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TMI Blog2020 (1) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Surc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided for under Chapter 3 of the FTP and utilizing such scrips. The concept of MEIS and SEIS Schemes are as follows: MEIS i) A claimant needs to export notified goods (coded under the ITC-HS) to notified places, as provided for under Appendix 3B to the Handbook of Procedures ( HOP ) of the FTP, in order to be entitled to MEIS benefit. The rate of reward for each type of export is also provided for under Appendix 3B. (Para 3.04 -FTP) ii) The value considered for calculating MEIS benefit is the realized FOB value of exports in free foreign exchange of the FOB value of exports as given in the shipping bills in free foreign exchange whichever is lesser. (Para 3.04 -FTP) iii) The claimant is then granted a 'Duty Credit Scrip' which can be used for defraying Customs Duties on imports, Excise Duties on manufactured goods and Service Tax on the procurement of services. However, the goods and services in question are to be notified by the Department of Revenue. (Para 3.02- FTP) iv) Duty Credit Scrips are freely transferable meaning that they can be sold and procured for a consideration. (Para 3.02- FTP) v) Chapter 3 of the HOP covers all the procedure related aspects of the MEIS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second respondent responded through the impugned letter stating that there was no excess duty being collected from the petitioner. The deduction of the amounts pertaining to SWS from the petitioner's MEIS and SEIS licenses is incorrect, unwarranted. Only Customs Duty leviable under the First Schedule to the Customs Tariff Act and Additional Duty under Section 3 of the Tariff Act can be debited from the MEIS and SEIS scrips other than what has been mentioned in the exempted notification. SWS is levied under Section 110 of the Finance Act 2018 as a duty of customs and not under the First Schedule to the Customs Tariff Act. Even if SWS is considered as equivalent to Customs duty, it is still not levied under the First Schedule to the Customs Tariff Act and therefore, not exempted under Notification No.24/2015 or 25/2015. Hence, the second respondent does not have power to deduct SWS amount from the MEIS and SEIS scrips. SWS is not in the nature of Customs Duties. The levy of SWS is not attracted at all. SWS is not to be charged on the imports because Section 110(3) of the Finance Act, 2018 provides for it to be calculated at the rate of 10% on the aggregate of duties of Customs, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of basic customs duties and other duties from duty credit scrips is the same as the DEPB Scheme available under the amended para 4.3.5 of Foreign Trade Policy 2004-2009. Thus, these schemes provide the objective to neutralize the incidence of customs duties on import component of the export product. This neutralization is provided by way of duty credit against export product which is at a specified percentage of FOB value of export. Thus, the MEIS Scheme and the SEIS Scheme like the earlier DEPB Scheme provides for payments for customs duty and additional duty by utilization of credit available in the credit schemes which are given as export rewards by the Government of India. In other words, the importer has the option to pay the customs duties either by cash or through debit under duty credit scrips. Para 3.15 of the Foreign Trade Policy 2015-20 laid down in categorical terms that the customs duties paid through cash or through debit under duty credit scrips shall be adjusted as Cenvat credit or duty drawback. Thus the provisions of the FTP 2015-20 make it very clear that the duty credit scrips awarded under the MEIS and SEIS Schemes is not an exemption from the duties but onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he basic customs duty and other customs duties as per sub section (5) of Section 110 of the Finance Act, 2018. Thus, in such an event the debit of SWS from the duty credit scrips is wholly justified and well in order and in accordance with the provisions of sub section (5) of Section 110 of the Finance Act, 2018 read with para 3.02 of the FTP 2015-2020. The Customs Circular issued by the CBIC Circular No.5/2005- Customs dated 31.01.2005 have clarified that in the case of DEPB Scheme, though the imports are governed by an exemption notification, the fact remains that in case of such imports the duty is debited from the DEPB scrips. The same Circular also lays down that the education cess which was in existence at that time and which was leviable at 2% of the aggregate duties of customs except safeguard duty, countervailing duty and anti dumping duty can be debited from the DEPB scrips when the imports are made under the DEPB scheme. The present SWS has replaced the education cess and is now calculated as 10% of the aggregate of basic customs duties and other additional duties except safeguard duty, countervailing duty, anti dumping duty and the SWS. Further, as Circular No.5/2005-Cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f exemption is reached. Therefore, it cannot be stated that the debit of scrip means payment of Customs Duties or that the duties are paid through the scrips. As per the above said two Notifications, the act of debit is permitted only for those duties which are leviable on the goods but for the specific exemption provided in the Notifications. In other words, only the Customs Duty leviable under the First Schedule to the Customs Tariff Act and Additional Duty under Section 3 of the Tariff Act can be debited, which is specifically exempted. In other words, if the rates of duties are prescribed under some other statute, even if those may be