Customs Appellate Tribunal Grants Refund Claim to LG Electronics India Pvt. Ltd. in Landmark Decision

Case Name:

Customs Appeal No. 41578 of 2014 and Customs Appeal Nos. 41580-41582/2014 - M/s. LG Electronics India Pvt. Ltd. vs. The Commissioner of Customs (Exports)

Key Takeaways:

1. The Customs Appellate Tribunal allowed the refund claim filed by LG Electronics India Pvt. Ltd. despite the absence of the required endorsement on the invoices.
2. The Tribunal relied on the precedent set by the case of Chowgule & Company Pvt. Ltd. Vs CC & CCE, where it was held that the endorsement requirement was procedural and not necessary for availing the exemption.
3. The decision emphasizes that the fulfillment of conditions in an exemption notification is still required for availing the exemption, but the specific endorsement on the invoices is not essential.
4. This ruling provides relief to traders who are unable to pass on the credit of additional duty of customs and supports their eligibility for refunds under Notification No.102/2007-Cus.

Case Synopsis:

This is a final order from the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench in Chennai. The order pertains to four customs appeals filed by M/s. LG Electronics India Pvt. Ltd. against the Commissioner of Customs (Exports) regarding a refund claim under Notification No.102/2007-Cus. The appeals were heard by Hon’ble Ms. Sulekha Beevi C.S., Member (Judicial) and Hon’ble Mr. Vasa Seshagiri Rao, Member (Technical).

The brief facts of the case are that the appellant filed a refund claim for the refund of Special Additional Duty (SAD) paid at the time of import of goods. However, the claim was rejected by the original authority because the invoice did not contain the endorsement “no credit of additional duty of customs levied under sub-section (5) of section 3 of the Customs Tariff Act, 1975 shall be admissible”. The Commissioner (Appeals) upheld the rejection of the claim, leading to the filing of these appeals.

During the hearing, the appellant’s counsel argued that the appellant is a trader and had furnished all the necessary documents along with the refund claims. The original authority rejected the claim based on the non-compliance of para-2(b) of the notification. The appellant contended that as a trader, they are unable to pass on the credit to any person, and therefore, there is no requirement to fulfill the condition as per the decision in the case of Chowgule & Company Pvt. Ltd. Vs CC & CCE - 2014 (306) ELT 326 (Tri.-LB). The appellant requested that the appeal be allowed.

The Department’s representative supported the findings in the impugned order.

After hearing both sides, the Tribunal considered the issue of whether the appellant is eligible for the refund even though there is no endorsement in the invoices as per para 2(b) of Notification No.102/2007-Cus. The Tribunal referred to the decision of the Tribunal’s Larger Bench in the case of Chowgule & Company Pvt. Ltd. Vs CC & CCE, where it was held that the condition relating to the endorsement on the invoice was merely procedural, and the purpose and object of such an endorsement could be achieved when the duty element itself was not specified in the invoice. The Tribunal concluded that the appellant, being a trader-importer who paid SAD on the imported goods and discharged VAT/ST liability on subsequent sales, would be entitled to the benefit of exemption under Notification 102/2007-Cus., notwithstanding the fact that no endorsement was made on the commercial invoices. The Tribunal clarified that this decision should not be interpreted to mean that the conditions of an exemption notification are not required to be fulfilled for availing the exemption.

Based on the cited decision, the Tribunal held that the rejection of the refund claim was not justified and set aside the impugned order. The appeals were allowed with consequential relief, if any.

FAQ:

Q1: What was the reason for the rejection of LG Electronics’ refund claim.

A1: The refund claim was rejected because the invoices did not contain the required endorsement stating that no credit of additional duty of customs shall be admissible.

Q2: What was the basis for the Customs Appellate Tribunal’s decision?

A2: The Tribunal based its decision on the precedent set by the case of Chowgule & Company Pvt. Ltd. Vs CC & CCE, where it was held that the endorsement requirement was procedural and not necessary for availing the exemption.

Q3: Does this ruling mean that all endorsement requirements can be disregarded?

