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2020 (1) TMI 212 - HC - CustomsClaim of re-credit of the amount to the MEIS and SEIS scheme - Social Welfare Surcharge (SWS) was debited to the script - petitioner was informed that 49.5% 49.5% on assessable value (BCD at 45% and Social Welfare Surcharge at 4.5%) of the goods imported is being debited from Scrips and no excess duty is being collected and thus, the question of refund does not arise - direction to re-credit the Social Welfare Surcharge component in all the MEIS and SEIS duty credit scrips of the petitioner from which such surcharge was deducted. The revenue sought to contend that the present issue is not a case of exemption of basic customs duty to test whether the exemption is at all applicable to social welfare surcharge and on the other hand, the issue revolves around the question whether the payment of SWS can be debited from the duty credit scrips like the customs duty. Whether SWS is an independent levy or it also takes the colour of the parental levy viz., the customs duty? - HELD THAT - Since this issue raised in respect of nature of levy of SWS is no more res integra in view of the latest decision of the Apex Court made in the case of M/s.Unicorn Industries 2019 (12) TMI 286 - SUPREME COURT as referred and discussed supra. By relying on SRD Nutrients Private Limited and Bajaj Auto Limited cases , the Revenue originally sought to contend that the Social Welfare Surcharge is not an independent levy and on the other hand, it forms part of the customs duty or takes the colour and nature of the parent levy viz., customs duty. It is true that in both the above decisions, the Apex Court has taken such view. The above two decisions are now considered by the Larger Bench of the Apex Court in M/s.Unicorn Industries case . The Hon'ble Supreme Court, after considering those two decisions and also the earlier decision of the Apex Court made in Union of India v. Modi Rubber Limited, 1986 (8) TMI 60 - SUPREME COURT , found that the duty on NCCD, Educational Cess and Secondary and Higher Education Cess are in the nature of additional duties imposed by different legislation for a different purpose - in view of the above recent decision of the Apex Court made in M/s.Unicorn Industries , I hold that Social Welfare Surcharge levied under Section 110(3) of the Finance Act, 2018, is an independent levy imposed and collected under different enactment viz., Finance Act 2018. Thus, SWS intended totally for a different purpose is not taking the colour of parent levy viz., customs duty. Whether the petitioner is correct in claiming that the customs duty for the subject matter imported goods is exempted in total and not paid by them? - If the customs duty is totally exempted and not paid, as claimed by the petitioner, whether the Revenue is justified in making deduction towards Social Welfare Surcharge out of the value of the scrips, apart from deducting the customs duty? - Whether Notification Nos.24/2015 and 25/2015 dated 08.04.2015 empower the Revenue to deduct SWS, apart from the duty of customs and additional duty of customs? - HELD THAT - The exemption notifications, specifically stipulate that those duty credit scrips should be produced before the concerned officer of customs by the importer, who imports goods against those scrips, for the purpose of debiting the duty leviable on such goods, but for exemption. It is to be noted at this juncture that the term but for exemption is to denote that the duty liable to be paid in cash, in view of exemption, is to be accepted by way of debiting such quantum of duty from the value of scrips - it is evident that the exemption granted under the above notifications is only in respect of payment of customs duty in cash and on the other hand, such value of the customs duty is debited from the value of the scrips. The customs duty leviable and payable, though deducted from the value of the scrips, in effect, no money representing the duty goes to the Government exchequer. It is true that it may give an impression, as pointed out by the learned counsel for the petitioner, that it is the Duty Forgone. When the value of the duty, leviable on such goods of import, is debited from the scrips, he stands as a person discharging his duty liability through the duty credit scrips - Therefore, he cannot contend that the duty paid is Nil. Neutralization of duty does not mean that there was no duty levied and collected at all. On the other hand, when such duty is debited from the scrips which has a money value, such act of debiting, amounts to levy and collection of the duty from the importer. Since the duty is not paid in cash and on the other hand it is discharged by utilizing the scrips, it is true that such value of the duty in money has not gone to the Government Exchequer. But, that does not mean that the duty was not collected from the importer at all. An adjustment of duty from the duty credit scrips by way of debit is not to be termed as Nil duty. It is like an adjustment on balance sheet - Hence, it cannot be said that there was no payment or collection of duty at all. As I pointed out earlier, collection of duty in this case, in view of the exempted notifications, is by way of debiting the value of such duty from the scrips. If no duty is leviable and payable in view of the exemption granted under the above said notifications, as contended by the petitioner, it makes no sense for imposing conditions therein for making debits towards customs duty leviable from and out of the value of the scrips. Admittedly, in this case, the petitioner is not opposing or denying or disputing the debit of customs duty from the value of the scrips. Their only grievance is against the levy and collection of SWS. One of the decisions relied on, no doubt is by the Division Bench of this Court made in DCW Ltd., case . It is true that in the above said decision, the Division Bench of this Court found that when the goods are fully exempted from excise duty and customs duty, the question of levying Educational Cess does not arise. However, it is to be noted that well before the said decision made in DCW Ltd., case, already another Division Bench of this Court in TANFAC Industries Ltd., Vs. Assistant Commissioner of Customs, Cuddalore, reported in 2009 (4) TMI 92 - MADRAS HIGH COURT had taken a different view and found that the goods cleared under the DEPB scheme cannot be treated as exempted goods, but they can only be treated to be duty paid goods. It was observed therein that