in the nature of Customs Duties, debit of such duties is not permissible under the said notification. Insofar as Social Welfare Surcharge (SWS) is concerned, the same is levied under Section 110 of the Finance Act, 2018 and not under the Customs Tariff Act, 1975. Consequently, since the rate of SWS is not prescribed under the Customs Tariff Act, neither SWS is exempted under the aforesaid Notification, nor it is debitable under the said notification. However, where the Basic Customs Duty as also to CVD is exempted under the said notification, then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest in case of irregular utilization of the scrips could not have arisen. Even in a situation where Duty has been paid, as per the pleadings of the Respondent (through a scrip) where such scrip was irregularly used by exporter, there can be no occasion for the Revenue to recover further duties along with interest, solely on account of such irregular usage of the scrip. This hypothesis is on the edifice that having collected the Duty through debiting the Scrip, no loss to the ex-chequer could have taken place, warranting a further recovery of Duties collected earlier at the time debit and charging of interest thereon. f) The respondents have placed undue reliance on the term debit that occurs in Notifications 24 and 25 of 2015. The respondents lost sight of the fact that the very term debit occurs in the Exemption Notification No.18/2015 pertaining to Advance Authorization and Exemption Notification No.19/2015 pertaining to Duty Free Import Authorization i.e., the so called exemption and remission schemes under Chapter 4 of the FTP. The fact that the said term i.e. debit is used both for SEIS and MEIS notifications as also Advance Authorization and DFIA Notifications, goes on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kerala - AIR 1957 SC 657 . The petitioner also relies upon the Division Bench decision of the Supreme Court in the case of HICO Products vs. CCE 1994 (71) ELT 339 (SC). i) The substance of the Notification ought to be relied upon and not certain works used out of context. The reference to the word paid used in the foreign trade policy or the word debit used in the Notifications concerned, ought not to be read out of context in appreciating whether or not the notification concerned is an exemption notification or not. Instead it is the substance of the notification that ought to be looked at and not certain words used of context. Accordingly, words such as paid used in the FTP or Debit used in the Notification ought not to be considered in coming to the conclusion that the exemption is indeed an exemption notification and not a notification in which duty is being asked to be paid through the mechanism of debit. A Division Bench of the Supreme Court in the case of Asst.Commr. Commercial Taxes. Vs. Dharmendra Trading Company 1988(3) SCC 570 at para 6 had the occasion, to adopt the above test of substance of the concession as opposed to certain words used out of context to ascertain th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Court in writ proceedings under Article 226. 9. Mrs.Aparna Nandakumar, learned counsel for the second respondent in W.P.No.24490 of 2019 made her oral submissions. Learned counsel also filed written submissions. Mr. Santhanaraman, learned counsel for the second respondent in W.P.No.27452 of 2019 submitted that he is adopting the argument advanced by Mrs.Aparna Nandakumar. Thus, the sum and substance of the submissions made on behalf of the second respondent in both the writ petitions are as follows: a) The petitioner herein is challenging the debit of Social Welfare Surcharge (SWS) from the duty credit scrips. The petitioner herein is under the Exports of India Incentive Schemes namely Merchandise Export India Scheme (MEIS in short) and Service Export from India Scheme (SEIS in short) under the Foreign Trade Policy 2015-20 (FTP in short). The object of these scheme is to offset infrastructure inefficiencies and to provide exporters a level playing field. The Exports from India Schemes falling under Chapter 3 of the FTP 2015-20 are different from the duty exemption/remission scheme which fall under Chapter 4 of the FTP 2015-20. Para 3.02 of the FTP 2015-20 lays down the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o places reliance on the decisions of the Hon'ble Gujarat High Court in Ratnamani Metals And Tubes Ltd. v. Union of India, 2016 (339) ELT 509 (Guj). The decision of the Gujarat High Court in Gujarat Ambuja Exports Ltd v. Government of India (289) ELT 273 (guj) relied on by the petitioner herein is not applicable to the facts of the present case. c) The petitioner herein has argued that the sub silentio principle will be applicable to the decisions referred to by the second respondent for the reason that the Hon'ble Supreme Court and the Division Bench of this Court do not refer to the debit of education cess which has been addressed by the Hon'ble Gujarat High Court in Gujarat Ambuja. Thus, in the context, the second respondent herein relied on the decision of this Court in QD Seatamon Designs Private Limited v. P.Suresh 2019 (1) MLJ 163 (Mad), which has relied on two judgments of the Supreme Court and one judgment of the Full Bench of this Court lays down that the sub silentio principles cannot be an exception to Article 141 of the Constitution of India. d) SWS was introduced vide Section 110 of the Finance Act, 2018 and it was essentially to replace Education cess. