No Social Welfare Surcharge when Basic Customs Duty is zero: CESTAT Kolkata

Emami Agrotech Limited Vs Commissioner of Customs (Port) (CESTAT Kolkata)

CESTAT Kolkata held that Social Welfare Surcharge would be nil in case where the aggregate of customs duties is zero. Thus, Social Welfare Surcharge not payable when Basic Customs Duty payable is zero.

Facts-

The Appellant is engaged in the business of refining and selling edible oils. The Appellant imports Crude Edible Oil from various countries and carries out refining thereof at its manufacturing facility located at Haldia (West Bengal). During the relevant period, the Appellant had filed 82 Bills of Entry (as per detail hereinabove) on the EDI Portal for the import of 82 consignments of crude palm oil by availing benefit of Exemption Notification Nos. 24/2015 – Cus. and 25/2025 – Cus. both dated 08.04.2015 issued under MEIS/SEIS Scheme, which are export promotion schemes. While BCD stood specifically exempted under these notifications the Appellant was constrained to pay Social Welfare Surcharge (SWS) in cash for causing clearance of these consignments. The Appellant was of the view that since BCD was not collected pursuant to the exemption (supra), no liability for SWS could have been determined with reference to the notional BCD. As the BCD was “Zero”.

Consequently, the Appellant challenged the assessments in each of these BOEs by filing the appeals before the Ld. Appellate Commissioner and seeking refund of SWS paid in cash on multi farious grounds. These appeals were rejected. Aggrieved against the said orders, the appellant is before us.

Conclusion-

Held that since in terms of Circular No. 3/2022 dated 01.02.2022, it has been clarified by the C.B.I.C. that SWS payable would be nil in case where aggregate of customs duties (which forms the basis of computation of SWS) is zero, even though SWS has not been exempted, SWS payable in this case is zero. Therefore, we hold that the appellant is not liable to pay SWS as the Basic Customs Duty payable by them is zero.

FULL TEXT OF THE CESTAT KOLKATA ORDER

In all these appeals, the issue is common; therefore, all the appeals are decided by way of a common order.

1.1. The details of the Bills-of-Entry involved in these appeals is furnished below: –

2. The facts of the case are that the Appellant is engaged in the business of refining and selling edible oils. The Appellant imports Crude Edible Oil from various countries and carries out refining thereof at its manufacturing facility located at Haldia (West Bengal). During the relevant period, the Appellant had filed 82 Bills of Entry (as per detail hereinabove) on the EDI Portal for the import of 82 consignments of crude palm oil by availing benefit of Exemption Notification Nos. 24/2015 – Cus. and 25/2025 – Cus. both dated 08.04.2015 issued under MEIS/SEIS Scheme, which are export promotion schemes. While BCD stood specifically exempted under these notifications the Appellant was constrained to pay Social Welfare Surcharge (SWS) in cash for causing clearance of these consignments. The Appellant was of the view that since BCD was not collected pursuant to the exemption (supra), no liability for SWS could have been determined with reference to the notional BCD. As the BCD was “Zero”.

2.1. Consequently, the Appellant challenged the assessments in each of these BOEs by filing the appeals before the Ld. Appellate Commissioner and seeking refund of SWS paid in cash on multi farious grounds. These appeals were rejected. Aggrieved against the said orders, the appellant is before us.

3. The contentions of the appellant are summarized below: –

A. The issue involved herein stands decided by multiple decisions of the division bench of the Hon’ble Bombay High Court and of the Hon’ble Tribunals, including the ones passed in Appellant’s own case.

(i) In terms of Section 110(3) of the Finance Act, 2018 SWS is required to be computed at the rate of 10% on the aggregate of duties levied and collected under Section 12 of the Customs Act, 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 Notifications 24 and 25, the SWS computed at the rate of 10% on “zero” shall also be “zero”. The CBIC in its later Circular No. 03/2022 – dated 02.2022 has also clarified the same :

(ii) The Appellant would like to state 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].

