2019 (4) TMI 1712 - AT - Customs

Refund of SAD - Denial on the ground that they have paid VAT / CST on such imported goods - N/N. 102/2007-CUS dated 14.9.2007 - HELD THAT - The notification in question provides for exemption/refund of SAD if the imported goods are subsequently sold and they have suffered VAT/ CST - the provision of one statute i.e. Project Regulations cannot be imported into the provisions of Notification No. 102/2007-Cus to interpret and deny the exemption/ refund of SAD. Once the assessee has paid CST/ VAT on sale of imported goods, there is no question of retaining the 4% SAD as the payment of such CST/ VAT is the only criteria for granting refund. The adjudicating and the Appellate authority have found from the records that the imported goods on which SAD was paid have been sold by the Respondent to their buyer on further payment of VAT/CST and in such case, there is no reason to deny refund on the ground that the goods were part of Project contract and has lost their identity. Unjust enrichment - The Revenue has argued that the price indicated in the purchase order is inclusive of all taxes duties and the respondent has passed on the incidence of VAT to the buyer and there has been unjust enrichment - HELD THAT - The unjust enrichment in the instant case would apply only if the Respondents would have passed the incidence of 4% SAD paid by them and not the element of VAT levied and recovered by the importer from their buyer as part of their subsequent sale of such goods. Para 2 (vii) of Circular 16/2008 issued by the Board clear states that the intention of the Government is not to allow the importer to recover 4% SAD from the buyer and to claim the refund from Customs as well and that the only method to ensure this is to make it conditional to satisfy the principal of unjust enrichment. The recovery of VAT by the Respondent on subsequent sale does not casts any effect on exemption from SAD as the unjust enrichment would apply only if the Claimant recovers the SAD amount from buyers. The Appellate Authority has also examined the issue as to whether the Respondent has passed on the SAD Component to their buyer whether it pertains to passing on SAD component to the buyers. He has observed that none of the sales invoices were issued by the Respondent under rule 11 of the Central Excise Rules to enable the buyer to avail cenvat credit nor the invoices indicate the SAD component separately as available credit. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Eligibility for Project Import Benefits.
2. Admissibility of Refund of 4% Special Additional Duty (SAD)/Countervailing Duty (CVD).
3. Compliance with Notification No. 102/2007-CUS.
4. Application of Doctrine of Unjust Enrichment.

Issue-wise Detailed Analysis:

1. Eligibility for Project Import Benefits:
The Revenue argued that the goods imported by the Respondent under the Project Import scheme should not be eligible for benefits as per Regulation 3(a) of the Project Imports Regulations, 1986. They contended that the goods were imported as single or composite machines, which are excluded from benefits under heading No. 98.01 of the First Schedule of the Customs Act, 1975. The Respondent, acting as an EPC contractor, was supposed to supply goods only after making further changes for erection and installation. Thus, the identity of the goods would change and merge into the contracted single unit of the "765KV & 400KV Substation."

2. Admissibility of Refund of 4% SAD/CVD:
The Respondent claimed a refund of 4% SAD/CVD under Notification No. 102/2007-CUS, asserting they paid VAT/CST on the imported goods. The Revenue opposed this, arguing that the goods were imported for specific end use in a power project, and the purported sale was only on paper to avail ineligible SAD Refund. The Revenue also argued that the invoices did not correlate with import documents, and the value shown in invoices did not match the Bill of Entry, thus not fulfilling the notification's conditions.

3. Compliance with Notification No. 102/2007-CUS:
The Tribunal found that the exemption under Notification No. 102/2007-CUS is available by way of a refund mechanism, requiring the importer to pay 4% SAD at the time of import and claim a refund after submitting evidence of VAT/Sales tax payment. The Tribunal agreed with the Appellate Commissioner that the provisions of one statute (Project Regulations) cannot be imported into the provisions of Notification No. 102/2007-CUS to deny the exemption/refund of SAD. The Tribunal noted that the Respondent had paid CST/VAT on the sale of imported goods, fulfilling the criteria for granting a refund.

4. Application of Doctrine of Unjust Enrichment:
The Revenue argued that the Respondent passed on the burden of taxes, including VAT, to the buyer, thus invoking the doctrine of unjust enrichment. However, the Tribunal found that unjust enrichment would apply only if the Respondent had passed the incidence of 4% SAD to the buyer, not the VAT element. The Tribunal noted that the Respondent had provided documentary evidence showing they did not pass on the SAD component to their buyers, and the sales invoices included a declaration regarding non-eligibility of Cenvat Credit. The Tribunal concluded that the refund was not hit by the unjust enrichment clause.

Conclusion:
The Tribunal upheld the Order-in-Appeal, rejecting the Revenue's appeal. It concluded that the Respondent was eligible for the refund of 4% SAD as they had paid VAT/CST on the sale of imported goods, and there was no unjust enrichment. The Tribunal found no reason to interfere with the Appellate Commissioner's order based on the facts and records presented.

(Pronounced in the open court on 25.04.2019)