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilip Kumar 2018 9 SCC 1 has laid down that exemption notifications must be construed very strictly and when there is an ambiguity in exemption notification, it should be in favour of the Revenue. The petitioner herein has now filed an amendment petition to amend the prayer and grounds seeking for a certiorarified mandamus as against the Bill of Entry. Thus the second respondent submits that the Bill of Entry which reflects the debit of Social Welfare Surcharge, the action by which the petitioner herein is aggrieved is an appealable order under Section 128 of the Customs Act, 1962. BCD and Additional Customs Duty can be debited from duty credit scrips which are export rewards under MEIS and SEIS Schemes. The debit through the duty credit scrips is only payment of customs duty and is not an exemption. SWS is calculated at 10% of the BCD. This being an additional customs duty takes the colour of parent levy namely BCD. In the present case, as BCD is not exempt but debitable from duty credit scrips, SWS is also not exempt but debitable from duty credit scrips. 10. After hearing the oral submission of the learned counsels for both sides and receiving their written submissions as well, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... na Nandhakumar, learned counsel for the Revenue. Perused the pleadings, written submissions and case laws cited on either side. 14. Point for consideration in this writ petition is as to whether the Revenue is justified in debiting the Social Welfare Surcharge also from and out of the value of the relevant scrips issued under two schemes viz., MEIS and SEIS, while debiting the customs duty from those two scrips. 15.a) The petitioner is in the business of manufacturing and marketing of eatable oils and fats. They import certain goods as a part and parcel of their business activities. b) Foreign Trade Policy 2015-2020 contains two schemes viz., Merchandise Exports from India Scheme (MEIS) and Service Exports from India Scheme (SEIS). Under the MEIS, a claimant has to export notified goods to notified places in order to be entitled to MEIS benefit, calculated based on the realised FOB value of exports in free foreign exchange or the FOB value of the exports as given in the shipping bills in free foreign exchange, whichever is lesser. Once such export is made, the claimant is granted a duty credit scrip, which can be used for paying the customs duty, excise duty on manufactured goods a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Scheme in accordance with paragraph 3.04 read with paragraph 3.05 of the Foreign Trade Policy (hereinafter referred to as the said scrip) from,- (a) the whole of the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) (hereinafter referred to as said Customs Tariff Act); and (b) the whole of the additional duty leviable thereon under section 3 of the said Customs Tariff Act. 2. The exemption shall be subject to the following conditions, namely :- (1) that the duty credit in the said scrip is issued - (a) against exports of notified goods or products to notified markets as listed in Appendix 3B of Appendices and Aayat Niryat Forms of Foreign Trade Policy 2015- 2020; (b)against exports of notified goods or products transacted through e-commerce platform as listed in Appendix 3C of Appendices and Aayat Niryat Forms of Foreign Trade Policy 2015-2020. In such cases the maximum free on board value, for calculation of duty credit amount, shall not exceed ₹ 25,000 per consignment; (2) that the export categories or sectors specified in paragraph 3.06 of the Foreign Trade Policy and listed in Table annexed hereto shall not be counted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st the amount debited in the said scrip; (10) that the benefit under this notification shall not be available to the items listed in Appendix 3A of Appendices and Aayat Niryat Forms of Foreign Trade Policy 2015-2020 . Explanation. - In this notification - (I) Capital goods has the same meaning as assigned to it in paragraph 9.08 of the Foreign Trade Policy; (II) Foreign Trade Policy means the Foreign Trade Policy, 2015-2020, published by the Government of India in the Ministry of Commerce and Industry notification number 01/2015-2020, dated the 1st April 2015 as amended from time to time; (III) Goods means any inputs or goods including capital goods; (IV) ITC (HS) has the same meaning as assigned to it in paragraph 9.27 of the Foreign Trade Policy; (V) Regional Authority means the Director General of Foreign Trade appointed under section 6 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) or an officer authorised by him to grant an authorisation including a duty credit scrip under the said Act. Table Export categories or sectors ineligible for duty credit scrip entitlement i EOUs / EHTPs / BTPs /STPs who are availing direct tax benefits / exemption; ii Suppli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption shall be subject to following conditions, namely:- (1) that the duty credit in the said scrip is issued to a service provider located in India against export of notified services listed in Appendix 3D of Appendices and Aayat Niryat Forms of Foreign Trade Policy 2015- 2020; (2) that the imports and exports are undertaken through the seaports, airports or through the inland container depots or through the land customs stations as mentioned in the Table 2 annexed to the Notification No. 16/2015- Customs dated 01.04.2015or a Special Economic Zone notified under section 4 of the Special Economic Zones Act, 2005 (28 of 2005): Provided that the Commissioner of Customs may within the jurisdiction, by special order, or by a Public Notice, and subject to such conditions as may be specified by him, permit import and export through any other seaport, airport, inland container depot or through any land customs station; (3)that the said scrip is registered with the Customs Authority at the port of registration specified on the said scrip; (4)that the said scrip is produced before the proper officer