2013 (6) TMI 536 - HC - Customs

Validity of Circular No. 18/2006 (Customs), dated 5-6-2006 - Levy of SAD u/s 3(5) on import of Crude Palm Oil, Vanaspati Ghee and Fatty Acid - The case of the petitioners is that by virtue of notifications issued from time to time by the Central Government, all goods other than edible oils are exempt from payment of customs duty and additional customs duty which are imported under DEPB scheme. Held that - in view of the decision in GUJARAT AMBUJA EXPORTS LTD 2012 (7) TMI 679 - GUJARAT HIGH COURT the stand of the respondents that on goods other than edible oils when imported under DEPB scheme, SAD is leviable is not legally sustainable. To that extent, the petition must succeed. The impugned circular to the extent it is in conflict with our above opinion, would stand invalidated. The petitioners have been clearing their goods during the pendency of this petition by paying SAD. Our declaration, therefore, shall apply in future imports. We reiterate that on any goods whenever the customs duty or additional duty is not fully exempt when imported under DEPB scheme, the entire amount of SAD would have to be paid by the importer. - Decided in favor of assessee.

Summary

Issues Involved:
1. Validity of Circular No. 18/2006 dated 5-6-2006 issued by the Central Government.
2. Levy and recovery of Special Additional Customs Duty (SAD) under Section 3(5) of the Customs Tariff Act, 1975 on imports under the DEPB scheme.
3. Exemption from payment of SAD on imports made under the DEPB scheme.
4. Applicability of previous court rulings on the DEPB scheme and related circulars.

Detailed Analysis:

1. Validity of Circular No. 18/2006 dated 5-6-2006:
The petitioners challenged Circular No. 18/2006, which mandated the payment of SAD on imports made under the DEPB scheme. The circular stated that exemption from basic customs duty and additional duty (CVD) was available only if the element of 4% special CVD was debited in the duty scrips/entitlement certificates. The petitioners argued that this circular was unauthorized and contrary to the exemption notifications issued by the Central Government.

2. Levy and Recovery of SAD under Section 3(5) of the Customs Tariff Act, 1975:
Section 3(5) of the Customs Tariff Act allows the Central Government to levy additional duty on imported articles to counter-balance the sales tax, value-added tax, local tax, or any other charges on similar articles sold within India. The petitioners contended that their imports under the DEPB scheme were exempt from such duties, and hence, the levy of SAD was not justified.

3. Exemption from Payment of SAD on Imports Made Under the DEPB Scheme:
The petitioners relied on various exemption notifications, particularly Notification No. 20/2006 and Notification No. 45/2002, which provided exemptions from payment of basic customs duty and additional customs duty on imports under the DEPB scheme. They argued that these exemptions should also apply to SAD. The court examined the conditions under which these exemptions were granted and found that for goods other than edible oils, there was a total exemption from payment of basic and additional customs duty. However, for edible oils, the exemption was only partial (50%).

4. Applicability of Previous Court Rulings on the DEPB Scheme and Related Circulars:
The petitioners referred to a previous judgment dated 21-6-2012, where the court had quashed a similar circular (Circular No. 5/2005) that mandated the payment of Education Cess on imports under the DEPB scheme. The court had held that the DEPB scheme provided for total or partial exemption from customs duty and that the adjustment of DEPB credits was procedural. The court applied the same reasoning to the current case, concluding that the impugned Circular No. 18/2006 was not legally sustainable.

Conclusion:
The court held that the stand of the respondents that SAD was leviable on goods other than edible oils imported under the DEPB scheme was not legally sustainable. The impugned circular, to the extent it conflicted with this opinion, was invalidated. The court clarified that its declaration would apply to future imports and that SAD would have to be paid on any goods where customs duty or additional duty was not fully exempt when imported under the DEPB scheme. The petition was disposed of with the rule made absolute to the aforesaid extent, with no order as to costs.