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TMI Blog2024 (2) TMI 1321X X X X Extracts X X X X X X X X Extracts X X X X ..... y is NIL or Zero , by virtue of the notification dated 08.04.2015, the rate of SWS when calculated in terms of Section 110 ibid 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. Since there was ambiguity in context with the subject issue, the Tax Research Unit in the Department of Revenue, Ministry of Finance vide Circular No.3/202-Customs dated 01.02.2022 had clarified that calculation of SWS is dependent on amount of the customs duty that is actually payable and not otherwise. It has been in explained in specific terms that legal provisions does not require calculation of SWS on notional value of customs duty calculated, as in the present case, the BCD is calculated for purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the appellants are engaged inter alia, in importation of various goods. During the disputed period from March, 2019 to June, 2019, the appellants have filed total 971 Bills of Entry (B/Es) for clearance of various imported goods, claiming exemption from import duty provided under Notification No. 24/2015-Cus. dated 08.04.2015 by producing Merchandise Export from India Scheme (MEIS) scrips. The B/Es were assessed by the Customs authorities at the port of import, in providing the exemption with regard to the Basic Customs Duty (BCD) and Additional duties of Customs (CVD) as per the said notification, by indicating the applicable rate of duty as "0" (Zero) in these B/Es and by debiting the amount of BCD as duty foregone by debiting the MEIS scrips. However, the department had assessed Social Welfare Surcharge (SWS) at the rate of 10% and insisted for payment of the said amount, as there was no specific exemption from payment of SWS in the said notification No.24/2015-Cus. The said amount of duty assessed by the Department was accordingly paid by the appellants by debiting both BCD and SWS in the various MEIS scrips. 2.2 The appellant had filed appeals against the aforesaid asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs, Mumbai Vs. Reliance Industries Limited - 2005 (188) E.L.T. 449 which was upheld by the Hon'ble High Court of Bombay in 2015 (322) E.L.T. 121, to state that when there is exemption from payment of Basic Customs duty, then there is no collection of the SWS. Similarly, he also placed reliance on the ratio of the judgement of Hon'ble High Court of Bombay on the same set of facts in the case of LA TIM Metal & Industries Limited Vs. The Union of India and Ors. in Writ Petition No.12183 of 2022, wherein it was held that SWS is payable at 10% on BCD but where the BCD is 'Nil', SWS shall also be computed 'Nil'. Learned Advocate further placed reliance on the Final Order of this Tribunal dated 30.08.2023 in the case of Tata Motors Limited Vs. Commissioner of Customs (Import), JNCH, Mumbai. 4.1 On the other hand, learned Authorized Representative appearing for Revenue has submitted that the BCD amount was quantified and debited in MEIS scrip in respect of the impugned goods and thus BCD is not Nil/Exempted and accordingly SWS needs to be charged at 10% of BCD. He has relied upon the letter dated 14.11.2022 of the Under Secretary to the Government of India, Tax Research Unit, Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods. - (1) Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, on goods imported into, or exported from, India. (2) The provisions of sub-section (1) shall apply in respect of all goods belonging to Government as they apply in respect of goods not belonging to Government." "Section 25. Power to grant exemption from duty. - (1) 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 (to be fulfilled before or after clearance) as may be specified in the notification goods of any specified description from the whole or any part of duty of customs leviable thereon. (2) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by special order in each case, exempt from the payment of duty, under circumstances of an exceptional nature to be stated in such order, any goods on which du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at the rate of ten percent on the BCD amount. The relevant legal provisions introduced in the Finance Act, 2018 are as follows: "CHAPTER VI SOCIAL WELFARE SURCHARGE 110. (1) There shall be levied and collected, in accordance with the provisions of this Chapter, for the purposes of the Union, a duty of Customs, to be called a Social Welfare Surcharge, on the goods specified in the First Schedule to the Customs Tariff Act, 1975 (hereinafter referred to as the Customs Tariff Act), being the goods imported into India, to fulfil the commitment of the Government to provide and finance education, health and social security. (2) The Central Government may, after due appropriation made by Parliament by law in this behalf, utilise such sums of money of the Social Welfare Surcharge levied under this Chapter for the purposes specified in sub-section (1), as it may consider necessary. (3) The Social Welfare Surcharge levied under sub-section (1), shall be calculated at the rate of ten per cent. on the aggregate of duties, taxes and cesses which are levied and collected by the Central