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2023 (10) TMI 1223 - AT - CustomsLevy and collection of Social Welfare Surcharge (SWS) computed @10% on the notional BCD in cash - Challenge to assessment of SWS in each of the BOEs - HELD THAT - Since both EC and SWS are in the nature of surcharge and the provisions pertaining to their quantification as contained in Section 94(1) of the Finance (No. 2) Act, 2004 and Section 110(3) of the Finance Act, 2018 are pari materia, the jurisprudence as regards non applicability/non levy of Education Cess in respect of goods imported against the DEPB and/or Target Plus Scheme should equally apply in the context of SWS in respect of goods imported against the MEIS/SEIS Schemes. The circular dated 10.1.2020 which takes the same view for SWS as was canvassed in Circular dt. 31.01.2005 for Education Cess cannot be given primacy over the later circular dt. 01.02.2022. Hon ble Supreme Court in M/S. UNICORN INDUSTRIES VERSUS UNION OF INDIA OTHERS 2019 (12) TMI 286 - SUPREME COURT was concerned with the interpretation of an exemption notification no. 71/2003-CE dt. 9.9.2003 granting area based exemption to units located in the north east. Under Notification No. 71/2003-CE, units in the north east were entitled to refund of specified duties paid on value addition and the question before the Hon ble Court was whether EC, SHEC, NCCD imposed by the Finance Act 2001, 2004 and 2007 which were not specifically exempted under Notification No. 71/2003 shall also come within the scope of the said exemption for the purposes of refund - The Hon ble Supreme Court denied refund of the un-specified duties under Notification No. 71/2003-CE as would be evident from para 40 of the said order as the exemption was categorical in its scope. Further, since refund of specified duties under Notification No. 71/2003-CE was only possible post collection, the question of non leviability of Education Cess under Section 94 of the Finance (No. 2) Act 2004 for want of collection of the underlying duty was not germane to the issue before the Hon ble Supreme Court and was therefore not gone into. The assessments in each of the impugned BOE s covered by the impugned orders are modified in so far as imposition of SWS is concerned and the appeals are allowed with consequential relief.
Issues Involved:
1. Levy and collection of Social Welfare Surcharge (SWS) on exempted Basic Customs Duty (BCD). 2. Applicability of Circulars and previous judicial decisions regarding SWS and similar surcharges. 3. Interpretation of exemption notifications and their impact on the computation of SWS. Summary: Issue 1: Levy and Collection of SWS on Exempted BCD The core issue in these appeals is whether SWS should be levied on BCD that is exempted under specific notifications. The Appellant argued that since BCD was not collected due to the exemption, SWS should also be zero. This argument is based on Section 110(3) of the Finance Act, 2018, which states that SWS is calculated on duties "levied and collected." The Appellant cited the Supreme Court's decision in Somaiya Organics Limited, which defined "collection" as the physical realization of tax. The Tribunal agreed with the Appellant, noting that BCD was shown as "zero" in the Bills of Entry, indicating no actual collection of BCD. Issue 2: Applicability of Circulars and Judicial Decisions The Appellant referenced Circular No. 03/2022, which clarified that SWS would be nil if the aggregate of customs duties is zero. The Tribunal noted that this beneficial circular should be applied retrospectively, as per the Supreme Court's decision in Suchitra Components. The Tribunal also considered previous judicial decisions, including the Bombay High Court's ruling in the Appellant's own case, which supported the non-leviability of SWS on exempted BCD. The Tribunal found that the earlier Circular No. 2/2020, which mandated SWS on imports against MEIS/SEIS scrips, could not override the later beneficial circular. Issue 3: Interpretation of Exemption Notifications The Tribunal examined the exemption notifications (Nos. 24/2015 and 25/2015) and concluded that the debit of BCD to the scrips is a procedural matter and does not constitute actual collection. The Tribunal referenced multiple High Court decisions, including Gujarat Ambuja Exports and Reliance Industries, which held that similar debits under DEPB and Target Plus Schemes did not amount to tax collection. The Tribunal found that the Appellate Commissioner's reliance on Circular No. 5/2005 was misplaced, as it had been quashed by the Gujarat High Court. Conclusion: The Tribunal concluded that SWS could not be levied on notional BCD when BCD is exempted under the relevant notifications. The Tribunal also noted that the Bombay High Court's decision in the Appellant's favor was not stayed and had been followed by refund orders. The appeals were allowed, and the assessments were modified to remove the imposition of SWS, providing consequential relief to the Appellant. (Order pronounced in open court on 22/09/2023.)
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