Custom, Excise & Service Tax Tribunal
Shandong Heavy Industry India P Ltd vs Nhava Sheve - Ii on 30 September, 2019
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
WEST ZONAL BENCH, MUMBAI
Customs Appeal No. 86914 of 2018
(Arising out of Order-in-Appeal No. 450(CRC-SAD-IV)/2017/(JNCH)-Appeal-II
dated 28.07.2017 passed by the Commissioner of Customs (Appeals-II), Mumbai-
II.)
M/s Shandong Heavy Industry ........Appellant
India Pvt. Ltd.
208/281/Near Power House Phase-II
Hinjawadi Village-Mann Tal Mulshi,
Pune, Maharashtra - 411 057
VERSUS
Commissioner of Customs, ........Respondent
Nhava Sheva-II
JNPT, Customs House, Nhava Sheva,
Raigad, Maharashtra - 400 707
APPERANCE:
Shri Ganesh Kumar, Chartered Accountant for the Appellant
Shri Ramesh Kumar, Assistant Commissioner, Authorised Representative
for the Respondent
CORAM:
HON'BLE DR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL)
FINAL ORDER NO. A/86726/2019
Date of Hearing: 19.06.2019
Date of Decision: 30.09.2019
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Denial of the benefit of the refund of Special Additional Duty
(SAD) of Rs. 9,64,094/- paid during importation of marine diesel
engines through three Bills of Entry of October to November, 2014
on the ground of limitation is assailed in this appeal.
2. Factual backdrop of the case is that appellant had effected
imports vide Bills of Entry dated 29.10.2014, 17.10.2014,
17.11.2014 as well as released goods upon payment of SAD @4%.
Subsequently appellant sold the goods within India on payment of
applicable VAT/CST and sought for refund of SAD vide its application
dated 16.03.2016 as per Circular/Notification No. 102/2007-Cus
dated 14.09.2007 as amended vide Notification No. 93/2008-Cus.
The said refund application was rejected by the Assistant
Commissioner of Customs, Central Refunds Cell - (SAD-VI), NS-III
vide his order dated 21.04.2016. Appeal of the appellant before the
Commissioner (Appeals) yielded no fruitful result for which it has
approached this forum.
3. In the memo of appeal and during course of hearing of the
appeal, learned Counsel for the appellant Shri Ganesh Kumar has
placed his reliance in the decision of the Hon'ble High Court of Delhi
in the case of M/s Soni India Pvt. Ltd. Vs. Commissioner of Customs,
New Delhi reported in [2014 (304) ELT 660 (Del)] and this Tribunal's
decision in M/s Bitumen Corporation (I) Ltd. passed on 26.02.2019
to argue that since refund application can only be filed after payment
of VAT/CST, the relevant date for completion of one year is to be
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taken as the date of payment of VAT/CST for which the order passed
by the Commissioner (Appeals) is required to be set aside.
4. In response to such submissions, learned Authorised
Representative for the respondent-department Mr. Ramesh Kumar,
Assistant Commissioner has argued that Hon'ble Bombay High Court,
which has jurisdiction over CESTAT Mumbai, has given its finding in
CMS Info System Ltd. Vs. UOI reported in 2017 (TIOL) 79 HC Mum.
that the time limit of one year as prescribed in the Customs
Notification No. 93/2008-Cus. will apply and it has well taken into
consideration the decision of Hon'ble Delhi High Court pronounced in
the case of M/s Sony India Ltd. (supra) while giving such a finding.
