The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) has held that the refund claim cannot be rejected on the basis of a mismatch between Special Additional Duty of Customs ( SAD ) and Value Added Tax ( VAT ).
Roots Multiclean Ltd, the appellant/assessee filed two refund claims for a refund of 4% SAD levied under Section 3(5) of the Customs Tariff Act, 1975, for their import of ‘Industrial Vacuum Cleaner and its spares’ in terms of Notification No. 102/2007 dated September 14, 2007, as amended along with relevant documents.
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The appellant submitted all relevant documents as proof that the necessary duties, including 4% SAD, were paid and that the goods were cleared for home consumption. They have submitted sales invoices and VAT/CST-paid challans and VAT/CST returns as proof that the goods imported were sold and that the necessary VAT/CST was paid on sale.
The appellant produced a chartered accountant’s certificate and reconciliation statement in support of their claim. After due process of law, the lower authority rejected the refund claims on the ground that there is a mismatch between the description of goods in the bills of entry and the sales invoice and that the CST/VAT discharged was less than the SAD paid. In appeal, the Commissioner (Appeals) rejected the appeal and upheld the Order in Original.
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The appellant contended that it has filed two refund applications for a refund of 4% additional duty amounting to Rs. 1,43,440/- paid for the import of cleaning equipment and its spares via three Bills of Entry and submitted all the relevant documents. As regards the discrepancy in the amount paid towards VAT/CCST and SAD, he stated that the two taxes were administered differently, the rates of taxes were also different, and a refund could not be rejected due to a mismatch on the score provided the VAT/CST as applicable was paid.
It was viewed that the CA’s certificate, along with the reconciliation statement, has been prescribed in the Board’s Circular to provide a ledger- or document-based scrutiny of the claim and should ordinarily be relied upon to sanction the claim. If a serious evasion of duty was suspected, a physical inquiry could have been conducted by revenue with the buyers or in any other manner, and the CA’s certificate and reconciliation statement were discredited while taking action to deny the claims.
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Further viewed that there would then be proper grounds to reject the claim and take any other action deemed necessary. Regular cash inflows are the lifeline of a business, and blocking legitimate claims for half-baked reasons does a great disservice and should be avoided.
The two member bench of M. Ajit Kumar (Technical Member) observed that minor discrepancies of description mentioned in the invoice vis-à-vis the bill of entry do not go to the root of the validity of the refund claim and are curable.
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The CESTAT bench while allowing the appeal, held that the order rejecting the refund claims was not proper and liable to be quashed.
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