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TMI Blog2013 (6) TMI 536X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of manufacturing its goods, the petitioner-company imports raw materials, such as, Crude Palm Oil, Vanaspati Ghee and Fatty Acid. 2.2 Under the Export-Import Policy framed by the Central Government, various schemes have been framed allowing import of goods used for manufacture of export product without payment of duty. Duty Entitlement Pass Book ("DEPB" for short) is one such scheme under which the importers, subject to certain conditions, are allowed to import goods without payment of customs duty, but against adjustments of credits lying in their account or which may have been purchased by them from other units engaged in export business. 2.3 Under Section 3(5) of the Customs Tariff Act, the Central Government has the authority to levy additional duty at a rate not exceeding 4% of the value of the imported articles as may be specified in the notification on being satisfied that it is necessary to levy such duty on any imported article as would counter-balance the sales tax, value added tax, local tax or any other charges for the time being leviable on a like article on its sale, purchase or transportation in India. Section 3(5) of the Customs Tariff Act reads as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h exemption. We may, however refer to the last such notification in point of time. By exemption Notification No. 45/2002, dated 24-4-2002, as amended from time to time, the Central Government in exercise of powers conferred under sub-section (1) of Section 25 of the Customs Act, 1962, granted exemption from so much of additional duty leviable on the goods of description specified in column 2 of the Table annexed with such notification, from so much of the duty leviable thereon as was in excess of the amount calculated at the rate specified in the corresponding entry in column 4 of the said Table. The notification also granted similar exemption from payment of additional duty leviable under Section 3 of the Customs Tariff Act. The Table referred to in the said notification reads as under : S. No. Description of goods Standard rate Additional duty rate 1 2 3 4 1. Goods other than edible oils Nil Nil 2. Edible oils 50% of applied rate of duty 50% of applied rate of additional duty 5. The exemption was, however, made available subject to certain conditions which were specified in the notification itself. Such conditions were as under : "[i] that the importer has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him, permit imports and exports from any other sea port, airport, inland container depot or through a land customs station : Provided also that in respect of Duty Entitlement Pass Book issued against supplied to a unit in Special Economic Zone (SEZ), this condition shall apply for the purpose of permitting import of goods. [v] where the importer does not claim exemption from the additional duty of customs leviable under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), he shall be deemed not to have availed the exemption from the duty specified in the First Schedule to the said Customs Tariff Act for the purpose of calculation of the said additional duty of customs. [vi] where benefit of exemption from duty is claimed by a person, who is not a Duty Entitlement Pass Book holder, such benefit shall be permissible only against specific amount of credit transferred by a Duty Entitlement Pass Book holder to such person." 6. Counsel for the petitioners submitted that by virtue of the exemption Notification No. 20/2006, the goods imported by the petitioners were exempt from payment of SAD since by virtue of exemption Notification No. 45/2002, such goods being imported under DEP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecting Education Cess on imports being made under such scheme. 7. On the other hand, learned counsel Ms. Amee Yajnik for the respondents opposed the petition. She relied on the affidavit in-reply filed by the respondents. She contended that in case of imports made under the DEPB scheme, there is no total exemption from payment of customs duty. Such scheme is, thus, vitally different from other duty exemption schemes. Under the DEPB scheme, the importer pays customs duty in the form of adjustments of DEPB credits. Instead of paying the duty in cash, he surrenders DEPB credits lying in the DEPB scrip. 8. Having, thus, heard the learned counsel for the parties, we find that under exemption Notification No. 20/2006, the Government of India has granted exemption from payment of SAD on import of "all goods which are exempt from the whole of the duty of customs leviable thereon or in case of which "Free" or "Nil" rates of duty of customs are specified" ... ... ... "and which are also exempt from the whole of additional duty of customs leviable thereon under sub-section (1) of Section 3 of the said Act, or on which no amount of the said additional duties of customs is payable for any rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption from payment of customs duty. In the process, we had quashed the circular of the Government dated 31-1-2005. We notice this because in the impugned circular dated 5-6-2006, to clarify that the petitioners cannot claim exemption from payment of SAD, it is the earlier circular dated 31-1-2005 which has been referred to and relied upon. Essentially, assertions of the Revenue in both circulars, that is, earlier circular dated 31-1-2005 and the impugned circular dated 5-6-2006 are common. Our decision dated 21-6-2012 would, therefore, squarely apply in the present case. 13. In our judgment dated 21-6-2012, we had stated as under : "10. From the above provision, it can be seen that education cess is to be collected on the customs duty levied and collected by the Central Government at the rate of 2% on such duty. In the present case, therefore, it would be important to ascertain whether on the imports made under DEPB scheme, it can be stated that the Central Government is levying and collecting duties of customs. 