He further argued with reference to the decision of Hon'ble Supreme
Court of India in the case of East India Commercial Co. Ltd., Calcutta
Vs. Collector of customs, Calcutta reported in 1983 (13) ELT 1342
(SC), that Tribunal over which Hon'ble High Court has
superintendence cannot ignore law declared by that Court. Further,
he has drawn attention of this Bench to other decisions of Hon'ble
High Court of Bombay in the case of CC NS-III Vs. DSM Sinochem
Pharmaceuticlas (I) Pvt. Ltd. reported in 2018 (359) ELT 509
(Bombay) and this Tribunal pronounced on 03.06.2019 in the case of
M/s Associated Chemical Corporation Vs. Commissioner (Appeals),
Mumbai-II wherein such refund claims were rejected basing on the
decision pronounced in CMS Info System Ltd. (supra) for which he
stated that interference by the Tribunal in the order passed by the
Commissioner (Appeals) is uncalled for.
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5. Perused the case record, the judgments referred by the
adversaries and the order passed by the Commissioner (Appeals).
Before delving into the intricacy of the issue, it is worthwhile to have
a look at the genesis of introduction of SAD in India by invoking
Section 35 of the Customs Act, which has been dealt elaborately in
the judgment of M/s Bitumen Corporation (I) Ltd.
6. As available in the Economics Time of 10.06.2008, SAD on
Customs @ 4% has been levied on all imports by the Budget 2006-
07. As no Central Sales Tax or VAT is levied on imports, the levy of
SAD was intended to create a level playing field for domestic goods
vis-a-vis imports. A manufacture of excisable goods is permitted to
utilise the SAD paid on imported goods as a credit against its excise
duty liability for which SAD is not a cost for a manufacturer and as
such does not operate as a countervailing tax. However, such credit
was not available to a service provider or to the traders. An importer
- traders who imports and sells goods in India upon payment of
CST/VAT had to first pay SAD, and then CST/VAT on sale of the
imported goods.
6.1 It was felt that for a trader, rather than being countervailing,
levy of SAD results in double taxation. To be WTO-compliant and
upon demand from the industry, the Government of India issued a
notification exempting all goods imported into India for sale from
levy of SAD, if such goods were resold in India upon payment of
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appropriate CST/VAT but such exemption has been granted by way
of a refund and the procedure prescribing such refund has been
issued by way of Circular/Notification No. 102/2007-Cus. dated
14.09.2007. The conditions are enumerated in para 2 of the said
notification in which under sub para (c) the importer will have to file
a claim of refund to the jurisdictional Customs Officer along with
copies of documents including documents evidencing payment of
CST/VAS on sale of such imported goods, for which SAD was paid.
Sub-para (c) was amended by way of Notification No. 93/2008-Cus.
dated 01.08.2008 where such refund claim before the jurisdictional
Customs Officer was stipulated to be filed before the expiry of one
year from the date of payment of the said additional duty of
Customs.
7. Dispute concerning such fixation of one year time period to
claim refund had reached the Hon'ble Delhi High Court through
petition of M/s Sony India Ltd. and in the above referred judgment, it
was observed by the Hon'ble High Court that the reason behind
fixing of such time frame was that some field formation authorities
invoked Section 27 of the Customs Act, where normal time limit of
six months was prescribed to claim refund and considering the fact
that goods imported will have to be dispatched for sale even to
different parts of the country which the importers may find difficult to
dispose of soon and complete the requisite documentation within the
normal period of six months, above exemption up to a period of one
year from the date of payment of duty had been necessitated,
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apparently in the public interest. Ultimately, Hon'ble Delhi High
Court rejected that time frame inclusion notification on the ground
that subordinate legislation on goods cannot prevail over statutory
substantive rights. On the contrary, Hon'ble Bombay High Court in
the case of CMC Info Systems Ltd. (supra), hold a finding that when
the exemption is conditional all the conditions therein have to be
complied with and the appellant cannot say one of those conditions
as excessive, arbitrary, unjust or unreasonable, which did not suit it.
As a matter of judicial discipline and in conformity to the rule of
precedent, the finding of the jurisdictional High Court is normally
considered as binding on this Bench of the Tribunal, since Article -
227 of the Constitution of India confers power of Superintendence on
the Hon'ble High Court over the Tribunals throughout its territories.