of customs at the time of clearance for debit of the duties leviable on the goods and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dance with the relevant Paragraphs of the Foreign Trade Policy, from the whole of the customs duty leviable thereon under the First Schedule to the Customs Tariff Act, 1975 and the whole of additional duty leviable thereon under Section 3 of the Customs Tariff Act, 1975. It is further contemplated therein that the said exemption granted is subject to certain conditions referred to at Paragraph No.2 of each notification. Clause 2(5) of the conditions referred to therein clearly contemplates that the above said scrips should be produced before the proper officer of the Customs at the time of clearance of the goods for debit of the duties leviable on such goods and that the proper officer of the Customs, after taking into account the debits already made under these exemption notifications and the debit made under Notification No.20/2015-Central Excise dated 08.04.2015 and No.10/2015-Service Tax dated 08.04.2015, shall debit the duties leviable on the goods, but for this exemption. 20. A careful perusal of these two notifications, more particularly, Clause 2(5) of the same would thus, indicate that though the said notifications at the beginning gives an impression as if the duty leviab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The Tribunal upheld the contention of the assessee therein that the levy of Education Cess under Section 84 of the Finance Act, 2004 was not to be levied on the exempted items and that the assesee therein was covered by the DEPB scheme and so, the liability therein was NIL. The Tribunal thus, found that when the assessee therein was totally exempted from payment of duty as per Notification No.96/2004 dated 17.09.2004, the question of levy of Education Cess did not arise. The said finding of the Tribunal was confirmed by the Division Bench. The order of the Division Bench reads as follows: 1. This Civil Miscellaneous Appeal is filed at the instance of the Revenue as against the order of the Customs, Excise Service Tax Appellate Tribunal, South Zonal Bench at Chennai [2006 (206) E.L.T. 1024 (Tri. - Chennai)], by raising the following substantial questions of law :-- (1) Whether the Department is entitled to collect Customs Educational Cess on Basic Customs Duty which was debited in the DEPB Licence? (2) Whether the Tribunal is right in not considering that the Notification No. 96/2004- Customs dated 17-9-2004 passed in exercise of powers under Section 25(1) of the Customs Act, 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (296) E.L.T 182 (Gujarat) considered similar issue. The issue raised therein was whether the Education Cess was not leviable on goods which have been exempted from payment of customs duty and additional duty of customs under Notification No.32/2005 dated 08.04.2005. The Gujarat High Court, by following its earlier decision made in the case of Gujarat Ambuja Exports Ltd., 2013 (289) E.L.T 273 (Gujarat), dismissed the Tax Appeal filed by the Revenue against the order of the Tribunal in holding that the Education Cess is not leviable on goods which have been exempted from payment of customs duty and additional duty of customs under Notification No.32 of 2005. In Gujarat Ambuja Exports Ltd. case , the very same Court has observed as follows: 16. From the nature of DEPB scheme and the exemption granted to imports made under such scheme, it can be seen that the very purpose is to neutralise the import duty component on the imported goods used for production of export items. Such object is achieved through the DEPB scheme under which the exporter is given the facility of utilising the credits in the DEPB scrips for the purpose of adjustment against the customs duty liability on the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents of an export product and the basic customs duty payable on such deemed imports. Thus through such adjustments on the DEPB scrips at the time of further imports, customs duty component is sought to be neutralised. The view expressed by the Tribunal in the case of Reliance Industries Ltd. (supra) appeals to us. In the said decision, the Tribunal taking note of the provisions contained in Sections 81 and 84 of the Finance Act, 2004 held that the impugned Circular No. 5/2005 is not legally sustainable. The Tribunal held that crediting and debiting of entries in the passbook is a matter of procedure and convenience and in essence, the Notification No. 45/2002 provides for full exemption from payment of customs duty. 20. We may also recall that the Larger Bench of the Tribunal in the case of Essar Steel Ltd. (supra) held that mere entry in the DEPB book is not sufficient for eligibility of Modvat credit availed on the strength of Bill of Entry where the importer had availed of benefit of the exemption from payment of customs duty. This would further go to show that while no customs duty is paid, there would be no question of availing Modvat credit on such duty. 21. We may notice tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensing route would have an optional facility of being governed under the DEPB scheme. 