Reimbursement of the SAD authorized to the importer even if the VAT/sales tax rate is lower than the SAD rate or zero: CESTAT

SAD refund - VAT - Sales tax - SAD - CESTAT - taxscan

The Delhi Bench of the Customs, Excise and Service Tax Appeals Tribunal (CESTAT) ruled that the SAD refund is available even if the VAT/Sales Tax rate is lower than the SAD rate or no.

even if the VAT/sales tax rate were zero, the refund under Notification No. 102/007-Cus would be admissible and allowed the importer’s appeal.

The tax authority went to court against the commissioner’s order (appeals) in which relief was granted to the appellants-importer, Omya & Company, finding that the refund of the SAD balance, paid at the time of the import of Rs.36,183/- is eligible as these goods were being resold and on such sale the VAT/sales tax rate was zero.

The department argued that the SAD refund is only available upon payment of the appropriate VAT/sales tax when reselling the goods. The department further relied on the Supreme Court’s decision in CEC, Vadodara Vs. Dhiren Chemical Industries, in which it was held that the word “appropriate” in the context of the exemption notice meant the correct or specified excise duty, and that where an exemption is extended, provided the “appropriate duty has been paid” on the raw material, such exemption is not available where the raw material is not subject to excise duty or that this duty is nil.Thus, the same standard also applies to the reimbursement of the DAS.

Shri Anil Choudhary, Member (Judicial) concluded that “there is no basis in the grounds of appeal. The SAD is enforceable at the time of importation through a fair levy in lieu of sales tax, so as to protect the domestic industry. In addition, the Customs Tariff Law itself provides for reimbursement of SAD upon resale of goods. The refund mechanism has been provided in Notification No. 102/2007-Cus, which states that one of the conditions for refund is that the goods must be resold and the appropriate VAT/sales tax must have been paid. This court, in a previous ruling by Gazal Overseas, ruled that the SAD refund is available even if the VAT/sales tax rate is lower than the SAD rate or zero.

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Chief Commissioner of Customs v Omya & Company

Counsel for the Appellant: Shri Gopi Raman

REFERENCE: 2022 TAXSCAN (CESTAT) 254

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