However, considering the peculiar composition of CESTAT which is a
Tribunal having jurisdiction over the whole territory of India, Bombay
Zonal Bench being a bench for the purpose of sitting of CESTAT, it
would be inappropriate to delve into the intricacies of the issue in
view of the fact that when Article - 227 was drafted, conception of
National Tribunals and Article - 323 A & B were not in existence for
which Tribunals, in Article - 227 would mean to read State Tribunals,
to be subjected to the superintendence and control of jurisdictional
High Court. Further five Members Bench of this Tribunal, in the case
of Atma Steel Pvt. Ltd. & Others Vs. Collector of Central Excise,
Chandigarh and others reported in [RLT (LB-CEGAT)-87] had held as
follows.
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"70. We also feel that as a Tribunal, working on all-
India basis, we have the freedom to consider judgments
holding conflicting views given by different High Courts,
and then see for ourselves as to which authority, applied
more fully and aptly to the facts of a given case, before
us. For, in view of the scheme of the Act, under which we
are functioning, as brought into focus in paras 59 and 61
above, we are constrained to repel the argument, that
we are circumscribed by the view of a particular High
Court where the assessee or a particular Collectorate is,
because that would inevitably land the Tribunal in a
mess, propounding conflicting and contradictory views,
vitiating its very existence, and cutting down the
wholesome principles, desirability whereof has been
highlighted in para 60 above. We, therefore, feel duty-
bound to determine ourselves, this issue; namely,
continuation of proceedings pending at the time of the
respective amendments, and adopting the view of
Madhya Pradesh High Court as enunciated in Gwalior
Rayon case (supra), we hold that these proceedings can
continue, which view a Bench of this Tribunal already
expressed, without much controversy having been raised
in the case of Carew & Co. Ltd. v. Collector of Central
Excise, Allahabad (1983 E.L.T. 1186) (CEGAT). Another
Bench of this Tribunal (NRB) also held similarly in case :
Sri Ram Pistons and Rings Ltd. v. C.C.A., Meerut (1980
E.L.T. 927)."
In view of the above proposition of law laid by the Larger Bench of
the Tribunal on judicial precedent to be followed, the freedom to
consider judgments holding conflicting views given by different High
Court is available with the Tribunal to see for itself as to which
authority would apply fully and aptly to the facts of a given case, to
be decided by the Tribunal.
8. A cursory reading of the Notification No. 102/2007-Cus. and
Notification No. 93/2008-Cus. would clearly reveal that in the public
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interest, such notifications were made by the Government of India
and as discussed earlier, SAD was made applicable to counter
balance CST/VAT and create a level playing field for domestic goods
so that price difference between the locally manufactured goods and
imported goods would not put the local manufacturer in a
disadvantageous position. Admittedly CST, VAT are collected for
distribution among the States, for which it is difficult to understand
why SAD is introduced as a counter balance. It appears that only to
maintain the price equilibrium, SAD has been introduced as a
precautionary measure to provide coverage to indigenous goods.
Therefore, it is collected with the avode purpose of providing a
security to such indigenous goods and collected as a security from
the importer so that the movement they sale it up in the domestic
market, they will pay CST/VAT accordingly and get back the SAD
already paid, by way of refund. This analysis is fortified by the fact
that such refund is designed as an exemption clause and not as a
rebate or refund of excess payment.
9. As found from the para 35 of the judgment of Hon'ble Bombay
High Court in CMC Info System Ltd. case, exemption flows from the
power to exempt and refund flows from the power to grant such
refund and makes it admissible. The word 'exemption' in its common
parlance indicates "the act of being free from an obligation or liability
imposed". Therefore, purpose of this exemption notification is not to
refund the tax but to exempt from payment of tax or duty which was
not due to be paid but was collected to meet certain contingency.
