SAD refund cannot be denied merely because invoice do not mention that ‘No Cenvat credit of SAD is admissible’

SAD refund cannot be denied merely because endorsement to the effect that ‘No Cenvat credit of the SAD is admissible’ was not made on Invoices

Chowgule & Company Pvt. Ltd (the Appellant) are the traders who, imported goods by discharging Special Additional Duty of Customs (SAD)under Section 3(5) of the Customs Tariff Act, 1975 and subsequently domestically sold such goods on payment of CST/VAT under commercial invoices. Thereafter, the Appellant filed refund of SAD under Notification No. 102/2007-Customs dated September 14, 2007 (the Notification) which was rejected by the Department on the ground that the endorsement to the effect that ‘No Cenvat credit of the SAD is admissible’ in respect of the goods covered therein, as required in terms of condition 2(b) of the Notification was not made on the invoices issued for sale of goods.

Being aggrieved, the Appellant preferred an appeal before the Hon’ble CESTAT, Mumbai wherein the Appellant contended that as no duty element is incorporated in commercial invoices, therefore, the question of taking benefit of SAD by the buyer does not arise. Further, relying upon the decisions of the Hon’ble Tribunal in the cases of Equinox Solution Ltd. [2010-TIOL-1907-CESTATMUM](“Equinox Case”)and Novo Nordisk India Pvt. Ltd [2013-TIOL-1944-CESTAT-MUM] (“Novo Case”), the Appellant submitted that SAD is payable by the assessee to safeguard CST/VAT and since the goods have been cleared on payment of CST/VAT, therefore, they are entitled to get the benefit as per the Notification.

On the other hand, the Revenue contended that the condition of the Notification needs to be followed strictly and relied upon the Division Bench decision in the case of Astra Zeneca Pharma India Ltd. [2013-TIOL-1946-CESTAT-DEL].

Observing the contrary views, the matter was referred to the Larger Bench on the issue as to whether compliance of the condition 2(b) of the Notification is mandatory to avail the benefit of the Notification by a trader who cleared the goods on the strength of commercial invoices.

The Larger Bench relying on the decision in case of Equinox Case andNovo Caseanswered the reference in favour of the Appellant and held that:

• From the genesis of the levy of SAD attributable to the Finance Bill, 1998 and the Budget speech of the Finance Minister, it is observed that the object of the levy was to counterbalance the levy of local taxes on imported goods. Thus, the purpose of the Notification is to grant relief from double levy;
• Non-declaration of the duty in the commercial invoices issued itself is an affirmation that no credit would be available on commercial invoices;
• Relying on the decision in case of Mangalore Chemicals and Fertilizers Ltd. [2002-TIOL-234-SC-CX] and New India Sugar Mills Ltd. [AIR 1963 SC 1207], the condition relating to endorsement on the invoice was merely a procedural one and the purpose and object of such an endorsement could be achieved when the duty element itself was not specified in the invoice.

Hence, the reference as answered above was returned to the referring bench for further action as necessary.