CA Certificate Sufficient & Valid for SAD Refund: CESTAT Bangalore

Faxtel Systems (India) Vs Commissioner of Customs Bangalore ( CESTAT Bangalore)

In a significant ruling, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Bangalore held that a Chartered Accountant’s (CA) certificate is sufficient to grant a refund claim for Special Additional Duty (SAD). The case, Faxtel Systems (India) vs. Commissioner of Customs Bangalore, revolved around the denial of a refund claim based on the alleged inadequacy of the CA’s certificate. This article provides a detailed analysis of the CESTAT Bangalore’s decision, its legal implications, and the broader impact on importers.

Background of the Case

Faxtel Systems (India) re-imported goods and cleared them upon payment of customs duty and 4% SAD as per Notification No. 102/2007 dated 14.09.2007. Following the sale of these goods with VAT paid, Faxtel Systems sought a refund of the 4% SAD. However, the refund application was initially rejected due to the CA certificate’s purported failure to demonstrate how unjust enrichment was avoided.

The Commissioner (Appeals) remanded the case, directing Faxtel Systems to provide further clarification from their CA. Despite additional submissions by the statutory auditor, the adjudicating authority partially allowed the refund, crediting Rs. 3,29,226 out of the claimed Rs. 5,92,973 to the Consumer Welfare Fund. Dissatisfied, Faxtel Systems appealed to the Commissioner (Appeals), who upheld the partial refund decision. This led to the present appeal before CESTAT Bangalore.

Arguments Presented

Faxtel Systems contended that their refund application was sufficiently supported by documents, including a CA certificate and detailed statements. The certificate clarified that the SAD amount was neither included in the selling price nor collected from customers, and remained receivable in their accounts for the financial year 2008-09.

Citing precedents like Koradia Exports (India) Private Ltd. vs. CC, Mumbai, the appellant argued that the practice of showing the SAD amount in the purchase account and later crediting it upon refund was acceptable and compliant with conditions for avoiding unjust enrichment.

Additionally, Faxtel Systems referenced multiple decisions, including CC, Bangalore vs. Apple India Private Limited, where the Tribunal had accepted similar CA certificates and ruled against the denial of refunds based on technical grounds.

CESTAT Bangalore’s Decision

The Tribunal meticulously examined the arguments and precedents. It noted that the issue of unjust enrichment was adequately addressed by the CA certificate, which confirmed that the SAD amount was not passed on to the buyers. The Tribunal emphasized that once a CA certificate is produced, and absent any allegations of fraud or collusion, such a certificate should be deemed sufficient for granting refund claims.

CESTAT Bangalore further criticized the lower authorities for denying refunds based on minor technicalities, asserting that compliance with procedural requirements should not overshadow substantive justice. It reiterated that the statutory auditor’s certificate fulfills the requirement to negate unjust enrichment, as per the conditions laid down in Notification No. 102/2007 and subsequent CBIC circulars.

Conclusion

CESTAT Bangalore’s ruling in Faxtel Systems (India) vs. Commissioner of Customs Bangalore underscores the validity and sufficiency of CA certificates in SAD refund claims. This judgment is pivotal for importers, as it clarifies that technical objections should not obstruct legitimate refund claims when supported by adequate documentation and professional certification. The decision reinforces the principle that procedural compliance should not impede the substantive rights of taxpayers.

FULL TEXT OF THE CESTAT BANGALORE ORDER

Issue in the present appeal is regarding refund of Special Additional Duty paid on import of goods. The appellant had re-imported goods and it was cleared on payment of customs duty and 4% SAD as per Notification No. 102/207 dated 14.09.2007. Thereafter goods were sold and on payment of VAT, appellant submitted refund claim for refund of 4% SAD. However, the refund application was rejected on the ground that the CA certificate has not stated as how the unjust enrichment was not applicable. Aggrieved by said order, an appeal was filed before Commissioner (Appeals) and considering the issue, the Commissioner (Appeals) remanded the matter to adjudication authority with a direction to the appellant to submit explanation from their CA as to how they arrive at the conclusion that the duty amount was not passed on to the customers. Thereafter adjudication authority considered the issue and even after submitting detailed explanation by the statutory auditor, the adjudication authority allowed refund partially. An amount of Rs. 3,29,226/- was allow against refund claim of Rs. 5,92,973/- and said amount is also credited to the Consumer Welfare Fund. Aggrieved by said order, an appeal was filed before the Commissioner (Appeals) and the Commissioner (Appeals) vide impugned order upheld the order of the adjudication authority. Aggrieved by said order, present appeal is filed.