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The right to avail such exemption from payment of duty would
accrue upon sale of the imported goods may be in the market,
consequent upon payment of CST/VAT. The cause of action can only
arise upon sale of the imported goods which is a market dependent
condition and sometimes sale may not occur even within the period
of one year. In such a situation, if benefit of exemption notification
is not extended to the appellant then the same would amount to
double taxation, which no law of the land would approve of, even in
the international arena. Therefore, such a duty imposed to counter
balance the Sales Tax or the Value Added Tax, Local Tax etc. will
have to be refunded and upon payment of those taxes alone, the
cause of action would accrue and such counter balancing payment
already made was to be refunded. This being the purpose of
introduction of SAD, I am of the considered view that amended sub-
para (c) of para 2 which stipulated the time period to file claim of
refund as one year from the date of payment of said additional duty
of Customs should be read as effective payment of additional duty of
Customs by way of CST/VAT as the purpose of payment of SAD at
the time of import was in the nature of counter balancing the
CST/VAT etc., which could be treated at par with security. I am
constrained to borrow this analogy as in the CMC Info System Ltd.
(supra) judgment, Hon'ble Bombay High Court had expressed its
apprehension that it was not possible to guess as to whether refund
application would be held to be not maintainable purely on the
ground that condition like sale of the said goods on payment of
appropriate of Sales Tax or Value Added Tax was not made. Going
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by the Board Circular No. 16/2008 which stipulates three months
time period for processing of such refund, sale of goods and payment
of CST/VAT etc. being condition precedent to file refund claim, no
incomplete refund application could have ever been entertained by
the respondent-department as the same is unusual to its prevailing
practices. Any such application could be considered as not-
maintainable being premature when such stipulation/condition is not
met. Therefore, with respectful regards to the findings of the Hon'ble
Delhi High Court and Hon'ble Bombay High Court on the issue
regarding legality of the prescribed time period to file refund which
was challenged and answered, and having regard to the definition of
relevant time given in Explanation (3) of Sub-Section (5) of Section
11B of the Central Excise Act, 1944 wherein time frame is stated to
have run from the date on which refund is held to be payable, I am
of the firm opinion that the same period of one year is to be
computed from the date of payment of CST, VAT etc. upon sale of
goods. It is a settled principle that Tribunal being creature of
statute, cann't go beyond the provisions of law but there is no
impediment on the part of the Tribunal to read into the law to
provide meaning and clarify to the provisions of law for the purpose
of making it virtually implementable. Interpretation of the provision
under sub para (C) of para 2 has not been done by the Hon'ble High
Court of Bombay or Delhi who have primarily dealt with the legality
of having a time limit to deal with cases of SAD refund.
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10. It is noteworthy to mention here i.e. in its additional
submissions, appellant has reproduced detail concerning payment of
VAT/CST thorough challans and it appears that except of payment on
20.10.2014, all VAT payment were made between July, 2015 and
October, 2015. The refund application being filed within one year of
such payment of sales tax i.e. on dated 16.03.2016, the same is to
be treated to have been claimed within the period of limitation as
contemplated in the amended Notification No. 93/2008-Cus. and the
said refund is therefore to be allowed by the jurisdictional refund
authority. Hence, the order.
ORDER
11. The appeal is allowed in part and the order passed by the Commissioner of Customs (Appeals-II), Mumbai-II vide Order-in- Appeal No. 450(CRC-SAD-IV)/2017/(JNCH)-Appeal-II dated 28.07.2017 is modified to the extent of allowing refunds of SAD paid against three Bills of Entry dated 29.10.2014, 17.10.2014, 17.11.2014 except refund of the amount against which VST/CST was paid on 20.10.2014. The refund process be completed within a period of 2 months from the date of receipt of this order with due regard to Section 11BB of the Central Excise Act dealing with interest on delayed refunds.
(Order pronounced in the open court on 30.09.2019) (Dr. Suvendu Kumar Pati) Member (Judicial) Prasad