Case Law Details
Enterprise International Ltd. Vs Commissioner of Customs (CESTAT Chennai)
SAD Liability Upheld Because Exemption Was Withdrawn Before Import Date; VAT Exemption in One State Cannot Eliminate SAD Liability Across India; CESTAT Says SAD Refund Mechanism Requires Prior Payment of Duty; Provisional Assessment Dispute on CVD Does Not Affect SAD Demand.
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai dismissed the appeal filed by Enterprise International Ltd. challenging the demand of 4% Special Additional Duty of Customs (SAD) on imported silk fabrics.
The appellant had imported silk fabrics under Bill of Entry dated 21.01.2012 and classified the goods under CTH 5007 while claiming exemption from SAD under Notification No. 20/2006-Cus. The Revenue issued a show cause notice dated 09.11.2012 proposing recovery of unpaid SAD on the ground that the exemption had ceased to apply after amendments introduced through the Finance Act, 2011 effective from 08.04.2011. The adjudicating authority confirmed the demand, and the Commissioner (Appeals) upheld the order, leading to the present appeal.
The appellant argued that SAD was not leviable because there was exemption from VAT under the Uttar Pradesh VAT Act. It was further contended that the assessment remained provisional due to disputes relating to countervailing duty (CVD), and therefore demand proceedings under Section 28 of the Customs Act could not be initiated. Reliance was placed on various judicial decisions in support of these submissions.
The Revenue contended that SAD had never been paid by the importer and that refund of SAD could be claimed only after payment of the duty. It argued that SAD is a central levy imposed in lieu of VAT/sales tax and cannot become inapplicable merely because VAT exemption existed in a particular State. The Revenue also submitted that the provisional assessment dispute related only to CVD and had no connection with SAD liability.
The Tribunal observed that when the Bill of Entry was filed in January 2012, the exemption from SAD had already been withdrawn with effect from 08.04.2011. Therefore, the importer was liable to pay SAD at the time of import. The Tribunal held that Notification No. 102/2007 governing SAD refunds required payment of SAD first before claiming refund and that there was no specific exclusion applicable to the appellant.
CESTAT further held that exemption from VAT in Uttar Pradesh could not exempt payment of SAD throughout India since imported goods could be sold in any State. It also rejected the appellant’s argument regarding provisional assessment, holding that the dispute concerning CVD had no bearing on SAD liability. Finding no infirmity in the impugned order, the Tribunal dismissed the appeal.
FULL TEXT OF THE CESTAT CHENNAI ORDER
This Appeal is filed against Order-in-Appeal No. 546/2015 dated 29.05.2015 passed by Commissioner of Customs (Appeals-II), Chennai and the short issue in this Appeal is the demand of 4% Special Additional Duty of Customs (SAD) on the Silk fabrics imported by the Appellant.
2. Heard Shri S. Murugappan, ld. Advocate for the Appellant and Shri Vineet Goyal, ld. Departmental Representative for the Respondent; perused the documents placed on record including the orders of lower authorities carefully and we have also gone through the decisions relied upon during the course of arguments.
3. A perusal of the Order-in-Original No.36231/2015 dated 27.03.2015 reveals that the Appellant filed a Bill of Entry on 21.01.2012 upon import of Silk fabrics, which was assessed to duty by classifying the goods under CTH 5007 and the Appellant also claimed the benefit of SAD vide No.50 of Customs Notification No.20/2006-Cus. A Show Cause Notice dated 09.11.2012 came to be issued proposing to recover the non-payment of SAD since, according to the Revenue, as per Finance Act, 2011 effective from 08.04.2011 all goods specified in the First Schedule to the Additional Duty of Excise (Goods of Special Importance) Act, 1957 stood deleted and hence, the Bill of Entry which was filed on 21.01.2012 which was after the enactment of Finance Act, 2011, the benefit of exemption of SAD was stood withdrawn. The Appellant appears to have filed its explanation justifying its claim of exemption which was considered in adjudication and the Adjudicating Authority vide Order-in-Original dated 27.03.2015 confirmed the proposal made in the SCN. Aggrieved by the above, the Appellant appears to have filed an Appeal before the First Appellate Authority and the First Appellate Authority also having dismissed their Appeal vide impugned Order-in-Appeal No.546/2015 dated 29.05.2015, the present Appeal has been filed before this forum.
