Special additional duty refund for ‘deemed sales’

By Ranjeet Mahtani and Rajat Chhabra, Economic Laws Practice
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Importation of goods into India attracts customs duties including special additional duty (SAD). This is in lieu of central sales tax/value-added tax (VAT) levied on the sale of goods in India. Notification 102/2007-Customs, dated 14 September 2007, provides for refund of SAD if the subject goods are subsequently sold in India.

Ranjeet Mahtani
Ranjeet Mahtani

To obtain the refund, the importer must: (i) pay all customs duties, including SAD, at the time of importation; (ii) specify in the invoice for Indian sale that no SAD credit will be admissible; (iii) file a claim for refund of SAD with the jurisdictional customs officer; and (iv) pay appropriate VAT/central sales tax on the sale of the goods.

One of the key issues in respect of SAD refund is whether only sales merit the recouping of SAD, or whether even deemed sales (such as transfer of right to use any goods, works contract, etc.) are eligible for refund. Questions also arise in the case of processing not amounting to manufacture of the goods. Tribunals and courts have expressed divergent views on this issue.

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Ranjeet Mahtani is an associate partner and Rajat Chhabra is a senior associate at Economic Laws Practice. This article is intended for informational purposes and does not constitute a legal opinion or advice.

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