2026-VIL-1080-CESTAT-BLR-CU
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CUSTOMS High Court Cases

Customs - Refund of Special Additional Duty of Customs when Sales Tax/VAT is Exempt – Import of goods under contract with Metro Rail Corporation – Appellant claimed refund of SAD of customs paid at the time of importation under Notification No. 102/2007 dated 14.09.2007. The importer contends that the goods were exempt from Sales Tax/VAT as the sale took place in the course of import under Section 5(2) of the CST, 1956 - Revenue rejected the refund claim on the ground that one of the mandatory conditions prescribed in the Notification, namely payment of appropriate Sales Tax/VAT on sale of imported goods, has not been fulfilled - Whether refund of SAD of customs is admissible under Notification No. 102/2007 dated 14.09.2007 when the imported goods are exempt from levy of Sales Tax/VAT – HELD - The Notification mandates that the importer shall pay "appropriate sales tax or value added tax as the case may be" on sale of imported goods. The term "appropriate" connotes the rate applicable to the transaction. When goods are legitimately exempt from Sales Tax or VAT under Constitutional provisions and statutory law, the appropriate rate of such tax becomes nil. Therefore, when the appropriate rate is nil, the appropriate Sales Tax or VAT paid is also nil, and this does not constitute non-compliance with the notification - So long as appropriate Sales Tax or VAT at the applicable rate is paid, refund of Special Additional Duty of customs is admissible, and where the appropriate rate is nil, the condition stands satisfied by payment of nil amount. The importer cannot be penalized for the goods being legitimately exempt from Sales Tax or VAT – The rejection of refund claim is set aside and the appeal is allowed
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