BCD Nil on Imports Means Social Welfare Surcharge (10% of BCD) Is Nil; Notional SWS Assessment Set Aside, Refunds Recredited

The HC held that where BCD on imported goods is nil, the Social Welfare Surcharge (SWS), payable at 10% of BCD, is also nil; notional assessment of SWS when BCD is nil is incorrect. The respondents were directed to re-credit the refund of the notional SWS into the duty-credit scrips used for the import within eight weeks from receipt of the order. Petition disposed.

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Issues:
Challenge to the collection of notional Social Welfare Surcharge on goods cleared without payment of Basic Customs Duty and Additional Duty Customs under Notification No.24/2015-Customs. Interpretation of Circular No. 3/2022-Customs dated 1st February, 2022 regarding the computation of Social Welfare Surcharge (SWS) when the Basic Customs Duty (BCD) is nil.

Analysis:
The petitioner, a trader of colour coated coils and profile sheets, filed multiple Bills of Entry claiming exemption under Notification No. 24/2015-Customs where BCD and ACD were assessed at nil but SWS was collected notionally. The recent Bill of Entry was assessed similarly, with SWS calculated at 10% of BCD. The petitioner argued that Circular No. 3/2022 clarified that SWS on goods with nil BCD should also be nil, citing a previous judgment in their favor.

The respondents argued that SWS was payable based on the Madras High Court's decision in a similar case and the Supreme Court's ruling in Unicorn Industries. However, the petitioner contended that SWS being directly linked to BCD should be nil when BCD is nil. The Circular dated 1st February, 2022, supported this argument by stating that SWS should be computed as nil when the aggregate customs duty payable is zero.

The Court held that if SWS is payable at 10% of BCD, but BCD is nil, then SWS should also be nil. The respondents were directed to refund the notional SWS collected within 8 weeks. The judgment disposed of the petition in favor of the petitioner, emphasizing the correct interpretation of SWS computation when BCD is exempted or assessed at nil.

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