Chennai CESTAT: Tax Refund Claim Can’t Be Refused Due to Mismatch Between SAD and VAT

The tax refund claim cannot be rejected based on a mismatch between Special Additional Duty of Customs and Value Added Tax (VAT), Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled.

The bench of M. Ajit Kumar (Technical Member) has marked that minor discrepancies in the description cited in the invoice vis-à-vis the bill of entry do not go in-depth with the validity of the refund claim and are fixable. Also, the mismatch in the SAD vs.

VAT or CST paid at distinct rates at which the tax is paid cannot be held against the refund applicant. No allegation is there that the Value Added Tax (VAT) and CST were not paid at the compelling rate.

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The appellant/assessee filed two refund claims for a refund of 4% SAD charged u/s 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 on September 14, 2007, as revised including related documents.

All relevant documents have been submitted by the appellant as proof that the crucial duties, including 4% SAD, were paid and that the goods were cleared for home consumption.

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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 crucial VAT/CST was paid on sale.

Also, the appellant has provided a Chartered accountant’s certificate and reconciliation statement in support of their claim. After due process of law, the lower authority denied the refund claims on the foundation that there was a mismatch between the description of goods in the bills of entry and the sales invoice and that the CST/VAT released was less than the SAD paid. The petition has been rejected by the Commissioner (Appeals) and upheld the Order in Original.

It was argued by the appellant that it has filed two refund applications towards a refund of 4% additional duty of Rs 1,43,440/- paid for the import of cleaning equipment and its spares via three Bills of Entry and furnished all the pertinent documents.

Concerning the discrepancy in the among file for the VAT/CCST and SAD, he mentioned that the two taxes were administered distinctly, the tax rates were indeed distinct, and a refund cannot be rejected because of the mismatch on the score furnished the VAT/CST as applicable was paid.

The tribunal mentioned that the Chartered Accountant’s (CA) certificate, along with the reconciliation statement, is required by the Board’s Circular to conduct a ledger- or document-based inspection of the claim. This documentation should typically be trusted to approve the claim.

If there were suspicions of serious duty evasion, the revenue could have conducted a physical inquiry with the buyers or through other means. However, in this case, the CA’s certificate and reconciliation statement were discredited when taking action to deny the claims. If there were valid reasons to believe that the claim was fraudulent, then it would be justified to reject the claim and take any necessary action.

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It’s important to note that regular cash inflows are crucial for a business, and unjustly denying legitimate claims for insufficient reasons is harmful and should be avoided.

While permitting the plea the Tribunal ruled that the order rejecting the refund claims was not effective and is obligated to be quashed.