2023 (9) TMI 463 - AT - Customs

Levy of Social Welfare Surcharge (SWS) - Determination of SWS where basic customs duty is NIL - Appellant claimed exemption from customs duty provided under N/N. 24/2015-Cus. dated 08.04.2015 by producing Merchandise Export from India Scheme (MEIS) scrips - Case of Revenue is that since the customs duty was paid by the appellant through MEIS scrip, it was liable to pay 10% of the amount of BCD, representing the SWS - HELD THAT - The benefit under MEIS scheme will be restricted upto Rs.1 lakh, which is commensurate to the volume of export achieved by the scrip holder. To ensure that the benefit under the MEIS is subject to achievement of the export obligation, though the Central Government has exempted the goods, vide notification dated 08.04.2015 - Relevance of the condition is to the effect that, though the goods imported under MEIS scrip are exempted from payment of customs duty, but to ensure that the incentive is within the permissible limit, the devise of maintaining the records have been prescribed therein. Such maintenance of records is in context with the Foreign Trade Policy, which have to be monitored by the agencies empowered under such policy i.e., the Ministry of Commerce, through the Director General of Foreign Trade. In the present case, it is not in dispute that the licensing authority has raised any objection with regard to non-observance or nonfulfillment of the conditions mentioned in the notification dated 08.04.2015. Thus, it would not be proper on the part of the authorities to say that debit of customs duty in the MEIS scrip would disentitle the imported goods from the claim of the benefit of Zero rate SWS. Since, the effective rate of the customs duty is NIL or Zero , by virtue of the notification dated 08.04.2015, the rate of SWS would automatically become zero , inasmuch as SWS is to be calculated not on the value of the goods, but on the duty of customs levied on the imported goods, which is evident from sub-section (3) of Section 110 of the Finance Act, 2018. The said statue has mandated that SWS levied under Sub-section (1) of Section 110, shall be calculated at the rate of 10% on the customs duty levied and collected by the Central Government. In the present case, since no customs duty is leviable in terms of notification dated 08.04.2015, there is no question of payment of SWS. On account of the BCD having been wholly exempted vide notification dated 08.04.2015, the calculation of SWS @ 10% of the basic customs duty would also be zero only. Thus, in effect, it is clarified that there is no SWS which needs to be paid by the importer-appellant. Review Petitions against the judgement of the Hon ble Bombay High Court it the case of LA TIM SOURCING (INDIA) PVT. LTD., LA TIM LIFESTYLE RESORTS LTD., GOPANI IRON POWER (INDIA) PVT. LTD. VERSUS THE UNION OF INDIA AND OTHERS 2019 (10) TMI 506 - BOMBAY HIGH COURT and LA TIM METAL INDUSTRIES LIMITED VERSUS THE UNION OF INDIA AND ORS. 2022 (11) TMI 1099 - BOMBAY HIGH COURT - No satisfactory explanation was furnished by the learned AR. Further, it is also found that though he has submitted that the Review Petitions have been filed before the Hon ble Court, but no copy of such petitions were placed before the Bench. Since, the said judgements are in operation, this Tribunal is bound to follow the ratio decided therein. There are no merits in the impugned orders passed by the learned Commissioner (Appeals) - impugned orders set aside - appeal allowed.

Summary

Issues Involved:

1. Early hearing of appeals.
2. Exemption from Social Welfare Surcharge (SWS) on imported goods where Basic Customs Duty (BCD) is zero.
3. Validity of the Commissioner (Appeals)' decision denying zero duty SWS.
4. Applicability of precedents and circulars on SWS calculation.

Summary:

1. Early hearing of appeals:
The appellant sought early hearing of the appeals, which was granted, and a common order was passed with the consent of both sides.

2. Exemption from Social Welfare Surcharge (SWS) on imported goods where Basic Customs Duty (BCD) is zero:
The appellant argued that since the BCD was exempted under Notification No. 24/2015-Cus., the SWS should also be zero, as 10% of zero is zero. They relied on the judgments of the Bombay High Court and Circular No. 3/2022-Customs, which clarified that SWS is not payable when BCD is zero.

3. Validity of the Commissioner (Appeals)' decision denying zero duty SWS:
The Commissioner (Appeals) had denied the benefit of zero duty SWS, stating that the notification did not provide for SWS exemption. The Tribunal found this reasoning flawed, emphasizing that SWS should be calculated at 10% of the BCD, which was zero in this case. Thus, no SWS was payable.

4. Applicability of precedents and circulars on SWS calculation:
The Tribunal noted that the Circular No. 3/2022-Customs clarified that SWS is calculated based on the customs duty payable, which was zero here. The Tribunal also distinguished the case from the Supreme Court's judgment in Unicorn Industries, which dealt with different facts. The Tribunal followed the Bombay High Court's judgments, as no satisfactory explanation or copies of pending review petitions were provided by the Revenue.

Conclusion:
The Tribunal set aside the impugned orders of the Commissioner (Appeals) and allowed the appeals, ruling that no SWS was payable when the BCD was zero. The miscellaneous applications were disposed of accordingly.