2024 (3) TMI 86 - AT - Customs

Imports crude edible oil - crude palm oil - Whether Social Welfare Surcharge (SWS) is leviable when the Basic Customs Duty (BCD) is exempted in terms of Notification No. 24/2015-Cus 25/2015-Cus, issued in terms of sub-section (1) of Sec 25 of the Customs Act, 1962, for the goods imported under Merchandise Exports from India Scheme (MEIS) and Service Exports from India Scheme (SEIS)? - HELD THAT - It is not in dispute that the Appellant had imported goods by availing benefit of exemption Notification Nos. 24/2015 25/2015 and were allowed the exemption from BCD on finding that the Appellant fulfilled the conditions thereunder. The aforementioned notifications have been issued in exercise of power to grant exemption u/s 25 of the Customs Act. BCD stands exempted subject to condition, inter alia, of debit to the MEIS/SEIZ scrips (as the case may be) of the BCD leviable on the goods, but for the exemption. Thus, we find that there is no actual collection of BCD in view of the exemption. As per Sec 110(3) of the Finance Act 2018, SWS leviable under sub-sec (1) has to be calculated @10% on the aggregate of duties/taxes and cesses, which are levied and collected u/s 12 of the Customs Act. Thus, in the instant case, admittedly, the aggregate of duties/taxes and cesses collected is nil, as is evident from the perusal of the Bills of Entry. Thus, we hold that SWS will be nil, as anything multiplied with zero is also zero. There is no specific provision made under Statute for calculation of SWS on notional BCD, when the actual BCD is exempted subject to fulfilment of stipulated conditions of the notification. The contention of Revenue is that debit of BCD to the scrip under the said notifications is an alternate method of payment and not an exemption, per se, so as to justify the computation of SWS on notional BCD. We find that such contention of Revenue is not in consonance with the method of calculation of SWS provided in Sec 110(3) of the Finance Act 2018. The Hon ble Apex Court in Somaiya Organics 2001 (4) TMI 84 - SUPREME COURT , has held categorically that the expression collection in the context of tax laws would mean physical realization of tax, whereas, in the instant case, the Commissioner (Appeals) has himself accepted in the Impugned Order that no money representing BCD goes to the exchequer under the said notifications. Meaning, thereby, that the context of physical realization of tax is clearly not met and the debit of BCD to the scrip is at best a notional collection of tax, when the said notifications are read in entirety. Had the debit to scrip been equivalent to cash payment or any other admissible mode of payment, there was no need to grant any exemption as duty levied would have been discharged in full using such scrips. The statutory provision is quite clear that power to exempt any duty of Customs is within section 25 only and thus, once BCD is exempted in terms of notification issued under Sec 25, it would tantamount to exemption from duty and no other interpretation is possible. We further find that the ruling of the Hon ble Bombay High Court in the case of La Tim Metal Industries 2022 (11) TMI 1099 - BOMBAY HIGH COURT is directly on the same issue of levy of SWS, where BCD is nil and duty paid/debited using MEIS scrip. We also find that in Appellant s own case, having similar facts, the coordinate Bench has also taken similar view. Hence, we find that goods imported under aforesaid notifications were exempted from BCD and Additional duty of Customs in full and there was no liability to pay BCD by the importer. This fact is an admitted fact. Further, the leviability of SWS is based on levy and collection of BCD, which itself is exempted. There cannot be any collection of SWS on such goods cleared under the aforesaid exemption notifications. Thus, we allow all the Appeals and set aside the Impugned Orders. The Appellant shall be entitled to consequential benefits, including refund of SWS paid with interest, as per law.

Summary

Issues Involved:
1. Whether Social Welfare Surcharge (SWS) is leviable when Basic Customs Duty (BCD) is exempted under Notification No. 24/2015-Cus & 25/2015-Cus.
2. The applicability of various judicial precedents and circulars in determining the leviability of SWS.
3. The interpretation of the terms "levied and collected" in the context of SWS.

Summary:

Issue 1: Leviability of SWS when BCD is exempted

The Appellant, engaged in the import of crude edible oil, availed the exemption from BCD under Notification No. 24/2015-Cus & 25/2015-Cus. However, they were required to pay SWS in cash for clearance of consignments. The Appellant argued that since BCD was not collected, no further liability for SWS could be determined with reference to the notional BCD. The Tribunal held that SWS should be nil as BCD was exempted, referencing Section 110(3) of the Finance Act, 2018, which states SWS is calculated at 10% on the aggregate of duties "levied and collected." Since BCD was nil, SWS should also be zero.

Issue 2: Judicial Precedents and Circulars

The Appellant cited several judgments, including the Bombay High Court in their own case, and the La Tim Metal & Industries Limited case, which supported their stance that SWS should be nil if BCD is exempted. The Tribunal also considered CBIC Circular No. 03/2022 dated 01.02.2022, which clarified that SWS payable would be nil when the aggregate of customs duties is zero. The Tribunal found that the beneficial circular should be applied retrospectively, as per the Supreme Court's ruling in Suchitra Components Vs. Commissioner of Central Excise, Guntur.

Issue 3: Interpretation of "Levied and Collected"

The Tribunal emphasized the Supreme Court's interpretation in Somaiya Organics Limited Vs State of Uttar Pradesh, where "collection" in tax laws means "physical realization of tax." Since BCD was not physically collected due to the exemption, SWS should also be nil. The Tribunal rejected the Revenue's argument that the debit of BCD to the scrips is an alternative method of payment, stating that it does not constitute actual collection of tax.

Conclusion:

The Tribunal concluded that the goods imported under the said notifications were exempted from BCD, and consequently, SWS was not leviable. The Appeals were allowed, and the Impugned Orders were set aside. The Appellant was entitled to a refund of the SWS paid with interest.