‘SAD Exemption Applicable on De-Bonding’: CESTAT overturns Customs Duty Demand on Samsung India Electronics [Read Order]

The Allahabad bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) overturned the customs duty demand on Samsung India Electronics as the bench reached the conclusion that Special Additional Customs Duty ( SAD ) exemption is applicable on debonding.

Coming to the facts of the present case, the appellant, M/s. Samsung India Electronics Pvt. Ltd has appealed against the order passed by the Principal Commissioner of the Excise Department, which confirmed a demand of Rs. 149.33 crores.

The appellant was registered with the Central Excise Department as an EHTP Unit for manufacturing excisable goods, including mobile phone handsets and tablet computers. They procured imported and indigenous capital goods, raw materials, and consumables at Nil duty under Notification No. 52/2003-Cus dated 31/03/2003, with receipt and consumption details reflected in their monthly ER-2 returns.

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After investigation, it was found that the appellant had removed goods worth ₹6,640,687,425.58 without paying the required duty, making them liable for confiscation under Section 111(o) of the Customs Act, 1962. They also violated Notification No. 52/2003-Cus (31/03/2003) by removing imported raw materials during de-bonding without paying duties, making them subject to penalties under Sections 72 and 112 of the Customs Act.

Another issue in this case was with regard to the payment of Special Additional Customs Duty (SAD) payable under Section 3(5) of the Customs Tariff Act.

The department contended that SAD would be payable as the clearances are not in terms of para 6.8 (a) of the Foreign Trade Policy, and as such, the exemption in terms of Sl. No. 1 of the table annexed to exemption Notification No. 23/2003-C.E. would not be applicable.

The bench going through various judgments noted that at the time of debonding, the value of raw material cleared has to be valued at the time of importation, and the rate of duty is the effective rate of duty leviable on the imported goods at the time of debonding.

The bench relied on the case of Salora Component Pvt Ltd [2019 (370) ELT 925 9TAhmd] In which the court held that the demand was not sustainable in the case as the goods were initially imported and used within the appellant’s 100% EOU and the exemption was claimed only during debonding.

The bench, comprising P.K. Choudhary (Judicial Member) and Sanjiv Srivastava (Technical Member), found no merit in the impugned order and allowed the assessee’s appeal. 

To Read the full text of the Order CLICK HERE

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