Social Welfare Surcharge not applicable when Basic Customs Duty exempted under MEIS/SEIS schemes notifications

CESTAT Hyderabad held that Social Welfare Surcharge (SWS) is not leviable when Basic Customs Duty (BCD) is exempted under Notifications 24/2015 and 25/2015 for goods imported under MEIS/SEIS schemes. The tribunal ruled that SWS calculation under Section 110(3) of Finance Act 2018 requires actual collection of duties, not notional amounts. Since BCD was fully exempted and no physical realization occurred (only scrip debit), the aggregate of collected duties was nil, making SWS nil. Appeals allowed; refund ordered with interest.

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Issues Involved:
1. Whether Social Welfare Surcharge (SWS) is leviable when Basic Customs Duty (BCD) is exempted under Notification No. 24/2015-Cus & 25/2015-Cus.
2. The applicability of various judicial precedents and circulars in determining the leviability of SWS.
3. The interpretation of the terms "levied and collected" in the context of SWS.

Summary:

Issue 1: Leviability of SWS when BCD is exempted

The Appellant, engaged in the import of crude edible oil, availed the exemption from BCD under Notification No. 24/2015-Cus & 25/2015-Cus. However, they were required to pay SWS in cash for clearance of consignments. The Appellant argued that since BCD was not collected, no further liability for SWS could be determined with reference to the notional BCD. The Tribunal held that SWS should be nil as BCD was exempted, referencing Section 110(3) of the Finance Act, 2018, which states SWS is calculated at 10% on the aggregate of duties "levied and collected." Since BCD was nil, SWS should also be zero.

Issue 2: Judicial Precedents and Circulars

The Appellant cited several judgments, including the Bombay High Court in their own case, and the La Tim Metal & Industries Limited case, which supported their stance that SWS should be nil if BCD is exempted. The Tribunal also considered CBIC Circular No. 03/2022 dated 01.02.2022, which clarified that SWS payable would be nil when the aggregate of customs duties is zero. The Tribunal found that the beneficial circular should be applied retrospectively, as per the Supreme Court's ruling in Suchitra Components Vs. Commissioner of Central Excise, Guntur.

Issue 3: Interpretation of "Levied and Collected"

The Tribunal emphasized the Supreme Court's interpretation in Somaiya Organics Limited Vs State of Uttar Pradesh, where "collection" in tax laws means "physical realization of tax." Since BCD was not physically collected due to the exemption, SWS should also be nil. The Tribunal rejected the Revenue's argument that the debit of BCD to the scrips is an alternative method of payment, stating that it does not constitute actual collection of tax.

Conclusion:

The Tribunal concluded that the goods imported under the said notifications were exempted from BCD, and consequently, SWS was not leviable. The Appeals were allowed, and the Impugned Orders were set aside. The Appellant was entitled to a refund of the SWS paid with interest.

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