, the applicable VAT on such goods could be high say, 12% or low say 0%. The notification does not make a distinction between these cases on the basis of the rate of VAT applicable on the goods. Similarly, the rate of SAD is only 4% regardless of the exact rate of VAT applicable to the goods. The refund under N/N. 102/2007-Cus only requires the appropriate amount of VAT to be paid after selling the goods. It does not indicate any specific rate of VAT. Therefore if the appropriate rate of VAT is nil sale of goods on payment of nil rate of VAT amounts to paying appropriate amount of VAT. The issue is no longer res integra and refund of SAD under N/N. 102/2007-Cus is available even if the appropriate rate of VAT is nil - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Whether an importer is entitled to a refund of Special Additional Duty of customs paid under Notification No 102/2007-Cus when goods are imported, sold under a tax/VAT invoice, and the applicable rate of VAT is 'nil'.

Analysis:

Issue 1: Entitlement to Refund of SAD under Notification No 102/2007-Cus
The Tribunal considered the case where goods were imported, sold under VAT invoices, but no VAT was paid due to exemption. The Revenue argued that since VAT was exempt, the importer cannot claim a refund of SAD. The Revenue relied on a Supreme Court judgment regarding excise duty exemptions. However, the Tribunal differentiated between excise duty and VAT, emphasizing that SAD aims to create a level playing field between imported and domestic goods. The Tribunal held that when imported goods are sold, both imported and domestic goods face the same VAT rate, justifying the refund of SAD. The Tribunal highlighted that the notification does not specify the VAT rate for refund eligibility, and as long as VAT is paid, even if 'nil,' the importer is entitled to the refund.

Issue 2: Interpretation of Notification No 102/2007-Cus
The Tribunal referenced a previous case where it was clarified that the importer must pay appropriate sales tax or VAT for SAD refund eligibility. The Tribunal emphasized that the notification does not require a specific VAT rate, and as long as the appropriate tax is paid, including 'nil' VAT, the refund is admissible. The Tribunal rejected the Revenue's argument that VAT exemption precludes SAD refund, highlighting that the focus is on the payment of VAT, not the rate. The Tribunal's decision aligned with previous rulings, establishing that SAD refund under the notification is available even if the VAT rate is 'nil.'

Conclusion:
The Tribunal allowed the appeals, setting aside the impugned orders and granting consequential relief. The judgment clarified that an importer is entitled to a refund of SAD under Notification No 102/2007-Cus even if the applicable rate of VAT is 'nil.' The decision emphasized the importance of paying appropriate tax, regardless of the VAT rate, for SAD refund eligibility, maintaining consistency with previous tribunal rulings.