the debit of any amount under the DEPB scheme is a mode of payment of duty on the imported goods and cannot be treated as exempted goods - it is evident that as on the date of rendering the decision in DCW Ltd., by the subsequent Division Bench, the decision made by the earlier Division Bench in Tanfac Industries Ltd., confirmed by the Apex Court on 09.10.2009, had already come into existence and in force. I am bound to follow the above binding decision of this Court made in Tanfac Industries Ltd. Case . It appears that the other Division Bench decision of this Court made in DCW Ltd., case seems to have not reached the Apex Court. Under such circumstances, when there are two Division Bench decisions of this Court, out of which, one is confirmed by the Apex Court, I am bound to follow the decision of the Division Bench which is confirmed by the Apex Court. Thus, the petitioner is not justified in contending that total exemption is granted to them from payment of customs duty and that there is nil rate of duty. Whether the Revenue is justified in making debit of the Social Welfare Surcharge from the value of the scrips? - HELD THAT - It is well settled that the exemption notifications are to be construed strictly. Scope and ambit of exemption notifications cannot be enlarged or extended beyond its intend as specifically spoken to therein. A benefit given in an exemption notification must be confined only with such of those benefits referred to therein in strict sense and not to be extended beyond its scope. If the notification is unambiguous, there is no need to interpret the same. Thus, under the guide of interpreting an exemption notification, a benefit conferred on a person cannot be extended as an undue benefit , which he is not entitled to otherwise under the notification. Going by the terms of the above exemption notifications and in view of the fact that levy and collection of Social Welfare Surcharge is an independent levy, that too, under a different enactment viz., the Finance Act, 2018, I am of the view that the respondents/Revenue are not empowered to make the debit of Social Welfare Surcharge, from and out of the value of the scrips apart from making debit of the duties leviable on the subject matter goods. Thus, it can be concluded that (a) The petitioner is liable to pay the appropriate Social Welfare Surcharge on Basic Customs Duty in respect of the subject matter imported goods. (b) However, recovery of such Social Welfare Surcharge cannot be done by making debit from the value of the scrips produced by the petitioner, as Social Welfare Surcharge is not the subject matter of exemption granted under Notification Nos.24 and 25 /2015. (c) Consequently, the respondents are liable and thus, directed to re-credit the value of Social Welfare Surcharge so far debited from the scrips held by the petitioner, subject to a condition that the petitioner pays such Social Welfare Surcharge either in cash or in any other mode before the concerned respondent within a period of four weeks from the date of receipt of a copy of this order. (d) On receipt of such payment, the respondents are directed to re-credit the value of the Social Welfare Surcharge so far debited from the scrips held by the petitioner, within a period of two weeks thereafter. Petition closed.
Issues Involved:
1. Whether the customs duty for the subject matter imported goods is exempted in total and not paid by the petitioner. 2. Whether the Revenue is justified in making deduction towards Social Welfare Surcharge (SWS) from the value of the scrips, apart from deducting the customs duty. 3. Whether Notification Nos. 24/2015 and 25/2015 empower the Revenue to deduct SWS, apart from the duty of customs and additional duty of customs. 4. Whether SWS is an independent levy or it also takes the color of the parental levy, viz., the customs duty. Detailed Analysis: 1. Exemption of Customs Duty: The petitioner claimed that the customs duty for the imported goods is fully exempted and not paid. However, the court found that the exemption notifications (Nos. 24/2015 and 25/2015) do not grant total exemption from payment of customs duty. Instead, they allow the duty to be debited from the value of duty credit scrips. The court emphasized that the exemption is from payment in cash, not from the duty itself. The duty is effectively paid through the debiting of the scrips, which have a monetary value. Therefore, the customs duty is considered paid, albeit not in cash but by debiting the scrips. 2. Deduction of Social Welfare Surcharge (SWS): The court held that the Revenue is not justified in making deductions towards SWS from the value of the scrips. SWS is an independent levy imposed under the Finance Act, 2018, and not under the Customs Tariff Act, 1975. The exemption notifications only allow for the debiting of customs duty and additional customs duty, not SWS. Therefore, the deduction of SWS from the scrips is not permitted under the notifications. 3. Empowerment under Notification Nos. 24/2015 and 25/2015: The court concluded that Notification Nos. 24/2015 and 25/2015 do not empower the Revenue to deduct SWS from the scrips. The notifications specifically mention the exemption of customs duty and additional customs duty, but there is no provision for the deduction of SWS. The court emphasized that exemption notifications must be construed strictly, and the scope cannot be extended beyond what is explicitly stated. 4. Nature of Social Welfare Surcharge (SWS): The court determined that SWS is an independent levy and does not take the color of the parental levy, i.e., customs duty. This conclusion was supported by the recent Supreme Court decision in the case of Unicorn Industries v. Union of India, which clarified that SWS is a distinct levy imposed under a different enactment (Finance Act, 2018) and is not merely an extension of customs duty. Conclusion: The court disposed of the writ petitions with the following directions: - The petitioner is liable to pay the appropriate SWS on Basic Customs Duty for the imported goods. - The recovery of SWS cannot be done by debiting the value of the scrips. - The respondents must re-credit the value of SWS debited from the scrips, provided the petitioner pays the SWS in cash or any other mode within four weeks. - Upon receipt of such payment, the respondents must re-credit the value of the SWS within two weeks. No costs were imposed, and the connected miscellaneous petitions were closed.
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