Commercial Invoices Without SAD Endorsement Still Eligible for Refund under Notification: CESTAT [Read Order]

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that refund of Special Additional Duty (SAD) cannot be denied merely because commercial invoices did not carry the endorsement required under Notification No. 102/2007-Customs, when all other conditions were satisfied.

N.R. Colours Ltd., the appellant, imported certain chemicals during 2013 and paid 4% SAD. The company later claimed a refund of Rs. 3,10,795 under the said notification. The refund was rejected by the adjudicating authority, and the Commissioner (Appeals) upheld the rejection on the ground that some sales invoices lacked the mandatory endorsement stating that no credit of additional duty would be admissible.

The appellant’s counsel argued that the invoices had been properly endorsed and, even if not, the omission was procedural. The revenue representative maintained that verification at the buyers’ end showed the endorsement was missing, justifying rejection.

The department counsel argued that both the adjudicating authority and the Commissioner (Appeals) had verified the sales invoices and found that they did not contain the endorsement required under paragraph 2(b) of Notification No. 102/2007-Customs. On that basis, it was submitted that the refund claim was correctly rejected.

The single-member bench comprising Vasa Seshagiri Rao (Technical Member) relied on the Larger Bench decision in Chowgule & Company Pvt. Ltd. v. Commissioner of Customs & Central Excise [2014 (8) TMI 214 – CESTAT Mumbai (LB)]. The Larger Bench had held that a trader-importer who paid SAD and subsequently discharged VAT or sales tax on resale would be eligible for refund under Notification No. 102/2007-Customs, even if the commercial invoices did not carry the endorsement, provided all other conditions were met.

Following the Larger Bench ruling, the Chennai Bench held that the absence of endorsement could not defeat the refund claim when other substantive requirements were fulfilled. The tribunal pointed out that judicial discipline required following the Larger Bench decision.

It found that the appellant had paid the applicable duties and taxes and had not passed on the duty burden to buyers. The tribunal set aside the appellate order and allowed the appeal with consequential relief.

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