[Order per : P.R. Chandrasekharan, Member (T)]. - The reference made to the Larger Bench reads as follows :

“Whether to avail the benefit of Notification No. 102/2007, the condition 2(b) of the Notification is mandatory for compliance being a trader who cleared the goods on the strength of commercial invoices.”

2. The reference has been made in the facts and circumstances detailed below :

2.1 The appellant, a trader, imported goods on which he discharged special additional duty of customs under Section 3(5) of the Customs Tariff Act, 1975. The said goods were sold on payment of CST/VAT under commercial invoices. In the said commercial invoice, the appellant did not indicate the SAD element separately. The appellant also did not make any endorsement on the invoices to the effect that no cenvat credit of the SAD is admissible in respect of the goods covered therein. The appellant claimed benefit under Notification 102/2007-Cus., dated 14-9-2007 which reads as follows :

“In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the goods falling within the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), when imported into India for subsequent sale, from the whole of the additional duty of customs leviable thereon under sub-section (5) of Section 3 of the said Customs Tariff Act (hereinafter referred to as the said additional duty).

2. The exemption contained in this notification shall be given effect if the following conditions are fulfilled :

(a)     the importer of the said goods shall pay all duties, including the said additional duty of customs leviable thereon, as applicable, at the time of importation of the goods;

(b)     the importer, while issuing the invoice for sale of the said goods, shall specifically indicate in the invoice that in respect of the goods covered therein, no credit of the additional duty of customs levied under sub-section (5) of Section 3 of the Customs Tariff Act, 1975 shall be admissible;

(c)     the importer shall file a claim for refund of the said additional duty of customs paid on the imported goods with the jurisdictional customs officer;

(d)     the importer shall pay on sale of the said goods, appropriate sales tax or value added tax, as the case may be;

(e)     the importer shall, infer alia, provide copies of the following documents along with the refund claim :

(i)      document evidencing payment of the said additional duty;

(ii)     invoices of sale of the imported goods in respect of which refund of the said additional duty is claimed;

(iii)    documents evidencing payment of appropriate sales tax or value added tax, as the case may be, by the importer, on sale of such imported goods.

3. The jurisdictional customs officer shall sanction the refund on satisfying himself that the conditions referred to in para 2 above, are fulfilled.”

It is in the context of condition stipulated under clause (b) of para 2 of the notification, the issue has arisen as to whether refund of SAD can be allowed when no endorsement was made on the commercial invoices as stipulated in paragraph 2(b) while all other conditions stipulated in the notification stood satisfied.

2.2 The above issue had come up for consideration earlier before this Tribunal in the case of Equinox Solution Ltd. v. Commissioner of Customs (Import) - and Nova Nordisk India Pvt. Ltd. v. Commissioner of Customs (ACC & Import), Mumbai - . In these two decisions, it was held that in a case where the trader issues a commercial invoice without making the endorsement as stipulated in paragraph 2(b) of the notification and quantum of SAD paid is not specifically mentioned in the invoices, refund of SAD paid should not be denied merely because the required endorsement was not made as that would constitute only a technical infraction. The purpose of clause (b) of para 2 of the Notification is to prevent availing of double benefit, i.e., the buyer of the goods takes the credit of SAD paid while the seller gets refund of the SAD paid. It was noted that in the case of a trader, who is not registered with the department and who is also not authorised to issue CENVATABLE invoices and who does not indicate in the commercial invoice the details of the SAD paid, the question of taking any credit would not arise inasmuch as commercial invoices issued by a non-registered trader is not a document on the strength of which CENVAT could be availed and in the absence of duty particulars the question of taking any CENVAT credit also would not arise. Therefore, it was held that even if the trader did not make the endorsement as envisaged under clause (b) of paragraph 2, it would not make any material difference and refund of SAD paid could be allowed subject to satisfaction of the other conditions stipulated in the notification.

2.3 However, another coordinate bench of this Tribunal, in the case of Astra Zeneca Pharma India Ltd. v. Commissioner of Customs, New Delhi - took a contrary view holding that if the condition specified is not complied with, the benefit of the Notification cannot be availed and, therefore, in the absence of the mandatory endorsement required to be made on the invoices, the question of refund of SAD would not arise at all. In view of the contrary views taken by the two benches of this Tribunal, a reference has been made to the Larger Bench for resolution of the issue.

