Karnataka HC affirms CA Certificate as Valid Proof to Claim 4% SAD Refund [Read Order]

The Karnataka High Court, in its recent ruling, has dismissed an appeal filed by the Revenue, upholding a Customs, Excise and Service Tax Appellate Tribunal (CESTAT) order that allowed a refund of 4% Special Additional Duty (SAD).

The bench observed that when read in conjunction with CBEC Circulars Nos. 6/2008, 16/2008, and 18/2010, the mechanism to rebut this presumption is the production of a certificate from a Chartered Accountant.

The appeal was filed by the Principal Commissioner of Customs against the order of the CESTAT in favour of M/s Festo Controls Private Limited, the respondent assessee. The respondent-assessee had imported goods after paying 4% SAD and later applied for a refund.

The adjudicating authority and the first appellate authority rejected the claim, holding that the aPRINCIPAL COMMISSIONER OF CUSTOMSssessee had failed to sufficiently prove that the burden of the duty had not been passed on to its customers, a concept known as 'unjust enrichment' under Section 28D of the Customs Act. The CESTAT, however, reversed this decision, accepting a certificate from a Chartered Accountant as adequate proof.

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Counsel for the Revenue argued that the CA certificate was unsatisfactory and that the CESTAT had misapplied the law. Per contra, the assessee's counsel contended that the certificate, as prescribed by various CBEC Circulars, was sufficient to rebut the statutory presumption of unjust enrichment.

A division bench comprising Justice S.G. Pandit and Justice K.V. Aravind held that Section 28D of the Customs Act imposes a rebuttable presumption that the duty burden has been passed on. The court observed that when read in conjunction with CBEC Circulars Nos. 6/2008, 16/2008, and 18/2010, the mechanism to rebut this presumption is the production of a certificate from a Chartered Accountant. The bench followed its own precedent in Commissioner of Customs, Bangalore vs. Apple India Pvt. Ltd., and found that the CESTAT had correctly applied the law.

In ruling, “it is clarified that the doctrine of unjust enrichment will apply to 4% CVD refunds Scheme under the said exemption notification issued in terms of Section 25(1) of the Customs Act, 1962. However, importers may produce a certificate from the statutory auditor/Chartered Accountant who certifies the importer's annual financial accounts under the Companies Act or any statute, explaining how the burden of 4% CVD has not been passed on by the importer and to fulfill the requirement of unjust enrichment. In addition to the aforesaid the importer shall also make a self-declaration along with the refund claim to the effect that he has not passed on the incidence of 4% CVD to any other person."

Finding no merit in the Revenue's arguments, the court dismissed the appeal and answered the substantial questions of law in favour of the assessee.

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