3.1 Under the Customs Act, 1962, Additional Customs Duty i.e. CVD is imposed to counteract the impact of subsidies awarded by exporting countries of their products and the same is levied on the assessed value of imported goods, the intention is to ensure a level playing field for domestic producers.
3.2 Special Additional Duty i.e. SAD is applicable to imported goods under the Central Excise Act, is applied at a specific percentage of value of the imported goods including BCD & CVD. SAD is imposed and collected in lieu of VAT/Sales tax. The goal therefore is to provide protection to domestic industries from the impact of cheaper imports.
4. The contention of the Ld. Advocate as could be seen from the Grounds of Appeal as well as the submission / synopsis filed during the course of arguments by the Appellant, is that primarily there was an exemption for payment of VAT under U.P. VAT Act and, therefore, SAD would not be leviable. Moreover, the assessment was only provisional on account of the dispute relating to levy of countervailing duty and, therefore, the demand raised, confirmed and upheld in the Order-in-Appeal under Section 28 ibid cannot sustain. It is the further case of the Appellant that when assessment is provisional, it remains provisional for all purposes and hence, no demand under Section 28 could be made. Reliance in this regard has been placed on the following judgements / orders :
(i) International Computers Indian Manufacturers Ltd. Vs Union of India [1981 (8) ELT 632 (Del.)]
ii. Commissioner of Customs Vs Aanchal Cements Ltd. [2020 (2) TMI 612]
iii. Commissioner of Customs Vs Katyal Metal Agencies [2023 (10) TMI 900-CESTAT Kol.]
5. Per contra, it is the case of the Revenue that the Appellant never paid SAD upon import, the importer should apply for refund only when they had paid SAD. Further, SAD is levied to counter VAT, only when is paid; when VAT itself is claimed to be exempted i.e. not-paid, there is no need to pay SAD is an illogical argument since SAD is a central levy which cannot be made inapplicable to a particular State, also since State of Utter Pradesh does not exempt payment of SAD and, there is also no bar on the importer for selling the goods imported in other states where VAT is payable. With regard to the demand under Section 28 when assessment was only provisional, it is contended that the dispute was relating to levy of CVD and hence, the same is not applicable to SAD.
6. Having heard the rival contentions, we find that the only issue to be decided is, ‘whether the demand of SAD as upheld in the impugned order is correct ?’.
7. It is an admitted fact that at the time of import, the Appellant did not pay 4% SAD since the Appellant claimed benefit of Notification No.20/2006, there is also no dispute that when the Bill of Entry was filed for the goods in question, change in law (w.e.f. 08.04.2011) was already in place, which changed the scenario by removing the exemption. This means that even as on the date of import, the exemption of 4% SAD stood deleted thereby making the Appellant liable; it is a different matter that the Appellant continued to claim exemption for the reasons best known to them. Going by the statute, there was a liability on the part of the importer i.e. Appellant and hence, prima facie it appears that the demand of short-levy is justified.
8. Statute also provides for claiming refund of SAD provided the claimant makes the payment of SAD only then they will be eligible to claim refund, which is not the case here. When there is no specific exclusion from exemption, the payment of duty is imperative. Just because it is claimed that there was exemption from VAT in U.P. does not mean the same is valid throughout India as long as the goods imported are sold anywhere in India. In this regard, we find merit in the contention of the Revenue that refund of SAD which is governed by Notification No.102/2007 makes it mandatory to pay the duty first and claim the refund of the same later. Further, with regard to the claim of provisional assessment and the demand under Section 28, we find that the dispute is only with the regard to applicability or otherwise of CVD in terms of Notification No.30/2004, which has nothing to do with SAD and hence, the said contention is also without any merit.
9. In view of the above, we do not find any infirmity in the impugned order and, therefore, the Appeal is liable to be dismissed as devoid of any merit. Same is accordingly dismissed.
(Order pronounced in open court on 24.04.2026)
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