25. We may note that in cases of Advance Licence Schemes under which imports are being made and which are exempt from customs duty under various notifications issued by the Central Government under Section 25 of the Customs Act, 1962, no Education Cess is demanded by the respondents. In fact, the impugned notification itself is sufficiently clear and records that imports against Advanced Licences are exempt from all duties of customs and therefore, it follows that Education Cess at 2% is not leviable on such imports. In case of DEPB, however, a distinction is sought to be drawn on the premise that though the importers are governed by exemption notification, the fact remains that in case of such imports, the duty is debited from DEPB scrip. To our mind, such distinction is not valid. The clarificatory circular itself refers to the imports made under the DEPB scheme being covered under exemption notification. Such exemption is, of course, subject to fulfillment of certain conditions. One of the conditions includes that of adjustment of credit in the DEPB scrip. This, however, is merely procedural in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Customs (Appeal), Mumbai. 2. This appeal has been admitted on the following substantial questions of law. (a) Whether the CESTAT is vested with powers or has jurisdiction to hold and declare that notification/circulars issued by the Board are inconsistent to legislature? (b) Whether Education Cess is leviable on imports made under DEPB Scheme as per Finance (No. 2) of 2004 read with Board's Circular No. 5/2005, dated 31- 1-2005? 3. The Counsel appearing for both sides have addressed us on Question 2(b). In their submission, same would suffice for disposal of this appeal. 4. The respondent-assessee filed about 16 bills of entries for the purpose of assessment of various goods imported by them and claimed benefit of Notification No. 45/02-Customs, dated 22nd April, 2004. On finalization of the assessment, the benefit of this notification was extended to all the bills of entries inter alia, exempting duties leviable subject to the conditions that the duties leviable were debited from the relevant pass book under a scheme known as DEPB Scheme. The Education Cess at 2% on these duties was also debited from the duties of DEPB as per clause of the Finance Bill, 2004. 5. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2% of the Customs duty in relative terms. In which case, it becomes nil for exempted DEPB imports. Accordingly, we hold that no education cess is leviable on fully exempted DEPB imports and therefore, no debits from DEPB scrip are required. We are also of the view that the circular dated 31st January, 2005 is contrary to the provisions of the Finance (No. 2) Act, 2004 read with Notification No. 45/2002-Customs, dated 22nd April, 2002. The revenue appeal is, therefore, rejected. 8. It is the correctness of this view of the Tribunal which is challenged before us. Mr. A.S. Rao appearing on behalf of the revenue submits that merely because there is a scheme and an exemption is granted that does not wipe out the duties. The Customs duty is leviable and recoverable. In the light of the exemption it cannot be said that these duties are not legally recoverable. Therefore, the education cess also could have been levied and recovered. The Tribunal's view is therefore, erroneous in law. 9. On the other hand, Mr. Patel appearing on behalf of the respondent assessee submits that the Tribunal's view as taken above has found favour at least with three High Courts in India and in that rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... followed with approval of the same High Court. That view has also been applied by the High Court of Gujarat in the case of Pasupati (supra). Once the Tribunal's view taken in the present case has found favour with at least three High Courts and has not been interfered with, then, we are of the view that the Tribunal's decision cannot be termed as perverse. It is also not vitiated by any error of law apparent on the face of the record. Following the High Court Gujarat judgment as above, we answer the substantial question of law in Para 2(b) in favour of the assessee and against the revenue. Appeal of the revenue fails and is dismissed. There shall be no order as to costs. g) The High Court of Andhra Pradesh in the case of Commissioner of Central Excise, Visakhaptnam, Vs. Kedia Overseas Ltd., 2011-TIOl-1063-HC-AP-CUS has observed that the Education Cess was not leviable in respect of duty free imports under DEPB scheme. Notification No. 45/2002 dated 22.04.2002 was the relevant notification considered therein. The Division Bench of the Andhra Pradesh High Court in the above case observed as follows: 2. The respondent is importer of edible refined oil. They imported crude pal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the importer has been permitted credit entries in the said DEPB by the Licensing Authority at the rates notified by, the Government of India; and (iii) the DEPB is produced before the proper officer of Customs for debit of the duties leviable on the goods but for exemption contained therein. The only disability is when there is no sufficient credit in the DEPB for debiting the duty leviable on the goods. 6. A reading of the Notification No. 45/2002 would show that the intention of the Government is to exempt the whole of the duty, additional duty and special additional duty. It is, therefore, not possible to read-any further restriction as to levy of education cess in respect of duty free imports under DEPB. scheme. Further there is no dispute that the ruling of South Zone Bench of CESTAT in Ruchi Health Foods Ltd. and that of the Mumbai Bench in Reliance Industries Ltd. have become final and the Revenue has not challenged the same. Therefore, this appeal is misconceived. 7. The appeal, for the above is reasons, is dismissed. 23. On the other hand, the learned counsel for the Revenue, in support of her contention that the duty credit scrips scheme cannot be treated as exemption fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty is paid by way of debit in DEPB. 2. The issue was examined and necessary clarification in the matter has been issued vide F. No. 605/85/2006-DBK, dated 21.7.2006 to the Commissioner concerned. Having regard to the general implications of the matter, a copy of the same is enclosed for information and necessary action. 