2024 (2) TMI 446 - AT - Customs

Sustainability of cess, when basic customs duty itself was Nil - contention of the department is barring the basic customs duty, other duties namely EC, SHEC and SWS ought not to have been debited in the duty credit scrips - HELD THAT - The decision of M/S. UNICORN INDUSTRIES VERSUS UNION OF INDIA OTHERS 2019 (12) TMI 286 - SUPREME COURT dealt with the learned adjudicating authority stand referred to a Larger Bench of the Apex Court in SRD NUTRIENTS PVT. LTD. VERSUS COMMR. OF CENTRAL EXCISE, GUWAHATI 2022 (1) TMI 615 - SUPREME COURT . The period involved in this case is from June-2017 to January-2018. The decision of UNICORN INDUSTRIES Vs. UNION OF INDIA was clearly distinguishable as in that case the duty as an NCCD was being levied as a separate ad valorem duty under different legislation and was not required to be worked out on the basis of a Nil Excise Duty which in that case was specifically exempted for Area Based Exemption Notification. However, in the instant case as has been upheld in the matter in their own case LOUIS DREFUS COMPANY INDIA P LTD VERSUS COMMISSIONER OF CUSTOMS (IMPORT II) , MUMBAI 2023 (11) TMI 972 - CESTAT MUMBAI which followed decision of LA TIM METAL INDUSTRIES LIMITED VERSUS THE UNION OF INDIA AND ORS. 2022 (11) TMI 1099 - BOMBAY HIGH COURT , it has been held that when cess as in this case was collected as percentage of duty liability and which is exempted under any notification the cess could not be computed in the face of Zero duty liability. We have agreed with the proposition that the Cess based on Nil total duty has to be Nil if machinery provision are clothed in such language and do not make levy an independent ad velorem duty. But same needs to be examined in detail to the specifics of the case including for C.V.D/ I.G.S.T component, if any during impugned period and language of the statutory provision relied upon by the appellant. Same therefore is remanded back. Other question relating to limitation and penalty shall be decided accordingly, considering quantum, legality of issues and malicious intention objectively - appeal allowed by way of remand.

Summary

Issues Involved:
1. Debiting of Education Cess (EC), Secondary and Higher Education Cess (SHEC), and Social Welfare Surcharge (SWS) using duty-free scrips.
2. Invocation of extended period of limitation under Section 28(4) of the Customs Act, 1962.
3. Imposition of penalties under Sections 114A and 114AA of the Customs Act, 1962.
4. Validity of penalties under Section 117 of the Customs Act, 1962 against the CHA (Customs House Agent).

Summary of Judgment:

1. Debiting of EC, SHEC, and SWS Using Duty-Free Scrips:
The appellants imported goods against duty-free scrips under MEIS and SEIS schemes and debited customs duties including EC, SHEC, and SWS in the duty scrips. The department contended that these duties should have been paid in cash and invoked the extended period, alleging deliberate evasion. The Tribunal referred to previous judgments, including the Bombay High Court in La Tim Metal and Industries and CESTAT Mumbai in CJ Shah & Co., which held that cess collectible as a percentage of duty liability could not be computed in the absence of duty liability. The Tribunal concluded that since BCD was zero, the other duties should also be zero. The appellants were entitled to a refund of the amounts debited in the scrips.

2. Invocation of Extended Period of Limitation:
The Tribunal found that the invocation of the extended period under Section 28(4) was not justified. The proper officer had granted out-of-charge for the bills of entry after being satisfied that import duties were paid. Thus, there was no basis for invoking the extended period, and the entire duty demand was time-barred.

3. Imposition of Penalties under Sections 114A and 114AA:
The Tribunal held that penalties under Section 114A were unsustainable as the EDI system permitted the appellants to pay the cess using the scrips, negating any suppression of facts. Similarly, penalties under Section 114AA were not applicable as the appellants' actions did not involve willful misstatement or suppression, and the scrips were valid for import with adequate credit.

4. Validity of Penalties under Section 117 Against CHA:
The Tribunal set aside the penalty under Section 117 against the CHA, noting that there was no breach of sub-regulation of Regulation 10, and the CHA was not required to advise on assessment aspects unless solicited. There was no record of action under C.B.L.R, 2018, and specific penalties under C.B.L.R could not be relegated to residual provisions under Section 117.

Conclusion:
The Tribunal allowed the appeal by remand, directing the Commissioner to reconsider the aspect of cess based on 'Nil' total customs duty and to decide on limitation and penalties accordingly. The appeal of the CHA was allowed, setting aside the penalty under Section 117.