(iii) The issue of leviability of SWS in case of import of goods against MEIS/SEIS scrips had fallen for consideration before the Hon’ble Division Bench of the Bombay High Court in the Appellant’s own case in Writ Petition bearing No. 1447 of 2021. The Hon’ble Court after considering the Circular dated 02.2022, decided the issue in favour of the Appellant vide its order dated 27.09.2022. Pursuant to the said order, refund of SWS amount has also been sanctioned to the Appellant vide refund sanction order dated 13.04.2022. The Department preferred a Review Petition against the aforesaid judgement of the Division bench of the Hon’ble Bombay High Court which was also rejected on 21 June 2024 based on the finding that an identical issue has already been dealt with by the Hon’ble Bombay High Court in the case of La Tim Metal & Industries Limited Vs. The Union of India [2022 (11) TMI 1099].

(iv) The Hon’ble Bombay High Court in the case of La Tim Metal & Industries Limited (supra) held that when the BCD is “nil”, SWS, being computed at the rate of 10% of BCD, shall also be “nil”. The said judgement was passed after considering the earlier Circular No. 2/2020 – Cus. dated 10.01.2020 as also the contrary judgement of the Ld. Single Judge of the Hon’ble Madras High Court in the case of M/s. Gemini Edibles and Fats India Pvt. Ltd. as also the decision of the Hon’ble Supreme Court in the case of Unicorn Industries.

(v) Further, the said issue has also been settled by various decision of the Hon’ble Tribunals, in the favour of the Appellant including decisions in Appellant’s own case. Reliance in this regard is being placed on the following judgements of the Hon’ble Tribunal:

a. Emami Agrotech Limited Vs. Commissioner of Customs (Port), Kolkata [2023 (10) TMI 1223 (Tri. Kol.)].

b. Emami Agrotech Limited Vs. Commissioner of Customs, Vijayawada [2024 (3) TMI 86 (Tri. – Hyd.)].

c. Reliance Industries Limited Vs. Commissioner of Customs (Import) [2024 (2) TMI 1321 (Tri. – Bom.].

d. Dalmia Cement (Bharat) Limited Vs. Commissioner of Customs, Preventive [2024 (5) TMI 632 (Tri. – Hyd.)].

c. Ms. Tata Motors Limited Vs. Commissioner of Customs, Maharashtra [2023 (9) TMI 463 (Tri. – Bom.)].

B. The jurisprudence available in the context of quantification Education Cess (EC) and Secondary and Higher Education Cess (SHEC) (which are also in the nature of surcharges) in case of imports against other duty credit scrips (DEPB and Target Plus) fully supports the case of the Appellant.

(i) Education Cess (EC) and Secondary and Higher Education Cess (SHEC), introduced vide the Finance Act, 2004 and Finance Act, 2007 respectively, are also in the nature of surcharges, akin to SWS and are calculated at a certain percentage of the aggregate of duties of Customs levied and collected under Section 12 of the Customs Act, 1962. Apropos the said surcharges, the Board vide its Circular No. 345/2/2004 – TRU dated 08.2004 had clarified in response to Issue No. 2 that duties which are both “levied and collected” shall be taken into account for the purpose of calculation of the surcharges and as such when the duties/cesses are themselves not collected owing to an exemption or clearance under a specified procedure, there would be no leviability of education cess. It is being reiterated that similar Circular dated 01.02.2022 was also issued with reference to the SWS whereby it was stated that when the aggregate of duties of customs is zero, the SWS shall also be computed as nil.

(ii) Further, in context of goods imported against Notifications operationalizing DEPB and Target Plus Scheme, dealing with a similar question of quantification of EC and SHEC, a consistent view has been taken by various High Courts and the Hon’ble Apex court. Reliance in this regard is being placed on the following judgements:

1. Gujarat Ambuja Exports Vs. Government of India [2013 (289) E.L.T. 273 (Guj.)]

2. Commissioner of Customs Vs. Pasupati Acrylon Limited [2014 (1) TMI 169 (Guj.)] SLP dismissed by the Hon’ble Supreme Court in [2015 (9) TMI 666]

3. Commissioner of Customs (Export) Vs. Reliance Industries Limited [2015 (322) E.L.T. 121 (Bom.)]

4. Commissioner of Central Excise, Vishakhapatnam Vs. Kedia Overseas Limited [2014 (305) E.L.T. 268 (AP)] SLP dismissed by the Hon’ble Supreme Court in [2015 (326) E.L.T. A134]

