Emami Agrotech Ltd Vs Commr. of Customs (Port) (CESTAT Kolkata)
CESTAT Kolkata held that when the Basic Customs Duty (BCD) is “Nil”, Social Welfare Surcharge (SWS), being computed at the rate of 10% of BCD, will also be “Nil”.
Facts- 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 carries out refining thereof at its manufacturing facility located at Haldia (West Bengal). During the period April 2020 to September 2020, the Appellant filed 160 Bills of Entry for the import of 160 consignments of crude palm oil by availing the benefit of Exemption Notification Nos. 24/2015 – Cus. and 25/2015 – Cus. both dated 08.04.2015 issued under MEIS/SEIS Scheme, which was an export promotion schemes. While Basic Customs Duty stood specifically exempted under these notifications, the Appellant was constraint to pay the Social Welfare Surcharge computed @10% on the notional BCD 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. Consequently, the Appellant challenged the assessment of SWS in each of these BOEs by filing as many appeals before the Appellate Commissioner. All these appeals were rejected by the Appellate Commissioner vide the impugned orders, which are the subject matter of challenge in these proceedings.
Conclusion- The CBIC in its later Circular No. 03/2022- dated 01.02.2022 has also clarified the said position 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.
Hon’ble Bombay High Court in the case of La Tim Metal has held that when the BCD is “nil”, SWS, being computed at the rate of 10% of BCD, shall also be “nil”.
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 as also the decision of the Hon’ble Supreme Court in the Unicorn Case. Therefore, in terms of the aforesaid, the issue at hand is no more resintegra and stands decided in favour of the Appellant by the Hon’ble Bombay High Court.
FULL TEXT OF THE CESTAT KOLKATA ORDER
This batch of 160 appeals comprised in Customs Appeal Nos. C/75045/2021-C/75069/2021, C/75070/2021-C/75090/2021, C/75097/2021-C/75116/2021¸C/75263/2021-C/75282/2021,C/75560/2021-C/75589/2021,C/76086/2021-C/76102/2021, C/76103/ 2021-C/76129/2021, have been filed against 7 Orders-in-Appeal passed by the Commissioner of Customs (Appeal), Kolkata bearing Nos. 743-767/2020 dated 04.11.2020, 768-788/2020 dated 04.11.2020, 820- 839/2020 dated 05.11.2020, 878-897/2020 dated 09.12.2020, 162- 191/2021 dated 22.02.2021, 354-370/2021 & 371-397/2021 both dated 13.04.2021 (hereinafter referred to as the “impugned orders”) respectively. Since the issue involved is common and the impugned orders read identical, all these appeals are decided by a common order.
2. Briefly stated, the facts of the case are that 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 carries out refining thereof at its manufacturing facility located at Haldia (West Bengal). During the period April 2020 to September 2020, the Appellant had filed 160 Bills of Entry (hereinafter “impugned BOEs) on the EDI Portal for the import of 160 consignments of crude palm oil by availing benefit of Exemption Notification Nos. 24/2015 – Cus., dated: 08/04/2015 and Notification No. 25/2015–Customs both dated 08.04.2015 issued under MEIS/SEIS Scheme, which are export promotion schemes. While Basic Customs Duty (“BCD”) stood specifically exempted under these notifications, the Appellant was constrained to pay the Social Welfare Surcharge (SWS) computed @10% on the notional BCD 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. Consequently, the Appellant challenged the assessment of SWS in each of these BOEs by filing as many appeals before the Ld. Appellate Commissioner. All these appeals were rejected by the Ld. Appellate Commissioner vide the impugned orders, which are the subject matter of challenge in these proceedings.
3. The learned Consultant appearing for the Appellant has assailed the impugned Orders on the following grounds:
(a) 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 Notification Nos. 24/2015 – Cus., dated: 08/04/2015 and Notification No. 25/2015–Customs 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 as is involved in the present proceedings stands decided by the Hon‟ble Division Bench of the Bombay High Court in the Appellant’s own case vide order dated 27.09.2022 passed in Writ Petition bearing No. 1447 of 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 said legal position has been reiterated by the Bombay High Court in the case of La Tim Metal & Industries Limited Vs. The Union of India reported in 2022 (11) TMI 1099.
(c) Education Cess (EC) and Secondary and Higher Education Cess (SHEC), introduced vide the Finance (No. 2) 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 10.08.2004 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 EC. Further, in the context of goods imported against exemption Notifications operationalizing DEPB and Target Plus Scheme, dealing with a similar question of leviability of EC and SHEC, a consistent view has been taken by various High Courts and Tribunal that there would be no liability for EC and/or SHEC despite the Circular No. 5/2005 – Cus dt. 31.01.2005. Reliance in this regard is placed upon the following decisions:
1. Gujarat Ambuja Exports Vs. Government of India [2013 (289) E.L.T. 273 (Guj.)]
2. Commissioner of Central Excise, Vishakhapatnam Vs. Kedia Overseas Limited [2014 (305) E.L.T. 268 (AP)] Maintained SC [2015 (326) E.L.T. A134]
3. Commissioner of Central Excise, Tuticorin Vs. DCW Limited [2014 (306) E.L.T. 398 (Mad.)]
4. Commissioner of Customs (Export) Vs. Reliance Industries Limited [2015 (322) E.L.T. 121 (Bom.)]
5. Commissioner of Customs, Kandla Vs. Bhushan Steel & Strips Limited [2010 (259) E.L.T. 155].
(d) The decision of the Hon’ble Supreme Court in the case of Unicorn Industries, reported in 2019 (370) ELT 3 (S.C.) 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 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 Nos. 24/2015 – Cus., dated: 08/04/2015 and Notification No. 25/2015–Customs 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 also in light of the judgement of the Hon‟ble Supreme Court in the case of CCE Vs. Srikumar Agencies [2008 (232) E.L.T 577].
(e) The findings and observations of the Ld. Appellate Commissioner are unsustainable and inconsistent and the counter contentions of the Appellant against each of the findings/observations made by the Ld. Appellate Commissioner has been tabulated hereunder:
