Court allows payment of education cess with MEIS scrips, extends Circular benefits, quashes order.

The court held that education cess and secondary and higher education cess are part of customs duty and can be paid using MEIS scrips. The court ruled that Circular No. 02/2020-Customs should apply to past cases, directing the respondent to extend its benefits to the petitioner. The court found the reliance on Unicorn Industries judgment misplaced and quashed the impugned order, allowing the writ petition with no costs.

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Issues Involved:
1. Legality of using MEIS scrips for payment of education cess and secondary and higher education cess.
2. Applicability of Circular No. 02/2020-Customs dated 10.01.2020 to past cases.
3. Interpretation of the Supreme Court judgment in Unicorn Industries Vs. Union of India.

Detailed Analysis:

1. Legality of Using MEIS Scrips for Payment of Education Cess and Secondary and Higher Education Cess:
The petitioner, an importer/manufacturer, used MEIS scrips to pay customs duties, including education cess and secondary and higher education cess, totaling Rs. 22,88,86,212/-. The respondent issued a show cause notice, arguing that education cess and secondary and higher education cess could not be debited from MEIS scrips as per Notification No.24/2015-Cus dated 08.04.2015. The respondent contended that only basic customs duty could be debited from MEIS scrips, and education cess and secondary and higher education cess must be paid in cash. The petitioner argued that education cess and secondary and higher education cess are part of customs duty and should be payable through MEIS scrips.

2. Applicability of Circular No. 02/2020-Customs dated 10.01.2020 to Past Cases:
The petitioner cited Circular No. 02/2020-Customs, which stated that for past cases, debits of Social Welfare Surcharge (SWS) made through duty credit scrips should be accepted as revenue duly collected, and recoveries in cash should not be insisted upon. The petitioner argued that this circular should apply to their case, as the payments were made before the circular was issued. The respondent, however, rejected this argument, stating that the circular only applied to SWS and not to education cess and secondary and higher education cess.

3. Interpretation of the Supreme Court Judgment in Unicorn Industries Vs. Union of India:
The respondent relied on the Supreme Court judgment in Unicorn Industries, which held that exemptions must be specifically stated in notifications, and additional duties like education cess and secondary and higher education cess cannot be assumed to be exempted unless explicitly mentioned. The petitioner argued that this judgment was misinterpreted and misapplied, as the education cess and secondary and higher education cess should be considered part of the customs duty, and thus payable through MEIS scrips.

Judgment:
The court found that the education cess and secondary and higher education cess, as per the Finance Acts of 2004 and 2007, are to be treated as part of customs duty. Therefore, payments made using MEIS scrips for these cesses should be accepted. The court held that the respondent's reliance on the Unicorn Industries judgment was misplaced, as the judgment supported the petitioner's case. The court quashed the impugned order and directed the respondent to extend the benefit of Clause 11 of Circular No. 02/2020-Customs to the petitioner. The writ petition was allowed with no order as to costs.

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