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TMI Blog2024 (3) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Customs Act, 1962, for the goods imported under Merchandise Exports from India Scheme (MEIS) and Service Exports from India Scheme (SEIS). 2. The Appellant is engaged in the business of refining and selling edible oils. For the said purpose, the Appellant imports crude edible oil from various countries and had imported vide 82 Bills of Entry during the period August 2020 to December 2020, crude palm oil availing exemption of BCD under Notification No. 24/2015-Cus 25/2015-Cus, issued under the MEIS/SEIS Scheme, which are export promotion schemes. 3. Vide Finance Act 2018, SWS was imposed as a duty of Customs to be levied and collected in accordance with Chapter VI of the Finance Act 2018, on the goods specified in the First Schedule to the Customs Tariff Act, 1975, being the goods imported into India, to fulfil the commitment of the Government to provide and finance education, health and social security. 4. Further, Sec 110(3) of the Finance Act, 2018 provides - that SWS levied under sub-sec (1), shall be calculated at the rate of ten percent on the aggregate of duties, taxes and cesses, which are levied and collected by the Central Government under Sec 12 of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1962. Further, in terms of the judgement of the Hon ble Supreme Court in the case of Somaiya Organics Limited Vs State of Uttar Pradesh [2001 (130) E.L.T. 3] collection in the context of tax laws means physical realization of tax . Since, no BCD is collected in view of the exemption conferred under Notification Nos. 24/2015 Cus., and 25/2025 - Cus., both dated 08.04.2015, the SWS computed at the rate of 10% on zero should also be zero . The CBIC in its later Circular No. 03/2022 - dated 01.02.2022 has also clarified the said position at Para 4 set out hereunder: 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. It is further stated that the aforesaid Circular, being a beneficial one shall be retrospectively applicable to the facts of the current case in terms of the judgement of the Hon ble Supreme Court in the case of Suchitra Components Vs. Commissioner of Central Excise, Guntur [2007 (208) E.L.T. 321]. (b) The same very issue involved in the present proceedings stands d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Supreme Court was dealing with an exemption notification no. 71/2003 CE dated 09.09.2003, granting certain duty concessions to the units located in the Northeastern states. Under the said notification, the assessee was entitled to refund of specified duties paid on value addition and the question before the Hon ble Court was whether EC and SHEC shall also come within the scope of exemption although not specified therein. Since refund of the specified duties was only possible post collection, the question of leviability of EC and SHEC was not gone into by the Hon ble Supreme Court in the said decision. The appellant on the other hand in these proceedings is questioning the liability/computation of SWS with reference to notional BCD under Section 110(3) of the Finance Act, 2018 when BCD is specifically exempted under Notification No.. 24/2015 Cus., and 25/2025 - Cus., both dated 08.04.2015. Therefore, the ratio of the decision of the Hon ble Supreme Court in Unicorn Case (supra) is clearly not applicable in view of the principle laid down by the Hon ble Supreme Court in the case of IndusInd Media and Communications Limited Vs. CC, New Delhi [(2019) 17 SCC 108] as als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt), Mumbai vs Dilip Kumar Company [2018 (9) SCC 1]. Customs exemption notification should be construed on its own terms without any intendment of the provisions of FTP. Reliance is placed on the ruling of the Hon ble Supreme Court in CC, Hyderabad vs Pennar Industries Ltd [2015 (322) ELT 402]. Hon ble Supreme Court in the case of Somaiya Organics Ltd vs State of Uttar Pradesh (supra) has held in no uncertain terms that the expression collection in the context of tax laws would mean physical realization of tax . In the facts of the instant case, collection of BCD is absent, which is ex-facie evident on the face of the Bills of Entry. The debit to the scrip is only a matter of procedure not vitiating the factum of exemption from BCD as held in the decision of the Hon ble Gujarat High Court in Gujarat Ambuja Exports Ltd (supra). 11. Learned Commissioner (Appeals) has erred by relying upon the provisions of FTP to hold that since the amount debited to the scrips is allowable as Cenvat credit or drawback, there is no absolute exemption under the aforementioned notifications. Assailing, learned Counsel urges that the conditions as regards entitlement of drawback and Cenvat credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collection. It has also been held in Bhushan Steel Strips Ltd (supra) that the condition as regards the availability of drawback or Cenvat credit against the amount debited from the said scrips does not alter the factum of exemption. 13. Further, the learned Commissioner (Appeals) has erred in holding that SWS is not specifically exempted under Notification No. 24/2015 25/2015 and as such the same cannot be assumed to be nil or exempted. Learned Counsel urges that Appellant is not seeking an exemption from SWS in the instant Appeals. Rather, the leviability of SWS is itself being challenged when the BCD is nil. It is a well stated principle in law that exemption presupposes a liability and it can only operate when there is a valid levy/liability. The issue of leviability of SWS is no more res integra, in view of the judgment of the Division Bench of the Hon ble Bombay High Court in La Tim Metal Industries (supra) as also in the Appellant s own case. Further, the self-same issue was considered by the Kolkata Bench of this Tribunal and vide Final Order No. 76944- 77103/2023 dt.22.09.2023, the issue has been decided in favour of the Appellant. In La Tim Metal Industries Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he last column. SWS has been paid @10% of the