2. When the appeal came up for hearing, learned counsel for the appellant submits that they have submitted the refund application with sufficient documents and also the application was supported by certificate issued by the Chartered Accountant, supported with statement showing the calculation of refund of SAD. Moreover, the initial certificate produced by the appellant clearly indicates that the amount claimed in the refund has not been included in the selling price and have not been collected from the customers. It is also stated that the amount stands receivable in their books of accounts for the financial year 2008-09. The learned counsel also drew my attention to the certificate produced by the appellant and as per the direction of the Commissioner (Appeals), a detailed statement was given as follows:

“For the purpose of examining the clause of unjust enrichment to the importer in respect of subject refund claim, we have verified the importer’s Books of Accounts and other relevant documents & records/cost sheets/price structure etc., of the goods. Based on such verification, we have satisfied ourselves that the price at which the imported goods have been sold to buyers (including those cases where the goods were subjected to RSP/MRP based assessment at the time of import) vide various invoices does not include the component of the said 4% Additional Duty of Customs levied under Section 3(5) of the Customs Tariff Act, 1975 which was paid at the time of import. As such, we certify that the claimant has not passed on the incidence of the 4% Additional Duty to the buyer or any other person and hence the requirement to rule out unjust enrichment to the importer/claimant is fulfilled in respect of all goods imported and sold as covered by the subject claim (as detailed in the correlation sheet enclosed herewith).”

3. The learned counsel further submits that the issue is no more res integra. The issue regarding defect alleged in such CA certificates were considered by the Tribunal in the matter of Koradia Exports (India) Private Ltd. Vs. CC, Mumbai – 2018 (362) E.L.T. 336 (Tri.-Mumbai) and it is held that-

“5. We have heard both sides and perused the case records. We find that the lower authorities have rejected the refund claims on the ground that the Balance Sheet for the year ending 31-3-2008 does not show the refund amount as receivables. We find from the Chartered Accountant certificate that they had accounting practice of showing the sad amount in purchase account and afterwards in next year when they received the amount of SAD, the amount was credited to “Refund Received from the Government Account”. This practice adopted by the Appellant and certified by the Chartered Accountant clearly shows that the claim is not hit by unjust enrichment. The main requirement is that the importer should not have charged SAD amount to their buyers which has not been disputed by the Appellate Authority. Further in Balance-Sheet for the year 2008-09, the said amount is appearing as “Refund received from Government” which is also not disputed. In view of above facts we do not find any reason to deny refund of 4% SAD to the Appellant as the requirement of the conditions for allowing refund stands complied with. We thus hold that the Appellant is eligible for the refund. We therefore set aside the impugned order and allow the appeal with consequential relief.”

4. The learned counsel also drew my attention to the decision of the Tribunal in the matter of CC, Bangalore Vs. Apple India Private Limited – 2014 (301) E.L.T. 675 (Tri.-Bang.), wherein it is held that –