Government in the Ministry of Finance (Department of Revenue) under section 12 of the Customs Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely transferrable. Thus, it is basically an accounting document to demonstrate actual availment of the incentives in terms of the value of goods exported. To illustrate the same, we may say that if the realized FOB value is Rs.20 lakhs and the incentives provided for the scheme is 5% advalorem; then in such case, the importer of the goods shall be eligible for availing the benefit on account of the incentives to the tune of Rs.1 lakh. In other words, the benefit under the 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 (supra), but have provided various conditions, including the conditions contained in para 2(5) for debiting the duties being exempted under this notification. The relevant portion of the said notification is extracted and provided herein below: "Notification No. 24 / 2015 - Customs New Delhi, the 8th April, 2015. G.S.R. 269 (E) . - In exercise of the powers conferred by sub-section (1) of section 25 of the Custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oreign Trade Policy 2015-2020 are undertaken either through the courier mode from airports at Chennai, Mumbai or Delhi or through the Foreign Post Offices at Chennai, Mumbai or New Delhi ; (4) that the said scrip is registered with the Customs Authority at the port of registration specified on the said scrip; (5) 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 proper officer of customs taking into account the debits already made under this exemption and debits made under the notification Nos. 20/ 2015 - Central Excise, dated the 8th April, 2015 and 10/ 2015 -Service Tax, dated the 8th April, 2015, shall debit the duties leviable on the goods, but for this exemption; (6) that the said scrip and goods imported against it shall be freely transferable; (7) that where the importer does not claim exemption from the additional duty of customs leviable under section 3 of the said Customs Tariff Act, he shall be deemed not to have availed the exemption from the said duty for the purpose of calculation of the said additional duty of customs; (8) that the importer shall be entitl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is applicable in a particular case upon fulfilment of these conditions under Notification dated 08.04.2015 which has been issued under Section 25 ibid. These conditions shall not in any case would put a bar for payment of SWS which could be 'NIL' on account of its determination under Section 110 of the Finance Act, 2018 or may be exempt by means of any exemption under some other notification issued under Section 110(3) ibid read with Section 25 ibid. 9.3 In the present case, it is not in dispute that the licensing authority has raised any objection with regard to non-observance or non-fulfillment of the conditions mentioned in the notification dated 08.04.2015. Thus, it would not be proper on the part of the Customs 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 when calculated in terms of Section 110 ibid 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 imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2018 (13 of 2018) and is calculated at the rate of 10 per cent. on the aggregate of duties, taxes and cesses which are levied and collected by the Central Government as a duty of customs on goods imported into India. 3. In this regard, it may be noted that at present SWS applies at the rate of 10% of the aggregate of customs duties payable on import of goods and not on the value of imported goods. If aggregate customs duty payable is zero on account of an exemption, the SWS shall be computed as 10% of value equal to 'Nil' (as aggregate amount of customs duties payable is zero). Law does not require computation of SWS on a notional customs duty calculated. 4. Thus, it is clarified that the amount of Social Welfare Surcharge payable would be 'Nil' in cases where the aggregate of customs duties (which form the base for computation of SWS) is zero even though SWS has not been exempted at tariff rate where applicable aggregate of duties of customs is zero. 5. The contents of this circular may please be brought to the notice of trade and industry through issue of Trade/ Public notices. The field formations may also be suitably sensitized in this regard. Difficulty, if any, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a), the Hon'ble High Court of Bombay in respect of Customs appeal No. 12 of 2006 had held that when the customs duty is fully exempt under DEPB scheme, then the education cess that is calculated at 2% on the customs duty also becomes 'Nil'. The relevant paragraphs of the aforesaid judgement is extracted and given below: "8. The Tribunal has in dealing with this controversy referred extensively to the salient features of the DEPB Scheme, relevant provisions of the Finance Act, 2004 and the Exemption Notification dated 22nd April, 2002. The Tribunal has held as under :- "We find that the DEPB Scheme operates under an exemption Notification No. 45/2002-Customs, dated 22nd April, 2002. The said notification specifically exempts goods imported under DEPB Scheme from basic, additional and special additional duties of Customs. However, in terms of the conditions specified in the said notification, the exemption operates by allowing duty credit in the Duty Entitlement Pass Book on exports at the rate specified and subsequently by debiting an amount equal to duty payable, against such credit in the pass book, on imports. As such, such crediting and debiting of duty amounts is a matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Commissioner of Customs v. Pasupati Acrylon Ltd. - 2013 (296) E.L.T. 182 (Guj.). He submits that the view taken by Gujarat High Court in Pasupati (supra) has been not interfered with by the Hon'ble Supreme Court and the revenue's appeal is dismissed on 8th May, 2013. 