SAD Refunds Can't Be Denied For Taking Away Facility Of Re-Crediting DEPB Scrips: Kerala High Court
The Kerala High Court has held that if the appellant/assessee satisfies the conditions in Notification No.102/2007-Cus dated 14.09.2007 for the purposes of refund of the 4% Special Additional Duty (SAD), then merely because the facility of re-crediting the Duty Entitlement Pass Book (DEPB) scrips has been taken away, the refund that the appellant is entitled to by virtue of the notification cannot be denied.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that since the Delhi High Court has already annulled the Circular dated April 29, 2013, the respondent-department is now legally obliged to consider the refund application preferred by the appellant independently, on its merits, to see whether the conditions specified in Notification 102/2007-Cus dated September 14, 2007 have been satisfied by the appellant.
The appellant/assessee is a leading food processing unit in India and is engaged in the export of processed food. In connection with its business activities, it procures raw materials locally to process the food items for export. On certain occasions, raw materials are also imported for the purposes of meeting export obligations.
While importing goods, the assessee used to pay the basic customs duty and special additional duty of customs by debiting the duty amounts in the Duty Entitlement Pass Book (DEPB) scrips that were obtained by it as export incentives under the DEPB export promotion scheme. Whenever a duty exemption was claimed, it would be made available to the exporters either by way of re-crediting the scrips with the refund amount or by paying the refund amount in cash to them. In the instant case, the appellant had paid the 4% Special Additional Duty by debiting the DEPB Scrips.
However, while claiming a refund of the SAD paid, by adducing proof of payment of value added tax, in accordance with Notification No.102/2007-Cus dated 14.09.2007, which envisaged an exemption from, and consequent refund of, the SAD paid, to importers, it came across Circular No.18/2013-Cus dated 29.04.2013 that changed the procedure for claiming refund of SAD.
As per the Circular, the refund of 4% SAD would be available to importers only if they had made the initial payment of 4% SAD in cash instead of debiting the DEPB scrips. It was on account of the reluctance shown by the customs authorities in processing the refund claims preferred by the appellant that he approached the writ court through the Writ Petition, seeking a direction to the customs authorities to process its refund claim for 4% SAD, notwithstanding the fact that the initial payment of SAD was through a debit of the DEPB scrips.
The appellant contended that he was not aware of the new circular issued by the Director General of Foreign Trade and could not be countenanced. So long as the Customs Authorities did not deny the initial payment of 4% SAD by the appellant, they could not deny him the refund. Once the conditions for refund had been satisfied in terms of Notification/Circular No.18/2013-Cus dated April 29, 2013, it could not be accepted.
The single judge dismissed the Writ Petition after finding that the claim for refund preferred by the appellant could not be processed.
The assessee contended that the single judge erred in not considering the fact that the appellant had actually paid the 4% SAD at the time of import, albeit by debiting the DEPB scrips, and that this payment was in fact accepted by the Customs Authority as being in due discharge of its liabilities under the Customs Act and Rules. It is contended, therefore, that on the appellant satisfying the condition for refund of SAD as envisaged under Notification No.102/2007-Cus dated September 14, 2007, the respondents could not have denied the appellant the benefit of refund by relying on Circular No.18/2013-Cus dated April 29, 2013.
The court allowed the Writ Appeal by setting aside the impugned judgment of the Single Judge and by directing the respondents to process the application for refund preferred by the appellant within a period of one month.
Counsel For Petitioner: M.A.Baby
Counsel For Respondent: S.Krishna
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