5. Commissioner of Central Excise, Tuticorin Vs. DCW Limited [2014 (306) E.L.T. 398 (Mad.)]

6. Commissioner of Customs, Kandla Vs. Bhushan Steel & Strips Limited [2010 (259) E.L.T. 155].

(iii) It has been held in the said judgements 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 Section 25 of the Customs Act thereby waiving actual collection. It has also been held that the condition as regards availability of drawback or CENVAT Credit against the amount debited from the said scrips does not alter the factum of exemption. In any event, eligibility to drawback is contingent upon the inputs imported against the scrips only when used for manufacturing export goods. In so far as the CENVAT credit of additional duties is concerned, since the goods imported are not subject to additional duties but IGST (which is not exempted) this condition is not applicable in the instant case and cannot be used against the Appellant. All these aspects have also been gone into by the Hon’ble Tribunal in great details in the decisions referred above.

C. The decision of the Hon’ble Supreme Court in the case of Unicorn Industries has no application to the facts of the present case in as much as the Appellant is not seeking any exemption from SWS under Notifications 24 and 25 but no liability/quantification of SWS arises as the BCD is nil.

(i) The Appellant would like to state that the judgement of the Hon’ble Supreme Court in the case of Unicorn Industries Vs. Union of India has no application to the facts of the present case. In the said case 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 North-eastern states. Under the said notification, the assessee was entitled to refund of specified duties paid on value additions 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. It is a settled position in law as laid down by the Hon’ble Supreme Court in the case of IndusInd Media and Communications Limited Vs. Commissioner of Customs, New Delhi [(2019) 17 SCC 108] that the judgement is an authority for what it decides and not for what can be logically inferred therefrom. Also, it is a settled position in law that the decision of the Court is not Euclid’s theorem which can be read out of context. Reliance in this regard is being placed on the judgement of the Hon’ble Supreme Court in the case of Commissioner of Central Excise Bangalore Vs. Srikumar Agencies [2008 (232) E.L.T 577]. Since the question of leviability of EC and SHEC when the underlying duty is zero was not before the Hon’ble Supreme Court, the ratio thereof is not applicable to the instant case.

(ii) The Appellant in the instant appeals, is not seeking an exemption from the payment of SWS. Instead, the leviability of SWS is itself being challenged. In this regard, the Appellant would like to state that exemption presupposes a liability, and it can only operate when there is a valid levy/liability. Reliance in this regard is being placed on the judgement of the Hon’ble Supreme Court in the case of Associated Cement Companies Limited Vs. State of Bihar [(2004) 7 SCC 642] (Para 17) and in the case of Peekay Re-Rolling Mills Private Limited Vs. Assistant Commissioner [2009 (13) S.T.R. 305] (Para 39).

D. The judgement of the Hon’ble Madras High Court in the case of Gemini Edibles does not lay any binding precedence

(i) The Hon’ble Madras High Court’s decision rendered on 10 May 2024 does not lay down any binding precedence on account of the following reasons:

(ii) The Hon’ble High Court of Gujarat, Maharashtra and Andhra Pradesh have expressed a contrary view by holding that an exemption which is subject to the condition of debiting the scrips must be understood and treated as exempted goods as such adjustment is procedural in nature and an exercise meant for administrative convenience in the following cases:

i. Gujarat Ambuja Exports Vs. Government of India [2013 (289) ELT 273 (Guj.)].

ii. Commissioner of Customs Vs. Pusupati Acrylon Ltd. [2014 (1) TMI 169 (Guj.)] maintained in the Hon’ble Supreme Court in 2015 (9) TMI 666 (SC).

iii. CC Vs. Reliance Industries [2015 (322) ELT 121 (Bom.)]

iv. CCE Vs. Kedia Overseas [2014 (305) ELT 268 (AP)] maintained by the Hon’ble Supreme Court in 2015 (326) E.L.T. A134 (SC) including the dismissal of a review petition.

Although, the Hon’ble Madras High Court acknowledges these contrary decisions at para 7.41 to 7.43 yet expressed its inability to follow these decisions in view of a co-ordinate bench decision of the Hon’ble Madras High Court itself in the case of TANFAC Industries, which was duly considered by the Hon’ble Gujarat High Court at para 23 & 24 of Gujarat Ambuja case (supra).