A3: No, the ruling specifically states that the fulfillment of conditions in an exemption notification is still required for availing the exemption. The specific endorsement on the invoices was deemed unnecessary in this particular case.

Brief facts are that the appellant filed refund claim under Notification No.102/2007-Cus. dt. 14.09.2007 for refund of SAD paid by them at the time of import of goods. The claim was rejected by the original authority for the reason that the invoice did not contain the endorsement “no credit of additional duty of customs levied under sub-section (5) of section 3 of the Customs Tariff Act, 1975 shall be admissible”. On appeal, the Commissioner (Appeals) upheld the same. Hence this appeal.

2. The learned Counsel Sri Rohan Muralidharan appeared and argued for the appellant. It is submitted by the learned counsel that the appellant is a trader and had furnished all documents along with the refund claims. The original authority has rejected the claim only on the ground that para-2(b) of the notification is not complied. The appellant being a trader it is not possible to pass on the credit to any person. So there is no requirement to fulfil the condition as per the decision in the case of Chowgule & Company Pvt. Ltd. Vs CC & CCE - 2014 (306) ELT 326 (Tri.-LB). It is prayed that the appeal may be allowed.

3. The Ld. A.R Sri M. Ambe appeared for the Department and supported the findings in the impugned order.

4. Heard both sides.

5. The issue is whether the appellant is eligible for the refund even though there is no endorsement in the invoices as per para 2(b) of the Notification No.102/2007-Cus. dt. 14.09.2007. The issue is settled by the decision of the Tribunal’s Larger Bench in the case of Chowgule & Company Pvt. Ltd. Vs CC & CCE (supra). Relevant para of the order reads as under :

5.3 In the Mangalore Chemicals and Fertilizers Ltd.’s case (supra), the Hon’ble Apex Court observed that a distinction, between the provisions of a statute which are of a substantive character and were built-in with certain specific objectives of policy on the one hand and those which are merely procedural and technical in nature on the other, must be clearly drawn. It was further held in the said decision that while interpreting an exemption clause, liberal construction should be imparted to the language thereof if the subject falls within the scope of the exemption. It was also held that, the need to resort to any interpretative process would arise only where the meaning is not manifest on the plain words of the statute. As held by the Hon’ble Apex Court in the New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar [AIR 1963 S.C. 1207] - “it is a recognized rule of interpretation of statutes that expressions used therein should ordinarily be understood in a sense in which they best harmonize with the object of the statute, and which effectuate the object of the Legislature”.

Applying the ratio of these decisions to the facts of the case before us, it can be seen that the condition relating to endorsement on the invoice was merely a procedural one and the purpose and object of such an endorsement could be achieved when the duty element itself was not specified in the invoice. Since the object and purpose of the condition is achieved by non-specification of the duty element, the mere nonmaking of the endorsement could not have undermined the purpose of the exemption. Thus we concur with the view taken by this Tribunal in the cases of Equinox Solution Ltd. and Nova Nordisk India Pvt. Ltd. (supra).

5.4 In view of the factual and legal analysis as above, we answer the reference made to us as follows. A trader-importer, who paid SAD on the imported .good and who discharged VAT/ST liability on subsequent sale, and who issued commercial invoices without indicating any details of the duty paid, would be entitled to the benefit of exemption under Notification 102/2007-Cus., notwithstanding the fact that he made no endorsement that “credit of duty is not admissible” on the commercial invoices, subject to the satisfaction of the other conditions stipulated therein. The above decision is rendered only in the facts of the case before us and shall not be interpreted to mean that conditions of an exemption notification are not required to be fulfilled for availing the exemption.

6. The reference as answered above is returned to the referring Bench for further action as necessary.”

6. Following the cited decision, we are of the opinion that the rejection of refund claim is not justified. Impugned order is set aside. Appeals are allowed with consequential relief, if any.

(Dictated and pronounced in court)

sd/- sd/-

(VASA SESHAGIRI RAO) (SULEKHA BEEVI C.S.)

Member (Technical) Member (Judicial)