TaxTMI 
TaxTMI 
2013 (6) TMI 536
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....products to various foreign countries. For the purpose of manufacturing its goods, the petitioner-company imports raw materials, such as, Crude Palm Oil, Vanaspati Ghee and Fatty Acid. 2.2 Under the Export-Import Policy framed by the Central Government, various schemes have been framed allowing import of goods used for manufacture of export product without payment of duty. Duty Entitlement Pass Book ("DEPB" for short) is one such scheme under which the importers, subject to certain conditions, are allowed to import goods without payment of customs duty, but against adjustments of credits lying in their account or which may have been purchased by them from other units engaged in export business. 2.3 Under Section 3(5) of the Customs Tariff Act, the Central Government has the authority to levy additional duty at a rate not exceeding 4% of the value of the imported articles as may be specified in the notification on being satisfied that it is necessary to levy such duty on any imported article as would counter-balance the sales tax, value added tax, local tax or any other charges for the time being leviable on a like article on its sale, purchase or transportation in India. Sect....
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....eral notifications issued by the Central Government from time to time granting such exemption. We may, however refer to the last such notification in point of time. By exemption Notification No. 45/2002, dated 24-4-2002, as amended from time to time, the Central Government in exercise of powers conferred under sub-section (1) of Section 25 of the Customs Act, 1962, granted exemption from so much of additional duty leviable on the goods of description specified in column 2 of the Table annexed with such notification, from so much of the duty leviable thereon as was in excess of the amount calculated at the rate specified in the corresponding entry in column 4 of the said Table. The notification also granted similar exemption from payment of additional duty leviable under Section 3 of the Customs Tariff Act. The Table referred to in the said notification reads as under : S. No. Description of goods Standard rate Additional duty rate 1 2 3 4 1. Goods other than edible oils Nil Nil 2. Edible oils 50% of applied rate of duty 50% of applied rate of additional duty 5. The exemption was, however, made available subject to certain condition....
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....: Provided further that the Commissioner of Customs may, by special order and subject to such conditions as may be specified by him, permit imports and exports from any other sea port, airport, inland container depot or through a land customs station : Provided also that in respect of Duty Entitlement Pass Book issued against supplied to a unit in Special Economic Zone (SEZ), this condition shall apply for the purpose of permitting import of goods. [v] where the importer does not claim exemption from the additional duty of customs leviable under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), he shall be deemed not to have availed the exemption from the duty specified in the First Schedule to the said Customs Tariff Act for the purpose of calculation of the said additional duty of customs. [vi] where benefit of exemption from duty is claimed by a person, who is not a Duty Entitlement Pass Book holder, such benefit shall be permissible only against specific amount of credit transferred by a Duty Entitlement Pass Book holder to such person." 6. Counsel for the petitioners submitted that by virtue of the exemption Notification No. 20/2006, the goods imported by ....
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....21-6-2012 and pointed out that this Court had examined at length the nature of the DEPB scheme and the legality of the respondents' action of collecting Education Cess on imports being made under such scheme. 7. On the other hand, learned counsel Ms. Amee Yajnik for the respondents opposed the petition. She relied on the affidavit in-reply filed by the respondents. She contended that in case of imports made under the DEPB scheme, there is no total exemption from payment of customs duty. Such scheme is, thus, vitally different from other duty exemption schemes. Under the DEPB scheme, the importer pays customs duty in the form of adjustments of DEPB credits. Instead of paying the duty in cash, he surrenders DEPB credits lying in the DEPB scrip. 8. Having, thus, heard the learned counsel for the parties, we find that under exemption Notification No. 20/2006, the Government of India has granted exemption from payment of SAD on import of "all goods which are exempt from the whole of the duty of customs leviable thereon or in case of which "Free" or "Nil" rates of duty of customs are specified" ... ... ... "and which are also exempt from the whole of additional duty of customs levi....
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....lusion that the exemption notification operates in such a manner that on the imports made by an importer under DEPB scheme, there was either total or partial exemption from payment of customs duty. In the process, we had quashed the circular of the Government dated 31-1-2005. We notice this because in the impugned circular dated 5-6-2006, to clarify that the petitioners cannot claim exemption from payment of SAD, it is the earlier circular dated 31-1-2005 which has been referred to and relied upon. Essentially, assertions of the Revenue in both circulars, that is, earlier circular dated 31-1-2005 and the impugned circular dated 5-6-2006 are common. Our decision dated 21-6-2012 would, therefore, squarely apply in the present case. 13. In our judgment dated 21-6-2012, we had stated as under : "10. From the above provision, it can be seen that education cess is to be collected on the customs duty levied and collected by the Central Government at the rate of 2% on such duty. In the present case, therefore, it would be important to ascertain whether on the imports made under DEPB scheme, it can be stated that the Central Government is levying and collecting duties of customs. 1....
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....EPB credit under the Scheme has to be calculated by taking into account the deemed import content of the export product as per basic customs duty and special additional duty payable on such deemed exports. Therefore, in our view, DEPB/Duty drawback are incentives which flow from the schemes framed by Central Government or from Section 75 of the Customs Act, 1962, hence, incentives profits are not profits derived from the eligible business under Section 80-IB. They belong to the category of ancillary profits of such undertakings." 14. Section 25 of the Customs Act, 1962 empowers the Central Government to grant exemption from duty. Sub-section (1) of Section 25 in particular provides that if the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally, either absolutely or subject to such conditions as may be specified in the notification, goods of any specified description from the whole or any part of the duty of customs leviable. 15. In exercise of powers under Section 25 of the Customs Act, 1962, the Government of India vide its exemption Notification No. 45/2002, granted total ex....
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....8. From the nature of DEPB scheme noted above and the exemption from payment of customs duty on imports made under such scheme, it can be gathered that the very purpose of granting such exemption is to neutralize the customs duty, on the import component of the export product. In essence, the Government of India grants duty remission at prescribed rates on the imports made under such a scheme. 19. It can thus not be denied that for the imports made under the DEPB scheme, there is total or partial, as the case may be, exemption in payment of customs duty. At the relevant time, for the goods other than edible oil, such exemption was total. For edible oil, such exemption was to the extent of 50% of the customs duty and additional duty payable. 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 collecting customs duty from the importers in form of adjustm....
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.... High Court in the case of Tanfac Industries Ltd. v. Asstt. Commr. of Cus., Cuddalore reported in 2009 (240) E.L.T. 341. In the said case, in the background of interest on warehoused goods where such demand of interest on goods cleared beyond 90 days arose, the Division Bench of the High Court came to the conclusion that on the imports under DEPB scheme, the importers pay duty not by cash but by way of credit and, therefore, the goods cleared under DEPB scheme cannot be treated as exempted goods. It can only be treated as duty-paid goods. 24. With respect, we are unable to concur with such a view. Firstly, in the said decision, the question of levy of education cess was not involved. More particularly in our view, the exemption notification No. 45/2002 is issued under the exercise of powers under Section 25 of the Customs Act, 1962. Such notification grants total exemption from payment of customs duty and additional duty on all goods other than edible oils which are imported under DEPB scheme. It is, of course, subject to conditions specified in the notification itself. Such conditions require adjustment of the credit in the DEPB scrip against the customs duty liability. However....