(iii) The Hon’ble Madras High Court does not take into consideration the decision of the Division Bench of the Hon’ble Bombay High Court in the case of La Tim Metal & Industries Ltd. Vs. The Union of India & Ors. [2022 (11) TMI 1099] as also the Circular No. 3/2022-Cus dated 1 February 2022 whereas the Hon’ble Bombay High Court in La Tim case (supra) had considered the decision of the Hon’ble Madras High Court in Gemini Case (supra) at para 4 thereof.

(iv) The dismissal of the review petition filed by the department in the Appellant’s own case before the Hon’ble Bombay High Court is later in time (21 June 2024) whereas the Hon’ble Madras High Court decision was rendered on 10 May 2024.

(v) The findings of the Hon’ble High Court that the notification operationalizing the MEIS Scheme issued under Section 25 of the Customs Act, is not an exemption notification by applying the doctrine of pith and substance effectively results in giving a go by to the well settled legal principle that an exemption notification deserves a strict interpretation when the language is plain and unambiguous and there is no room for intendment or equity in tax matters as held by the Hon’ble Supreme Court in the following cases:

i. Commissioner of Customs (Import), Mumbai Vs. Dilip Kumar and Company [(2018) 9 SCC 1].

ii. Commissioner of Central Excise, Surat – I Vs. Favourite Industries [2012 (278) E.L.T. 145 (SC)]

(vi) The Hon’ble Madras High Court also failed to consider the judgement of the Hon’ble Supreme Court in the case of Somaiya Organics Vs. State of Uttar Pradesh [2001 (130) E.L.T. 3] whereby it was held that “collection” in the context of tax laws would mean “physical realization of tax”.

E. The findings and observations of the Ld. Appellate Commissioner are unsustainable and inconsistent

(i) The Appellant would like to state that impugned orders fail to consider the Circular of the Board dated 01.02.2022 as also the jurisprudence available in the context of SWS and as such suffers from perversity.

4. On the other hand, the Ld. Authorized Representative appearing for the Revenue supported the impugned orders.

5. Heard the parties and considered their submissions.

6. After hearing the parties, the following issue is framed:

Whether the Appellant is liable to pay social welfare surcharge in a case where Basic Customs Duty is exempt in terms of Notification No. 24/2015 and 25/2015-Cusboth dated 08.04.2015 issued under MEIS and SEIS schemes, or not.

7. The Revenue is of the view that as the imported goods are liable to Basic Customs Duty but are exempted by a specific Notification under a scheme and there is no exemption given to social welfare surcharge, in these circumstances, the appellant is liable to pay such social welfare surcharge.

8. The Hon’ble Apex Court in the case of Somaiya Organics (supra) has held that since no BCD is collected in view of the exemption granted under Notification No. 24/2015 and 25/2015 dated 08.04.2015, the SWS computed at the rate of 10% on zero, shall be zero.

9. The said issue has been clarified by the C.B.I.C. vide Circular No. 3/2022 dated 01.02.2022 wherein it has been clarified that SWS payable would be nil in case where aggregate of customs duties (which forms the basis of computation of SWS) is zero, even though SWS has not been exemption. The said clarification given by the C.B.I.C. itself supports the case of the appellant.

9. Further, we find that the issue on hand has already been examined in various decisions in the appellant’s own cases as well as in the case of Reliance Industries Ltd. [2024 (2) TMI 1321 – CESTAT, Mumbai].

10. During the course of arguments, the Ld. Consultant appearing on behalf of the appellants has fairly submitted that a contrary decision has been passed by the Hon’ble Madras High Court in the case of Gemini Edibles and Fats India Pvt. Ltd. 2024 (6) TMI 142 – Madras High Court dated 10.05.2024.

10.1. However, it is his contention that there is a contrary decision to the same in their own case by the Hon’ble Bombay High Court as reported in 2022 (9) TMI 1588 – Bombay High Court; Further the review petition filed by the revenue was also dismissed on 21.06.2024.