3. In brief, the issue involved is, whether the duty paid through debits under DEPB is to be treated as payment of duty of exemption from duty. Hitherto, the stand taken by the Department was that goods cleared through debit under DEPB are exempted goods and, accordingly, no CENVAT or drawback was allowed for such payments. Para 4.3.5., of the Foreign Trade Policy, 2004-09 was amended allowing additional Customs duty paid through debit under DEPB to be adjusted as Cenvat credit or duty drawback. The said position was clarified vide Circular No. 59/2004-Cus., dated 21.10.2004 (2004 (173) E.L.T. T9). It implies that the goods cleared by debits through DEPBs are not to be treated as exempted but duty paid. 4. Section 61 of the Customs Act, 1962 provides for charging of interest on duty payable on clearance of warehoused goods. Section 61(d)(i) and (ii) provides that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l miscellaneous appeals are dismissed. The above said decision was put to challenge before the Hon'ble Supreme Court in Special Leave Petition Nos.24638-24640/2009 and the same was dismissed on 09.10.2009. b) Tanfac Industries Ltd. case was subsequently followed by another Division Bench decision of this Court, in the case of Commissioner of Central Excise Vs. SPIC Heavy Chemicals Division, (2014) 25 GSTR 538 (Mad.). At paragraph Nos.7, 8, 9, 12, 21 22, the Division Bench has observed as follows: 7. In this connection, learned counsel appearing for the assessee placed reliance on the decision of this court reported in [2010] 2 GSTR 468 (Mad) : [2009] 240 ELT 341 (Mad) Tanfac Industries Ltd. v. Assistant Commissioner of Customs, wherein this court had referred to the decision of the apex court reported in [2008] 11 RC 285 : [2008] 229 ELT 3 (SC) Commissioner of Customs v. Indian Rayon and Industries Ltd., and held that when a clearance is allowed in the DEEC Scheme, even if the duty is not paid in cash but only by way of credit, the same would tantamount to payment of duty in cash. Consequently, unlike the DEEC Scheme, the debit of additional customs duty liability under the DEP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the Tribunal which went against the assessee, in the light of the decision of the larger Bench reported in [2004] 173 ELT 239 (Trib.- Delhi) [LB] Essar Steel Ltd. v. CCE. He further submitted that the decision of the larger Bench has not been taken on appeal so far. In the circumstances, the view thus having attained finality, the same may be accepted by this court. Hence, he submitted that the appeal filed by the Revenue merits to be allowed. ..... 12. As is evident from the reading of the scheme, it is an export oriented scheme. The objective of the scheme is to neutralise the incidence of customs duty on the import content of the export product. A reading of the scheme shows that although DEPB holder is allowed to import without payment of basic customs duty, credit is available as regards the additional customs duty payable and the scheme further recognises that the holder has the option to pay additional customs duty, if any, in cash as well. A reading of paragraph 7.25 as extracted above thus shows that the scheme of DEPB, works on the adjustment of debit entry as against credit entry available. The credit entry includes basic customs duty as well as additional duty o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elief under rule 57Q of the Central Excise Rules, irrespective of whether the duty is paid in cash or through credit entry in the passbook. c) Apart from the above decisions, the learned counsel for the Revenue, though originally relied on two decisions of the Hon'ble Supreme Court reported in the case of SRD Nutrients Private Limited Vs. Commissioner of Central Excise, Guwahati, reported in 2018 (1) SCC 105 and in the case of Bajaj Auto v. Union of India reported in 2019 (366) E.L.T. 577 (SC), in support of her contention that Social Welfare Surcharge is also having the colour of duty of customs and thus, is not an independent levy, has however fairly submitted subsequently that in view of the recent decision of the Hon'ble Apex Court made in the case of Unicorn Industries v. Union of India others (Civil Appeal No.9237 of 2019 dated 06.12.2019) , the revenue is not pressing the above point. At this juncture, it is relevant to quote the above recent decision of the Apex Court dated 06.12.2019, wherein at paragraph Nos.22, 28, 29, 38, 41, 42, 43, it has been observed as follows: 22. The main question arising for consideration is when 100 per cent exemption had been granted f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be construed as comprehending special duty of excise. Merely reference to the source of power is not enough to attract the exemption and what exemption has been granted to be read from the notification issued therein. This Court has further laid down that in case notification granting exemption issued under the Central Excise Rules, 1944 without reference to any other statute, the exemption must be read as limited to the duty of excise payable under the Central Excises and Salt Act, 1944. It cannot cover such special or another kind of duty of excise. This Court in Modi Rubber Limited (supra) has discussed the provisions of the Finance Act, 1979 thus: 9. We have already pointed out, and this is one of the principal arguments against the contention of the respondents, that by reason of the definition of duty in clause (v) of Rule 2 which must be read in Rule 8(1), the expression duty of excise in the notifications dated August 1, 1974 and March 1, 1981 must be construed as duty of excise payable under the Central Excises and Salt Act, 1944. The respondents sought to combat this