aggregate of the duties so paid by debit. There is an endorsement by the proper officer of Customs Importer has used MEIS licenses for payment of BCD . Thus, the Bills of Entry indicate clearly that BCD has been paid through the mode of MEIS scrips, in lieu of cash or other modes normally used. 18. Further urges that Para 3.02 of the FTP with respect to nature of rewards, provides as follows: Duty credit scrips shall be granted as rewards under MEIS and SEIS. The Duty Credit Scrips and goods imported/domestically procured against them shall be freely transferable. The Duty Credit Scrips can be used for: (i) Payment for Customs Duties for import of inputs or goods including capital goods; (ii) Payment of Excise Duties on domestic procurement of inputs or goods including capital goods, as per DOR notification; (iii) Payment of Service Tax on procurement of services as per DOR notification; (iv) Payment of Customs duty and fee as per Para 3.18 of FTP. 19. Thus, it is abundantly clear that the very intention of the MEIS is to provide the importer the means to discharge the duty liability on the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew petition before the Hon ble Bombay High Court against the aforementioned decision dt.27.09.2022, which is pending consideration. In the review petition, it has been pointed out that the Hon ble High Court has relied on the CBIC-TRU Circular dt.01.02.2022, whereas the said circular dealt with only the general implication of charging SWS in those cases where the BCD and/or ACD payable is nil. It does not deal with cases where the duty due has been paid out of the MEIS/SEIS scrips. 23. Further urges that as per Board Circular dt.10.01.2020, there appears to be no exemption from SWS in the FTP in the relevant Customs exemption notification. Keeping in view the ruling of the Hon ble Apex Court in Unicorn Industries (supra), it has been clarified that SWS is not exempted and has to be levied and collected on the imported goods. 24. Further urges that the Hon ble Madras High Court (Single Judge) has, in the case of Gemini Edibles and Fats India Pvt Ltd held that the petitioner is liable to pay the appropriate SWS on BCD in respect of the subject imported goods either in cash or any other mode and that necessary debit and recredit entries may be made on the scrips. 25. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payment of duty at the time of clearance of goods except capital goods and goods mentioned in negative list. 28. The Apex Court has thus acknowledged the fact that under the DEPB scheme, which is similar to MEIS, the debit to scrips reflects payment of duty. 29. Following the aforementioned observations of the Apex Court, the Hon ble Madras High Court in Tanfac Industries Ltd (supra) has held that it is clear that under DEEC scheme, the clearance is allowed duty free, whereas, under DEPB scheme, the exporters are issued DEPB scrips, which allows them specific amount to be utilized for payment of duty. Therefore, the importers who use DEPB scrips pay duty not by cash but by way of credit. Thus, it is evident that goods cleared under DEPB scheme cannot be treated as exempted goods but they can only be treated as duty-paid goods and therefore, attracts consequential interest. 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, unlike the goods under DEEC scheme. 30. Significantly, it is also seen that Notification No. 11/2018 as amended by Notification No. 41/2018, fully exempts a large ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same should be followed in the instant case. 37. Heard both the parties and perused the records. 38. 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 under Sec 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 under Sec 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved that the intention of the Government is to exempt the whole of BCD/ACD/SAD. It is, therefore, not possible to read any further restriction as to levy of EC in respect of duty free imports under DEPB scheme. Further, the Hon ble High Court has also taken notice that under similar facts and circumstances, the ruling of this Tribunal in Ruchi Health Foods Ltd (Chennai Bench) and Reliance Industries Ltd (Mumbai Bench) have become final as the Revenue has not challenged the same in further Appeal. Accordingly, the Hon ble High Court dismissed the Appeal of Revenue. 41. The Hon ble Gujarat High Court in the case of Gujarat Ambuja Exports (supra) has held that the condition of debit of the exempted duties to the scrips is merely procedural as the scrip has value and would not change the nature of benefit from one being of exemption, having been issued in exercise of powers conferred under Sec 25 of the Customs Act. It was also held that merely because the conditions are provided for adjustment of credit in the DEPB scrip, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the La Tim Metal Case (supra) in its order dated 15.11.2022 passed in WP No. 12183/2022 at para 6 thereof, while holding that when the BCD is nil , SWS, being computed at the rate of 10% of BCD, shall also be nil . Further, as already observed above, Circular No. 5/2005 dt.31.01.2005 which provided for levy and collection of Education Cess in case of goods imported under the notifications operationalizing the DEPB Scheme was held to be not in consonance with provisions of Section 94 of the Finance (No.2) Act, 2004. Therefore, the circular dated 10.1.2020 which takes the same view for SWS as was canvassed in Circular dt.31.01.2005 for Education Cess cannot be given primacy over the latter circular dt.01.02.2022. 45. We further find that reliance placed by Revenue on the ruling of the Hon ble Apex Court in Unicorn Industries (supra) is misplaced as the same was concerned with the interpretation of Exemption Notification No. 71/2003-CE granting area based exemption to units located in the North-East. Such units were entitled to refund of specified duties paid on value addition and the question before the Court was whether EC/SHEC/NCCD imposed vide Finance Act, which were ..... 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