10.2. As there are two different contrary decisions of two different High Courts, in these circumstances, we relied on the decision of this Tribunal in the case of Maheshwari Solvent Extraction Ltd. vs. Commr. Of C. EX., Nagpur 2014 (299) E.L.T. 116 (Tri.-Mum.) wherein this Tribunal observed as under: –

“18. It is a well-settled law that in case of conflicting judgments of the co-equal benches/co-ordinate benches, the Judgment which stales the law accurately has to be followed and mere incidence of time whether the judgments of co-equal benches are earlier or later is hardly relevant. Same view was taken by the Hon’ble Delhi High Court in the case of Smt Gopa Manish Vora v. Union of India and Anr. reported in WP (Crl) 2444/2006 Thus, the merits of each judgment of the co-ordinate benches of Hon’ble Tribunal need to be examined before following any of the judgments. In view of the wordings of the Notification, read with the law laid down in Raipur Manufacturing Co. Ltd. (supra), it is clear that the view in A.G. Flats (supra), to the effect that “waste”, under the Notification, has to refer to goods of no value or of little value, cannot be preferred, as goods of no value would not command any duty at all in the first place. Besides, this would amount to adding words to the Notification where they do not exist.

19. Further, in the case of Babu Parasu Kaikadi v Babu, (2004) 1 SCC 681, the Hon’ble Apex Court observed as under:

“17. in Govt of APB Satyanarayana Rao it has been held as follows (SCC p. 264, para 8)

“The rule of per incuriam can be applied where a Court omits to consider a binding precedent of the same Court or the superior Court rendered on the same issue or where a Court omits to consider any statute while deciding that issue

18. Furthermore, this Court, while rendering judgment in Dhondiram Tatoba Kadam was bound by its earlier decision of a coordinate Bench in Ramchandra Keshav Adke We are bound to follow the earlier judgment which is precisely on the point in preference to the later judgment which has been rendered without adequate argument at the Bar and also without reference to the mandatory provisions of the Act.”

20. It is well settled law that one additional or different fact may make a world of difference between conclusions in two cases. Therefore, in the case of A.G. Flats (supra) this Tribunal observed that the spent earth arising in course of refining of oil, being of no value, is not a new product or a by-product. Therefore, we are not considering the decision of A.G. Flats (supra) as the same is not spirit of the exemption notification on the basis of which exemption was denied. We. Therefore, found that the arguments advanced in the instant case with support of authoritative pronouncements of Apex Court, statutory provisions and the material adduced herein were not available for consideration or not argued before earlier Benches.”

11. We observe that in the appellant’s own case, the Hon’ble Bombay High Court has passed the following order:

1 Prayer clause(a) reads as under:-

“(a) That this Hon ble court may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India directing the respondents to grant the exemption of the Social Welfare Surcharge amount in terms of the Exemption Notification No. 24/2015-CUS dated 8-4-2015 & 25/2015 dated 8-4-2015“

In addition, in prayer clause (e) petitioner is also seeking refund of the Social Welfare Surcharge wrongly debited from the Merchandise Export from india Scheme (MEIS) / Service Exports from India Scheme (SEIS) scrips held by petitioner from July 2018 onwards alongwith applicable interest.

2. An identical issue was considered by this court where the court by order dated 10th August 2022 in Writ Petition No. 8677 of 2019 disposed the petition. The order dated 10th August 2022 reads as under.

“1 Mr Prakash Shah tenders Circular No. 3/2022-Customs issued on 01st February 2022 by the Department of Revenue (Tax Research Unit), Ministry of Finance, Government of India. The same is taken on record and marked “X” for identification, and for ease of reference, the same is scanned and reproduced herein below:-

2. In view of the circular, the grievance of the Petitioner, Respondents debiting notional social welfare surcharge in the duty credit scrip issued under the Merchandise Export from india Scheme (MEIS) is resolved.

3. In view of the circular certainly Petitioner will be entitled to re-credit and/or refund of notional social welfare surcharge in the duty credit scrip issued under MEIS in the goods imported by Petitioner

4. Respondents to do needful within 8 weeks of receiving copy of this order.

5. Petition accordingly stands disposed.

6. In view of the circular, we would add that those parties, who have not filed petition in this court, will also be able to take benefit of this order.”