conclusion by relying on sub section (4) of Section 32 of the Finance Act, 1979 - there being an identica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (4) of Section 32 or other similar provision. The reference to the source of power in such a case would not be just to Rule 8(1), since it does not of its own force and on its own language apply to granting of exemption in respect of special duty of excise, but the reference would have to be to Rule 8(1) read with subsection (4) of Section 32 or other similar provision. It is significant to note that during all these years, whenever exemption is sought to be granted by the Central Government from payment of special duty of excise or additional duty of excise, the recital of the source of power in the notification granting exemption has invariably been to Rule 8(1) read with the relevant provision of the statute levying special duty of excise or additional duty of excise, by which the provisions of the Central Excises and Salt Act, 1944 and the rules made thereunder including those relating to exemption from duty are made applicable. Take for example, the Notification bearing No. 63/78 dated August 1, 1978 where exemption is granted in respect of certain excisable goods from the whole of the special duty of excise leviable thereon under subclause (1) of clause 37 of the Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) has also considered when the exemption is granted under the particular provision; it would not cover any other kind of duty of excise imposed under separate Acts. This Court observed thus: 10. We may incidentally mention that in the appeals a question of interpretation was also raised in regard to the Notification bearing No. 249/67 dated November 8, 1967 exempting tyres for tractors from so much of the duty leviable thereon under item 16 of the First Schedule to the Central Excises and Salt Act, 1944 as is in excess of 15 per cent . The argument of the respondents in the appeals was that the exemption granted under this notification was not limited to the duty of excise payable under the Central Excises and Salt Act, 1944 but it also extended to special duty of excise, additional duty of excise and auxiliary duty of excise leviable under other enactments. This argument plainly runs counter to the very language of this notification. It is obvious that the exemption granted under this notification is in respect of so much of the duty leviable thereon under item 16 of the First Schedule to the Central Excises and Salt Act, 1944 as is in excess of 15 per cent and these words d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im Jamat Mandal, AIR 2006 SC 3446 and State of Uttar Pradesh Ors. v. Ajay Kumar Sharma Ors. (2016) 15 SCC 289. The decision rendered in ignorance of a binding precedent and/or ignorance of a provision has been held to be per incuriam in Subhash Chandra Ors. v. Delhi Subordinate Services Selection Board Ors. (2009) 15 SCC 458, Dashrath Rupsingh Rathod v. State of Maharashtra (2014) 9 SCC 129, and Central Board of Dawoodi Bohra Community Ors. v. State of Maharashtra Ors. (2005) 2 SCC 673. It was held that a smaller bench could not disagree with the view taken by a larger bench. 43. Thus, it is clear that before the Division Bench deciding SRD Nutrients Private Limited and Bajaj Auto Limited (supra), the previous binding decisions of three- Judge Bench in Modi Rubber (supra) and Rita Textiles Private Limited (supra) were not placed for consideration. Thus, the decisions in SRD Nutrients Private Limited and Bajaj Auto Limited (supra) are clearly per incuriam. The decisions in Modi Rubber (supra) and Rita Textiles Private Limited (supra) are binding on us being of Co ordinate Bench, and we respectfully follow them. We did not find any ground to take a different view. Thus, from the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the angle of the income tax has been seen as income of the undertaking. Thus when an importer whether imports goods under DEPB scheme or pays customs duty on the imports on purchased DEPB credits, he essentially pays customs duty by adjustment of the credit in the pass-book. It would therefore, be incorrect to state that the imports made in such fashion have not suffered the customs duty. (emphasis supplied) 24. Going by the above case laws cited on both sides and considering the submissions made by the learned counsels appearing on either side, the following questions need to be answered for the disposal of these writ petitions. (a) 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? (b) 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? (c) 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 cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as I have already pointed out, the above exemption is not an exemption simplicitor from payment of the duty of customs and on the other hand, such exemption is subject to certain conditions stipulated in those two notifications. One of the conditions specifically contemplates that the importer should produce the scrips before the proper officer of the customs at the time of clearance for debit of the duties leviable on the goods and the proper officer of customs, taking into account the debits already made under the exemption notification, shall debit the duties leviable on the goods , but for the exemption. I have already pointed out that under Clause 3.02 of the Foreign Trade Policy, it is clearly stated that duty credit scrips are granted as rewards under MEIS and SEIS and the duty credit scrips and goods imported domestically shall be freely transferable and that the duty credit scrips can be used for Payment of Basic Customs Duty and Additional Customs Duty and Payment of Central Excise Duties. For better clarity, let me reproduce Clause 3.02 of the said policy as hereunder: 3.02 Nature of Rewards Duty Credit Scrips shall be granted as rewards under MEIS and SEIS. The Duty Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... senting 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. 