11. In order to be able to do so, we would have to appreciate the nature of the DEPB scheme. The DEPB scheme is a part of Exim Policy of the Government of India form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty payable on such deemed exports. Therefore, in our view, DEPB/Duty drawback are incentives which flow from the schemes framed by Central Government or from Section 75 of the Customs Act, 1962, hence, incentives profits are not profits derived from the eligible business under Section 80-IB. They belong to the category of ancillary profits of such undertakings." 14. Section 25 of the Customs Act, 1962 empowers the Central Government to grant exemption from duty. Sub-section (1) of Section 25 in particular provides that if the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally, either absolutely or subject to such conditions as may be specified in the notification, goods of any specified description from the whole or any part of the duty of customs leviable. 15. In exercise of powers under Section 25 of the Customs Act, 1962, the Government of India vide its exemption Notification No. 45/2002, granted total exemption from payment of customs duty and additional duty on goods other than edible oils on imports being made under DEPB scheme subject to certain conditions. Such exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption is to neutralize the customs duty, on the import component of the export product. In essence, the Government of India grants duty remission at prescribed rates on the imports made under such a scheme. 19. It can thus not be denied that for the imports made under the DEPB scheme, there is total or partial, as the case may be, exemption in payment of customs duty. At the relevant time, for the goods other than edible oil, such exemption was total. For edible oil, such exemption was to the extent of 50% of the customs duty and additional duty payable. In essence, therefore, for imports made under the DEPB scheme, of course, subject to the conditions specified in the exemption notification, the customs duty was exempt. Merely because the conditions provided for adjustment of credit in the DEPB scrips, it cannot be stated that either there was no exemption from payment of customs duty or that the Central Government was levying and collecting customs duty from the importers in form of adjustment of credit in the DEPB scrips. We may recall that such credits are given at specified rates on the basis of SION norms primarily taking into account deemed import contents of an export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch demand of interest on goods cleared beyond 90 days arose, the Division Bench of the High Court came to the conclusion that on the imports under DEPB scheme, the importers pay duty not by cash but by way of credit and, therefore, the goods cleared under DEPB scheme cannot be treated as exempted goods. It can only be treated as duty-paid goods. 24. With respect, we are unable to concur with such a view. Firstly, in the said decision, the question of levy of education cess was not involved. More particularly in our view, the exemption notification No. 45/2002 is issued under the exercise of powers under Section 25 of the Customs Act, 1962. Such notification grants total exemption from payment of customs duty and additional duty on all goods other than edible oils which are imported under DEPB scheme. It is, of course, subject to conditions specified in the notification itself. Such conditions require adjustment of the credit in the DEPB scrip against the customs duty liability. However, such adjustment is only procedural in nature. As noted earlier, para 7.14 of the Export-Import Policy clearly provided that the exporter who does not desire to go through the licensing route would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enjoy only partial exemption from payment of customs duty, it is an admitted position on part of the petitioner that education cess would be leviable on such portion of customs duty as is not exempt. The second aspect is that while admitting this petition, a Division Bench of this court had directed that the demands to impugned notices were raised without any adjudication. In the affidavit-in-reply filed by the respondents, it is stated that such notices have now been issued. It is open for the respondents to proceed further with the hearing of such notices and come to a conclusion in accordance with law of course bearing in mind the conclusions that we have arrived at in this petition." 14. Under the circumstances, we are of the opinion that 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. 15. Before closing, we may record that the petitioners have been clearing their goods during the pendency of this petition by paying SAD. Our declaration, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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