3. Mr. Mishra and Mr. Sridharan submit that order in Writ Petition No. 8677 of 2019 will squarely applied to this petition as well.

4. In the circumstances, respondents are directed not to auto debit from petitioner’s MEIS and SEIS scrips any amount towards Social Welfare Surcharge,

5. Moreover, any amount deducted shall be refunded to petitioner within 8 weeks of receiving an application from petitioner for refund. Mr. Sridharan states that necessary application for refund to justify the quantum of refund will also be filed. Refund shall be issued together with interest thereon in accordance with law.

6. Petition disposed.

12. We also take note of the fact that in the appellant’s own case, the co-ordinate Bench of the Tribunal sitting in Calcutta reported in 2023 (10) TMI 1223 – CESTAT, Kolkata has again held as under: –

“6. We find that a pure question of law arises for our consideration in these appeals not involving any factual controversy The issue involved in these appeals relates to the levy and collection of SWS under Section 110(3) of the Finance Act, 2018 set out hereunder to the extent relevant for the instant appeals

(3) The Social Welfare Surcharge levied under sub-section (1), shall be calculated at the rate of ton percent on the aggregate of duties, taxes and cesses which are levied and collected by the Central Govemment in the Ministry of Finance (Department of Revenue) under Section 12 of the Customs Act, 1962 and any sum chargeable on the goods specified in sub-section (1) under any other law for the time being in force as an addition to and in the same manner as a duty of customs, but not including (a)….

(b)…

(c)….

(d)…

Therefore, SWS is required to be quantified @ 10% with reference to specified duties of customs, which are not only levied but also collected by the Ministry of Finance. In the facts of the present case, it is not in dispute that the Appellant had imported goods by availing the benefit of Notification No. 24/2015 and Notification No. 25/2015 (‘the said notifications’) and fulfilled the conditions thereunder. It is the case of the Appellant that under the said notifications issued in exercise of the powers to grant exemption under Section 25 of the Customs Act, 1962, BCD stands exempted albeit subject to the condition inter alia of a debit to the MEIS/SEIS scrip (as the case may be) of the BCD leviable on the goods but for the exemption. Since there is no actual collection of BCD in view of the exemption, the Appellant argues that no SWS can be levied and collected with reference to notional BCD under Section 110(3) of the Finance Act, 2018 extracted (supra). The contention of the revenue, on the other hand, is that debit of BCD to the scrip under the said notifications is an alternate mode of payment and not an exemption perse so as to justify the computation of SWS. However, we find that BCD amount is conspicuously reflected as “zero” in the BOEs filed availing the said notifications, which is not in consonance with the contention of the revenue that BCD is collected in case of goods imported under the said notifications The Hon’ble Supreme Court in the Somaiya Organics Case (supra) has held in no un-certain terms that the expression “collection” in the context of tax laws would mean “physical realization of tax” where as in the instant case, the Appellate Commissioner has himself accepted at para 28 of the impugned orders that no money representing BCD goes to the exchequer under the said notifications meaning thereby that the test of “physical realization of lax is clearly not met and the debit of BCD to the scrip is at best a notional collection of tax when the said notifications are read in entirety. Moreover, a similar condition of debit to the duty credit scrips as prevalent in the notifications operationalizing the DEPB scheme and the Target Plus Scheme had fallen for consideration of various High Courts and Tribunal in the following cases in the context of levy and collection of EC imposed by the Finance (No. 2) Act, 2004:

(i) Gujarat Ambuja Exports Vs. Government of India [2013 (289) E.L.T. 273 (Guj.)]

(ii) Commissioner of Central Excise, Vishakhapatnam Vs. Kedia Overseas Limited [2014 (305) E.L.T. 268 (AP)] Maintained SC [2015 (326) E.L.T. A134]

(iii) Commissioner of Central Excise, Tuticorin Vs. DCW Limited [2014 (306) E.L.T. 398 (Mad.)]

(iv) Commissioner of Customs (Export) Vs. Reliance Industries Limited [2015 (322) E.LT. 121 (Bom.)]

(v) Commissioner of Customs, Kandla Vs. Bhushan Steel & Strips Limited [2010 (259) E.LT. 155].