“10. From the above, it can be seen that the auditors are the regular auditors; they have applied appropriate audit test; they have certified that the burden has not been passed on either directly or indirectly; they have taken into account how the price of traded goods have been arrived at for this purpose. On the other hand, we find that while the appeal memorandum says worksheet clearly shows that the appellants have passed on the ACD and CA^‟s certificate has not categorically explained how ACD has not been passed on, there are no specific observations as to why the worksheet or the CA^‟s certificate cannot be accepted and what are the defects in the certificate/worksheet. On the other hand, we find that several orders have been passed by the officers of the department sanctioning refund in respect of the same appellant. In some of these cases, the very same Chartered Accountants have given the certificates and department has not even taken care to check whether those certificates are different from the present one. When the same appellant is able to get refund on the basis of very same facts, very same certificates and on the very same goods, it is not understandable how this particular case alone has been selected for special treatment. While memorandum as reproduced about sets out what should be the approach, in the very same paragraphs negates its own observation when no defects are pointed out in the worksheet/CA certificate turning observations into empty rhetoric. It is also necessary to consider the Board’s circular issued in this regard. Two circulars have been issued by the Board. The first one is No. 6/2008, dated 28-4 -2008 and the second one is No. 16/2008-Cus., dated 13-10-2008. Both these circulars have specific paragraphs devoted to unjust enrichment and how the unjust enrichment angle is required to be dealt with by the importers. In the circular issued on 28-4- 2008, the Board had said “importers may produce a certificate from the statutory auditor/Chartered Accountant, who certifies the importer’s annual financial accounts under the Companies Act or any statute explaining how the burden of 4% CVD has not been passed on by the importer to fulfil the requirement of unjust enrichment in addition to a self-declaration”. Subsequently based on the representation made by Trade and Industrial Associations, Board issued further clarifications and also felt the need for relaxation of procedural requirements and therefore, another circular was issued on 13-10-2008. In this circular, the Board observed as under “considering these provisions, it is clarified by the Board that the ^„statutory auditor/Chartered Accountant^‟ mentioned in para 6 of the earlier Board’s circular refers to ^„Chartered Accountant^‟ within the meaning of Section 2(1)(b) of the Chartered Accountants Act, 1949. However, it is clarified that the custom field formations shall accept the certificate given only by such a Chartered Accountant who either certifies the importer’s financial records under the Companies Act, 1956 or any ST/VAT Act of the State Government or the Income Tax Act, 1961 in order to fulfill the obligation to show that unjust enrichment is not attracted”. The very purpose of requiring a certificate to be produced by a professional Chartered Accountant and insisting on the fact that the Chartered Accountant should be one who is responsible for auditing the companies accounts either statutorily is to ensure that the Chartered Accountant is familiar with the accounts of the company, their practices and also would be knowing and would be in a position to verify the accounts and such certificates shall be accepted.”

5. The learned counsel for the appellant also draws my decision to the following decisions:

a. National Steel Agro Industries Limited Vs. CC, Mumbai – 2020 (371) E.L.T. 551 (Tri.-Mum.)

b. Systronic (India) Limited Vs. CC, Bangalore – 2019 (370) E.L.T 945 (Tri.-Bang.)

c. MIRC Electronics Vs. CC, Ahmedabad – 2013 (287) ELT 225 (Tri. -Ahmd.)

d. Equinox Solutions Ltd. Vs. CC, Ahmedabad – 2017 (357) E.L.T. 1041 (Tri.-Ahmd.)

6. The learned AR reiterated the submissions in the impugned order and submits that the appellant has not fulfilled the requirement of unjust enrichments and they have not shown the due amount as receivable in the financial year 2007-08 and it is shown as receivable only for the financial year 2008-09. For the above reasons, the appellant is not eligible for the refund as claimed by them.

7. Heard both sides. The limited issue in the present appeal is regarding the defect related to refund claim submitted by the appellant. It is the admitted fact that appellant had paid 4% SAD at the time of import and the appellant had also paid VAT as applicable while selling the goods. The appellant also complied with the condition No. 2(b) in the Notification No. 102/2007 dated 14.09.2007 where it is stated that “the importer, while issuing the invoice for sale of the said goods, shall specifically indicate in the invoice that in respect of the goods covered therein, no credit of the additional duty of customs levied under sub-section (5) of Section 3 of the Customs Tariff Act, 1975 shall be admissible. Facts being so, it is an admitted fact that the amount paid by the appellant as 4% SAD is not passed on to the buyers and the said aspect was confirmed by the statutory auditor of the appellant while issuing certificate on 05.06.2012. As regarding the objections made by lower authority, issue is squarely covered by the decisions of the Tribunal relied by the appellant, it is settled that once CA certificate is produced and in the absence of any allegation of fraud or collusion, such certificate is sufficient to grant the refund claim. Refund should not be denied merely on technical violations.

8. In view of the above, I am of the view that impugned order rejecting the refund claim is not sustainable. Therefore, impugned order is set aside and the appeal is allowed with consequential relief, if any, in accordance with law.