11. The Tribunal's view is endorsed not only by the High Court of Gujarat but equally by the High Court of Madras in Commissioner of Customs, Tuticorin v. DCW Ltd. - 2014 (306) E.L.T. 398 (Mad.) and the High Court of Andhra Pradesh in Commissioner of C.Ex., Visakhapatnam v. Kedia Overseas Ltd. - 2014 (305) E.L.T. 268 (A.P.). Our attention is invited to the judgments of the Gujarat and Andhra Pradesh High Courts. 12. After hearing both sides we find that the Gujarat High Court has extensively dealt with this issue. It has expressed an opinion that the duty exemption remission scheme and the duty exemption passbook scheme are essentially to promote economic growth and in terms of the new policy adopted by the Government of India. The education cess on imported goods shall be in addition to any other duties of Customs chargeable on such goods under the Customs Act, 1962 or any other law for the time being in for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Notification No. 32/2005, would still be liable to pay Education Cess on such basic duty of customs and additional duty on the ground that such duty-free imports were being made under DEPB scheme. The case of the Revenue before the Tribunal was that in view of the Circular of C.B.E. & C., dated 31-1-2005, such imports when made under DEPB scheme, though may enjoy exemption from payment of Customs and additional duty if the conditions of Exemption Notification No. 32/2005 are satisfied, nevertheless, the importers would have to pay the Education Cess on the customs duty and additional duty otherwise payable. 7. Identical issue came up for consideration before this Court in Special Civil Application No. 11635/2005 in case of Gujarat Ambuja Exports Ltd. wherein by judgment dated 21-6-2012 [2013 (289) E.L.T. 273 (Guj.)] while allowing the writ petition of the importers, the issue was decided in following manner :- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rters 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 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toms 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 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 exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Hon'ble Supreme Court in the case of Unicorn Industries (supra), the Board has clarified that SWS cannot be debited through duty credit scrips and therefore has to be paid by the importer in cash. The case in hand does not relate to debit of any amount towards SWS from the duty scrips; rather, the issue is only confined to claim of 'zero' rated SWS, which has adequately been dealt with in the subsequent Circular No.3/2022-Customs dated 01.02.2022 issued by CBIC. 11.2 Learned AR has also relied upon the judgement of Hon'ble Supreme Court in the case of Unicorn Industries (supra), to submit that the appellant was liable to pay 10% on the amount of BCD foregone as SWS in respect of the goods imported under MEIS. On examination of the said judgement delivered by the Hon'ble Supreme Court, we find that the issue involved therein relates to grant of exemption from payment of NCCD, Education Cess and Secondary and Higher Education Cess. The Hon'ble Court have ruled that for grant of any exemption, a notification has to be issued and, in the absence thereof, automatic exemption cannot be claimed by the manufacturer. The issue involved in these appeals are based on entirely different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notification No.11/2018- Customs dt. 02.02.2018 'NIL/Rs.0' 'NIL/Rs.0' The issue involved in the present appeals is categorized under Situation Case No.3 in the above table, where 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 appellants in the present case. 13. Learned AR also made a submission that the Revenue has filed Review Petitions against the judgement of the Hon'ble Bombay High Court it the case of La Tim Sourcing (India) and La Tim Metal & Industries Ltd. (supra), and the same is pending. In this regard, we find that the Hon'ble High Court of Bombay had taken note of the judgements cited by the Revenue as decided by Hon'ble Madras High Court and after proper examination of the issues in hand had decided the case by holding the view that SWS shall be computed as 'Nil' when BCD is 'Nil'. Inasmuch as the Hon'ble Supreme Court had already upheld the decision of the Hon'ble Gujarat High Court in the case of Pasupathi Acrylon Ltd.,(supra) wherein it was held that no cess is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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