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Special Additional Duty Refund

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While importing goods in India, the importer is required to pay Special Additional Duty (SAD). The rationale behind levying this import duty is to counterbalance VAT (i.e. tax revenues of government) and boost the domestic suppliers (which would have been purchased from domestic market otherwise). The SAD is levied as per Section 3(5) of Customs Tariff Act and also known as Counter Value Duty (CVD). However, if the same goods are furthers sold out then refund can be available to importer to the extent of Special Additional Duty (SAD) paid.

The importer shall pay on sale of the said goods, appropriate sales tax or value added tax, as the case may be. Time-limit for filing of refund claim is up to a period of 1 year from the date of payment of duty. The refund claims should be processed within the prescribed period of 3 months time. Importer is required to make a specific declaration in the sale invoice that no CENVAT credit would be admissible in respect of 4% CVD. -Customs stated that only those cases where 4% CVD was paid on or subsequent to 14.9.2007, will qualify for refunds under this scheme subject to fulfillment of prescribed conditions.

In some cases of when the VAT credit is available with the importer due to credit of VAT paid on local purchase of other products, the payment of VAT by input tax credit adjustment should be acceptable in lieu of VAT paid challan. Further, a certificate from statutory auditor/Chartered Accountant correlating the payment of VAT on the imported goods with the invoices of sale, along with supporting documents of proof of payment of appropriate VAT is acceptable for the purpose of refund. The importers should submit copies of VAT challan along with a certificate from the Chartered Accountant, who either certifies the importer’s financial records under the Companies Act, 1956 or any VAT Act of the State Government or the Income Tax Act, 1961, confirming the payment against the aforesaid documents.

The Customs 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. A certificate by any other independent Chartered Accountant would not be acceptable for this purpose. The importers who operate through consignment agents / stockists, it is found that the imported goods are held by these agents / stockists in the capacity of bailee. The goods are sold by them on behalf of the importer and the payment for the sale is made to the importer. The circular also states in favor of importers that where certain quantity of goods were lost or short-landed or damaged resulting in sale of part quantity and the importer submitting a refund claim for the quantity that was sold along with the declaration that for the remaining quantity they would not claim refund, the claims shall be entertained even for part quantity by the Customs.

The status of the refund claims should be placed on the website of the Commissionerate and updated periodically for monitoring of timely disposal of refund claims. Wherever refund claims are sanctioned necessary defacement of the original bill of entry may be carried out in order to ensure that in no case refund is entertained on the same grounds for same goods covered under a bill of entry again. In case of refund claim not being disposed of in 3 months, the matter should be reported to the Board within a fortnight mentioning the reason for delay and any area of doubt which needs to be clarified. The importers can submit the copy of invoices in electronic form (including the form of CD) as prescribed in Information Technology Act, 2000. The electronic media containing the information about sale invoices should, however, be submitted along with a paper declaration by the applicant indicating the invoice numbers contained in the media and subscribing to their truthfulness.

One of the conditions of SAD refund is that document evidencing payment of appropriate VAT/CST on sale of such imported goods must be produced by the importer. In line to this, payment of VAT/CST will become a pre-requisite for claiming the refund of SAD. Conceptually, certainly the stand of CESTAT is valid but further appeal till Supreme Court is still possible.

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