3. The learned counsels appearing for the appellant, M/s. Chowgule & Company Pvt. Ltd., reiterate the findings and the conclusions drawn in the case of Equinox Solution Ltd. (supra) and Nova Nordisk India Pvt. Ltd. (supra). They further submit that the purpose of the Notification is to grant relief from double levy, when duty is levied once by way of SAD and again by way of sales tax/VAT. The object of levy under Section 3(5) of the Customs Tariff Act, 1975, is to counter balance the sales tax, valued added tax or any other charges levied on a like article on its sale to parties located in India and the imported article has been made liable to an additional duty at a rate not exceeding 4% of the value of imported article. But when the imported article is subsequently sold on which the local levies are required to be discharged, it would amount to double levy, once by way of SAD and second by way of VAT/sales tax. To offset/neutralise this double levy, relief has been provided under Notification 102/2007 by way of a refund mechanism. It is not in dispute that the appellant trader, while selling the imported goods has discharged sales tax/VAT liability and, therefore, if he is made to bear the burden of SAD also, it would defeat the very object of the levy. Reliance is placed on the decision of the Hon’ble Apex Court in the case of Mangalore Chemicals & Fertilizers Ltd. v. Dy. Commissioner - and Bombay Chemical Pvt. Ltd v. Collector of Central Excise, Bombay - wherein it has been held that an exemption, cannot be denied when there is an infraction of a procedural condition of a technical nature. Therefore, a distinction has to he drawn between a procedural condition and a substantive condition. Once this distinction is drawn, the benefit of exemption should not be denied merely on account of an infraction of a procedural condition. Reliance is also placed on the statutory principle that a provision enacted for the benefit of the assessee should be so construed which enables the assessee to gets the benefit. Accordingly, it is prayed that in a case where CENVAT credit could not be taken at all of the SAD paid by the buyer of the goods for the reason that the document was not a cenvatable invoice issued by a dealer and the duty element is also not specified in the document, the benefit of exemption under Notification 102/2007 should not be denied.

4. The learned Additional Commissioner (AR) appearing for the Revenue submits that Notification 102/2007-Cus. is an exemption Notification which grants a benefit subject to fulfilment of the conditions stipulated therein. One of the conditions prescribed for availing the exemption is that, in the sale invoices, there should be an endorsement to the effect that in respect of the goods covered therein, no credit of the additional duty of customs levied under Section 3(5) of the Customs Act, 1962 would be admissible. Therefore, if the invoices do not bear this endorsement, the question of allowing the benefit under Notification 102/2007 would not arise at all. It is argued that the exemption, being in the nature of an exception, should be construed strictly. Therefore, ratio in the case of Astra Zeneca Pharma India Ltd. (supra) should be preferred over that laid down in Equinox Solutions Ltd. and Novo Nordisk India Pvt. Ltd. (supra). It is also his submission that the invoices issued by a trader-importer is also one of the prescribed documents for availing CENVAT credit and, therefore, it cannot be said that no CENVAT credit can be availed on the strength of an invoice issued by an importer.

5. We have carefully considered the rival submissions.

5.1 It would be useful and appropriate at this juncture to understand the genesis of the levy of Special Additional Duty of Customs (SAD). While moving the proposal for this levy in the Finance Bill, 1998, the Hon’ble Finance Minister of India stated as follows in his Budget Speech :

“I am persuaded about a clear disability that our commodity taxation inflicts on the indigenous goods vis-à-vis the imported goods. While the former are subjected to sales tax and other local taxes and levies, the import sector escapes them by their very nature. In order to provide a level playing-field to the domestic industry, I propose to impose an additional non-modvatable levy of 8% on imports which is approximately equal to the burden of local taxes on domestic producers. This duty should not be viewed as a protectionist measure but only as a response to a legitimate demand for a level playing field. The new levy would not apply to crude oil, newsprint, capital goods sector under a special tariff regime or goods which are subjected to additional duties of excise in lieu of sales tax, gold and silver imported by passengers or other nominated agencies and life saving drugs that are free from customs duties. The levy would also not apply to goods which are currently exempt both from basic and additional duties of customs. Similarly, goods imported for subsequent trading have also been left out of its purview, since they bear the burden of Sales tax at the time of first sale. The new levy will also not apply to inputs imported under export-promotion schemes. In addition, there may be other sectors eligible for exemptions. These would be examined and if considered appropriate notified separately.

The rate of levy was subsequently reduced to 4%. All goods imported for subsequent sale were initially exempted from levy of SAD vide Sl. No. 11 of the Table Annexed to Notification No. 29/1998-Cus., dated 2-6-1998. The said exemption underwent many changes over the years and the present exemption is contained in Notification 102/2007-Cus. wherein the exemption is operationalised through a refund mechanism. Notwithstanding these changes, the object of the levy was to counterbalance the levy of local taxes on domestically produced goods on imported goods so that there is a level playing field between the two. However, when the imported goods are subsequently sold in the domestic market bearing the burden of local taxes, exemption is provided from SAD so as to neutralize the impact of double levy. This object and purpose of the levy and the exemption needs to be kept in mind while interpreting Notification No. 102/2007-Cus.

5.2 Rule 9 of the CENVAT Credit Rules prescribes the documents on the strength of which CENVAT credit can be taken. An invoice issued by an importer is also one of the prescribed documents. However, for taking the CENVAT credit, under sub-rule (2) of the said Rule 9, following particulars are required to be indicated, namely, details of the duty or service tax payable, description of the goods or taxable service, assessable value, Central Excise or Service Tax registration number of the person issuing the invoice, name and address of the factory or warehouse or premises of first or second stage dealers or provider of taxable service, etc. For taking the credit, the quantum of duty paid should be shown in the invoices and the same should be shown separately for each type of duties. In respect of a commercial invoice, which shows no details of the duty paid, the question of taking of any credit would not arise at all. Therefore, non-declaration of the duty in the invoice issued itself is an affirmation that no credit would be available. Therefore, non-declaration/non-specification of the duty element as to its nature and quantum in the invoice issued would itself be a satisfaction of the condition prescribed under clause (b) of para 2 of the Notification 102/2007.

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 non-making 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.

(Pronounced in Court on 24-6-2014)