The Hon’ble Gujarat High Court in the Gujarat Ambuja Case (supra) 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 Section 25 of the Customs Act. Relevant para of the said decision is extracted below:

19 …………………. 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 collection customs duty from the importers in the 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 content of the export product and the basic customs duty payable on such deemed imports. Thus through such adjustment on the DEPB Scrips at the time of further imports, customs duty component is sought to be neutralized The view expressed by the Tribunal in the case of “Reliance Industries Ltd (supra) appeals to us. In the said decision Tribunal taking note of the provisions contained in Section 81 and Section 84 of the Finance Act 2004 held that the impugned Circular No. 5/2005 is legally not 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”

The above view of the Gujarat High Court was followed in S.No (iii) to (v) above. The Hon’ble Madras High Court in S No (ii) above was concerned with the subsequent notification no 96/2004 – Cus dated 17.09 2004 operationalizing the DEPB Scheme and the Tribunal in S.No (v) was concerned with the notification no 32/2005-Cus operationalizing the Target Plus Scheme The conditions of debit of BCD to the scrip and the availment of drawback with respect to the subsequent exports out of the imported inpuls were also prevalent in notification no 96/2004-Cus dt 17.09.2004 and notification no 32/2005-Cus The DEPB Scheme is similar to the MEIS/SEIS Scheme and that the levy of SWS has replaced EC but learned Appellate Commissioner has himself accepted at para 16 & 17 of the impugned Orders that the DEPB Scheme is similar to the MEIS/SEIS Scheme and that the levy of SWS has replaced EC but erroneously relies upon Circular No. 5/2006-Cus dt. 31.01.2005, which has been held invalid and contrary Section 81 and Section 84 of the Finance Act. 2004 and quashed by the High Court in the Gujarat Ambuja Exports Case (supra) At this stage, it would also be pertinent to refer to the provisions of Section 94 of the Finance (No. 2) Act, 2004, which reads as under:

(1) The Education Cess levied under Section 91, in the case of goods specified in the First Schedule to the Customs Tariff Act 1975 being goods imported into India, shall be a duty of customs (in this section referred to as the Education Cess on imported goods) at the rate of two percent calculated on the aggregate of duties of customs which are levied and collected by the Central Government in the Ministry of Finance (Department of Revenue) under Section 12 of the Customs Act, 1962 and any sum chargeable on such goods under any other law for the time being in force, as an addition to and in the same manner as a duty of customs but not including,

(a) …….

(b) ……

7. Since both EC and SWS are in the nature of surcharge and the provisions pertaining to their quantification as contained in Section 94(1) of the Finance (No. 2) Act, 2004 and Section 110(3) of the Finance Act. 2018 as extracted above are pari materia, the jurisprudence as regards non applicability/non levy of Education Cess in respect of goods imported against the DEPB and/or Target Plus Scheme should equally apply in the context of SWS in respect of goods imported against the MEIS/SEIS Schemes.

8. Even otherwise, the self same issue of non leviability of SWS in case of goods imported under the said notifications with which we are concerned in these proceedings had fallen for consideration before the Hon’ble Division Bench of the Bombay High Court in the Appellant’s own case in Writ Petition bearing No. 1447 of 2021. The Hon’ble Court after considering the Circular dated 01.02.2022, decided the issue in favour of the Appellant vide its order dated 27.09.2022. No stay has been brought to our notice against the said order of the Hon’ble Bombay High Court. On the contrary, pursuant to the said order, refund of SWS amount has also been sanctioned to the Appellant vide refund sanction order dated 13.04.2022. The grievance of the revenue before us is that an earlier Circular dated 10.01.2020, which was specific to the issue at hand and which has not been rescinded was not considered. We find that both the Circulars deal with levy and collection of SWS, while the earlier one is oppressive and provides for payment of SWS in case of imports against the MEIS/SEIS Scrip the later Circular contemplates that the amount of SWS payable would be “NIL” where the BCD which forms the basis for computation of SWS is “Zero” even though SWS has not been exempted. The later Circular does not contemplate that its operation is limited to situations not covered by the earlier circular. It is settled by the Hon’ble Supreme Court in the case of Suchitra Components Ltd reported in 2007 (208) ELT 321 that a beneficial circular is to be applied retrospectively. Moreover, both the Circulars were considered by the Hon’ble Bombay High Court 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 later circular dt. 01.02.2022