30. In my considered view, the above claim of the petitioner though appears to be fascinating, in effect it is not so, more particularly, to sustain their contention that the duty paid is Nil in view of exemption. As already discussed supra, in view of the exports made under free foreign exchange, the exporter is given incentives in the form of duty credit scrips under MEIS and SEIS schemes. The very term duty credit scrips would undoubtedly, indicate that those scrips are loaded with money value and the same can be used for payment of customs and excise duties, when the import is made against those scrips. Therefore, insofar as the importer is concerned, 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (240) E.L.T. 341 (Mad.) 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 was also observed therein that the importers, who used DEPB scrips, pay duty not by cash, but only by way of credit. In support of such conclusion, the Division Bench relied on the decision of the Apex Court in the case of Pratibha Processors case , reported in 1996 (88) E.L.T. 12 (SC). A challenge made against the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same is in line with TANFAC Industries Ltd., decision rendered by the Division Bench of this Court confirmed by the Apex Court. Hence 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. 33. At this juncture, it is to be noted further that TANFAC Industries Ltd., decision has been considered by another Division Bench decision of this Court made in the case of CCE v. SPIC, Heavy Chemicals Division, [2014] 25 GSTR 538 (Mad.), as extracted supra. In that case, the assessee therein placed reliance on the decision made in TANFAC Industries Ltd., in support of their claim for Modvat credit, based on the payment of duty through DEPB scheme. The Division Bench has taken note of the finding rendered in TANFAC Industries Ltd. Case, that when a clearance is allowed in a DEEC scheme, even if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise in respect of certain products and pharmaceuticals products. A condition for debiting the value of the duty from the scrips, as in the present case is not a condition or a condition similar in nature, was stipulated therein. 36. Likewise, the decision of the Apex Court in 1988 (3) SCC 570, Assistant Commissioner Commercial Taxes vs. Dharmendra Trading Company, is also not applicable to the present facts and circumstances, since in the case of the petitioner herein, exemption granted is not an exemption from payment of duty in toto and on the other hand, it is in respect of mode of paying such duty. In other words, the duty paid in this case is admittedly by debiting from the scrips. 37. The main issue involved in this case is not against the collection of customs duty, whether it is exempted in toto or not. The grievance is only against the collection of SWS, that too, by making debit out of total value of scrips along with the customs duty. Therefore, it is to be seen as to whether the Revenue is justified in making debit of the Social Welfare Surcharge from the value of the scrips. 38. I have already pointed out that SWS is an independent levy imposed and collected under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. There is no dispute to the fact that the petitioner is not questioning the debiting of duty liability out of the value of the scrips produced by them. Their only dispute is against debiting SWS also. Under such circumstances, I am of the view that even without taking aid the facts and circumstances of any of the decisions, whether it has been dealt with the said issue or not, this Court can safely come to the conclusion and decide that exemption granted herein is not against payment of duty in toto and on the other hand, it is against the payment of the same in cash, so as to enable the petitioner to use those scrips for debiting the quantum of duty. 40. Likewise, in view of the recent decision rendered by the Apex Court in Unicorn Industries Ltd. Case, consideration of the other decisions relied on by both sides, in support of their respective contentions regarding the nature and status of SWS, does not arise. 41. Let me, now, consider the other issue as to whether the Revenue is entitled to collect the Social Welfare Surcharge from the petitioner under the present facts and circumstances, if not by way of debiting the same from the value of the scrips. The petitioner contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty in toto, the petitioner is not justified in contending that the other duties or levy payable under different enactment are also exempted. In this case, I have already pointed out that exemption granted is against payment of duty in cash and not the liability itself in toto, as such duty is admittedly, debited from the value of the scrips. In other words, the Social Welfare Surcharge being a levy imposed under the Finance Act, 2018 and an independent levy, the petitioner is bound to pay the same. If the liability to pay the customs duty element is discharged by effecting adjustment from the value of the scrips, the liability to pay the Social Welfare Surcharge is also to be discharged by the petitioner either by way of cash or by other mode, since the scrips cannot be used for discharging such liability. The above three questions thus, are answered accordingly. 43. In the result, the Writ Petitions are disposed of as follows: (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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