9. We also find that the Hon’ble Supreme Court in the Unicorn Case (supra) was concerned with the interpretation of an exemption notification no 71/2003-CE dl. 9.9.2003 granting area based exemption to units located in the north east Under Notification No. 71/2003-CE. units in the north east were entitled to refund of specified duties paid on value addition and the question before the Hon ble Court was whether EC SHEC NCCD imposed by the Finance Act 2001 2004 and 2007 which were not specifically exempted under Notification No. 71/2003 shall also come within the scope of the sate exemption for the purposes of refund. Para 2 and 22 of the said decision are set out hereunder for ease of reference:

2. The question involved in the appeals is with respect to the levy of education cess, higher education cess and National Calamity Contingency Duty on it The appeals arise out of common Judgement The High Court has held that duties in question are not part of the exemption notification. The writ petitions have been dismissed Hence, the appeals have been preferred

22. The main question arising for consideration is when 100 percent exemption had been granted for excise duty for a period of 10 years whether the exemption notification issued for the stalo of Sikkim on 9-9-2003 shall be confined to the basic excise duty under the Act of 1944. additional duty under the Act of 1957 and additional duty under the Act of 1978. which wore specifically mentioned in the notification issued on 9-9-2003 or it also includes cess/duty Imposed by Finance Acts of 2001. 2004 and 2007

10. The Hon’ble Supreme Court denied refund of the un-specified duties under Notification No. 71/2003- CE as would be evident from para 40 of the said order as the exemption was categorical in its scope Further, since refund of specified duties under Notification No. 71/2003-CE was only possible post collection, the question of non leviability of Education Cess under Section 94 of the Finance (No. 2) Act 2004 for want of collection of the underlying duty was not germane to the issue before the Hon’ble Supreme Court and was therefore not gone into. A judgement is an authority for what it decides and not what can be inferred from it as held by the Hon’ble Supreme Court itself in Indusind Media Case (supra). The Hon’ble Supreme Court in the Srikumar Agencies Case (supra) has also held that the decisions of the Court are not Euclid’s theorem and cannot be read out of context as one fact or circumstantial flexibility can make a whole lot of difference to the outcome of the case. Therefore, reliance placed by the revenue on the decision of the Hon’ble Supreme Court in the Unicorn Case (supra) is clearly distinguishable on facts and we are in complete agreement with the Appellant that the ratio thereof cannot be applied to the instant case:

11. The decision of the Hon’ble Bombay High Court in the La Tim Metal Case is not only later in time but also takes into consideration the earlier contrary decision of the learned Single judge of the Madras High Court in the Gemini Case (supra) as also the decision of the Hon’ble Supreme Court in the Unicorn Case (supra). Therefore, in terms of the “later the better” principle [Refer CESTAT Larger Bench decision in Rainbow Silks Vs. CC 2015 (325) E.L.T. 599) as also in light of the fact that the Bombay High Court decision is by a division bench the same has to be given primacy over the decision of the Hon’ble Madras High Court in the Gemini Case (supra) following judicial discipline. Therefore, in terms of the aforesaid, the issue at hand is no more res integra and stands decided in favour of the Appellant by the Hon’ble Bombay High Court.

12. Accordingly, the assessments in each of the impugned BOE’s covered by the impugned orders are modified in so far as imposition of SWS is concerned and the appeals are allowed with consequential relief.

The review petition filed by revenue is also dismissed by the Hon’ble High Court of Mumbai on 21.06.2024.

13. We are also of the considered opinion that since in terms of Circular No. 3/2022 dated 01.02.2022, it has been clarified by the C.B.I.C. that SWS payable would be nil in case where aggregate of customs duties (which forms the basis of computation of SWS) is zero, even though SWS has not been exempted, SWS payable in this case is zero. Therefore, we hold that the appellant is not liable to pay SWS as the Basic Customs Duty payable by them is zero.

14. Accordingly, we do not find any merit in the impugned orders. The same are set aside.

15. In the result, the appeals are allowed with consequential relief, if any.

(Order Pronounced in Open court on 05.09.2024)