TaxTMI 
TaxTMI 
2020 (1) TMI 212
X X X X Extracts X X X X
X X X X Extracts X X X X
....fund does not arise. 2. W.P.No.27452 of 2019 is filed to quash 193 Bills of Entry listed therein, as the same being contrary to law and for direction to the respondents to re-credit the Social Welfare Surcharge component in all the MEIS and SEIS duty credit scrips of the petitioner from which such surcharge was deducted and further to restrain the respondents from debiting any amount pertaining to SWS from the MEIS and SEIS duty credit scrips and from debiting any amount pertaining to BCD over and above the prescribed rate on all future imports. 3.The petitioner in both the writ petitions is one and the same. 4. The case of the petitioner is as follows: The petitioner is in the business of manufacturing and marketing edible oils and fats. Importing of goods is part and parcel of the petitioner's activities ordinarily attracting the levy of Customs Duties. The petitioner offset such Customs Duties, by procuring scrips under the MEIS (Merchandise Exports from India Scheme) and SEIS (Service Exports from India Scheme) provided for under Chapter 3 of the FTP and utilizing such scrips. The concept of MEIS and SEIS Schemes are as follows: MEIS i) A claimant ne....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Notification No.25/2015 dated 08.04.2015 was issued exempting goods imported against SEIS scrips, as well. By virtue of the aforesaid provisions, notifications and scrips, the customs duties, that were otherwise payable by the petitioner became exempt. c) Social Welfare Surcharge (hereinafter referred to SWS) was introduced as a levy under Section 110 of the Finance Act, 2018 to meet the Government's obligations to finance education, health and social security. The said surcharge was levied at the rate of 10% of the aggregate of duties of Customs levied and collected by the Government under Section 12 of the Customs Act, 1962. d) The petitioner imported certain goods at Karaikal Port in the normal course of its business during the period July 2017 to July 2018 and its Bills of Entry were assessed. The petitioner's MEIS licenses and SEIS licenses were debited by the amounts pertaining to SWS by the second respondent by including the same as part of customs duties. The petitioner through letter dated 26.06.2019 sought to ascertain the methodology adopted by the second respondent in deducting excess duties of customs from the scrips. The se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s made in the counter affidavit are as follows: a) Merchandise Exports from India Scheme (MEIS) and Service Exports from India Scheme (SEIS) are export incentives. Under both the scheme, duty credit scrips are granted as rewards and such scrips can be used for payment of Custom Duties, payment of excise duties, payment of service tax, payment of customs duty and fee as per paragraph 3.18 of the policy. Under the earlier Foreign Trade Police namely FTP 2004-2009, the duty paid through debits under DEPB Scheme which is similar to MEIS Scheme and SEIS Scheme under FTP 2015-2020 was originally treated as exemption from duty and that goods cleared through debit under DEPB Scheme were exempted goods. Subsequently para 4.3.5 of the FTP 2004-09 was amended so as to give the benefit of Cenvat credit or duty drawback to additional customs duty paid through debit under DEPB Scheme. Customs Notification 96/2004 dated 17.09.2004 read with Customs Circular No.59/2004 dated 21.10.2004 laid down that the additional customs duty paid through debit under DEPB Scheme shall be allowed to be availed as cenvat credit or duty drawback. Thus, it is submitted that the MEIS Scheme and SEIS....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ad in the context of para 3.15 of FTP 2015-20. b) The MEIS and SEIS Scheme do not give the benefit of exemption of customs duty and additional customs duty but only give the benefit of neutralization in the form of debit from the duty credit scrips. Clause 2 of the Notification 24/2015-Customs and Notification 25/2015-Customs dated 08.04.2015 states that the exemption mentioned in clause (1) are subject to the conditions laid down in sub clause (1) to (10) of clause 2 of the Notifications. Sub clause (8) and (9) lays down that the importer shall be entitled to avail the drawbacks of the customs duty and CENVAT credit or drawback or additional customs duty against the amount debited in the scrips. Sub clause (5) lays down that the said scrips has to be produced before the proper officer of customs at the time of clearance for the debit of the duties leviable on the goods. Thus on a conjoint reading of the clauses in the Notifications, it is evident that there is no factual exemption on the customs duty but the Notifications only speak about the debit of the leviable duties from the duty credit scrips. Thus the SWS which was introduced as an additional customs duty under Sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....alf of the petitioner are also filed. The sum and substance of the submissions made by the petitioner are as follows: a) Both these writ petitions are filed challenging the arbitrary and illegal debit of Social Welfare Surcharge from the scrips obtained by the petitioner under the Merchandise Exports and India Schemes (MEIS) and the Service Exports from India scheme(SEIS) under the Foreign Trade Policy 2015-2020 relevant to two imports made at Karaikal Port and Chennai Port. The respondents instead of debiting Basic Customs Duty(BCD) at 45% on the assessable value of bill of entry from the scrips of the petitioner have debited 49.5% by adding 10% of Social Welfare Surcharge, which is illegal, arbitrary and unsustainable in law. Notification Nos.24 & 25/2015 specifically exempt goods when imported using MEIS and SEIS scrips from the whole of the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act 1975 and the whole of additional duty leviable thereon under Section 3 of the Customs Tariff Act, 1975. The exemptions under the aforesaid Notifications are effectuated by way of debiting the duty amount from the value that the MEIS and SEIS scrips b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....P-CUS (Commissioner of Central Excise Vishakapatnam vs. Kedia Overseas) d) The above Notifications grant exemption from payment of duties and cannot be read as requiring the importer to "pay duty through debit". If the Notification contemplates payment of duty through the scrips, then monies paid by way of tax would have formed part of the Consolidated Fund of India and not shown as "Duties Foregone" in the Budget Documents. Tax incentives through exemptions etc. do not form part of the Consolidated fund of India. From a perusal of Union Budget of 2018-19 and more particularly, Annexure 7 of the Receipt Budget presented before the Parliament makes it abundantly clear that Revenue Impact on account of Export Promotion Concessions such as SEIS schemes and MEIS schemes etc. adds up to the Total Customs Duty Foregone by the Government of India. It is crystal clear that the incentives available under the DEPB scheme, SEIS Scheme, MEIS Scheme etc. tantamount to Revenue Foregone by the Central Government and thus do not form part of the Consolidated Fund of India. If debit of Duty through the scrips indeed amounted to payment of Tax, then for sure, such payment would hav....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ned, it is abundantly clear that the same has been issued under Section 25(1) of the Customs Act Under that Section, power has been granted to the Central Government, to grant exemption from Customs Duty either conditionally or subject to certain conditions. Accordingly, where the source of power of the legislative action of the executive is under Section 25(1) of the Customs Act (power to grant exemption), such a delegated legislation in the form of Notification cannot be anything other than a Notification granting exemption. Any other interpretation suggestive of the Notification requiring payment of tax, would run wholly contrary to the source of power, effectuated for issuing the subject notification and thus cannot be countenanced. h) Significance of the phrase "But for this exemption". On a perusal of Clause 2(v) of the present Notification, it can be noticed that the power has been granted to the proper officer to debit the duties leviable on the goods but for this exemption. The choice of the words "but for this exemption" essentially denotes that where without the operation of the exemption notification, Customs Duty is payable, however, on application of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... debit. Furthermore, since SWS is calculated at 10% of the aggregate of Duties payable (pursuant to Section 110(3) of the FA 2018) which in the present case would be NIL by operation of the present exemption notifications, the liability to pay SWS would also be NIL (10% of NIL being Zero). j) Decisions of the Division Bench of the Madras High Court in Tanfac and SPIC are distinguishable. Furthermore the Tanfac decision was rendered by the Madras High Court in 2009, whereas in the year 2013, a Division Bench of the Madras High Court in case of Commissioner of Customs Tuticorin vs. DCW reported in 2014(306) ELT 398 (Mad.) in identical facts and issues involved as in the present petition, had come to the conclusion that the notification concerned therein i.e. Notification 96/2004 dated 17.09.2004 under which customs duties were being debited under the DEPB scheme, essentially granted a total exemption from the payment of Customs Duties, and consequently, it was held that Education Cess (similar to SWS) was also exempt. k) The Respondents' reliance on Circular No.5/2005 dated 21.05.2005 is wholly misplaced. It is submitted that such reliance is wholly mis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eaks about the admissibility of CENVAT Credit. Chapter 3 and Chapter 4 of the FTP 2015-2020 operate on different premises. While Chapter 3 lays down that duties can be paid by way of debit through scrip rewards in which case the benefit of CENVAT credit/Duty Drawback is available, Chapter 4 speaks about exemptions/conditional exemptions and circumstances in which CENVAT Credit/Duty Drawback can be availed when there is no specific exemption. Thus, the petitioner endeavour to equate all the incentive schemes under one umbrella of exemption is wholly erroneous. The Duty Entitlement passbook Scheme or the Duty Credit Scrips Scheme cannot be treated as an exemption from payment of duty. In this regard, the second respondent herein places reliance on the decision of the Hon'ble Supreme Court in Commissioner of Customs, Calcutta v. Indian Rayon and Industries Ltd. [2008 (10) SCALE 498]. The decision of the Apex Court has been followed by the Division Bench of this Court in Tanfac Industries Ltd. v. The Assistant Commissioner of Customs, Customs Division, 2009 (165) ECR 186 (Madras). SLP 24638-24640/2009 filed against this decision dismissed by the Hon'ble Supreme Court. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted out to the levy, assessment, etc., on the BCD would mutatis mutandis be applicable to SWS also. In this connection, the second respondent places reliance on the decisions of High Court and Apex Court laying down that Automobile Cess/Education Cess/Secondary and Higher Education Cess/National Calamity Contingent Duty are duties of excise and are not independent levies: A. CCE v. TELCO (1997) 5 SCC 275. B. Banswara Syntex v. UOI (Rajasthan High Court) RLW 2007(4) Raj.2995. The provisions of Section 110 of the Finance Act, 2018 are similar to Section 93 of the Finance Act, 2004 by which Education cess was introduced. While Section 93(1) of the Finance Act 2004 is comparable to Section 110(1) of the Finance Act, 2018, Section 93(2) and 93(3) of the Finance Act, 2004 are comparable to Section 110(4) and (5) of 2018. Thus, it is submitted that the decision in Banswara rendered in the context of education cess is applicable in all fours to the issue of SWS. The decision of the Hon'ble Rajasthan High Court in Banswara has been affirmed by the Hon'ble Supreme Court in SRD Nutrients v. CCE, (2018) 1 SCC 105 and in Bajaj Auto Ltd. Vs. UOI 2019 (366) ELT ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arding the effect of the above decision of the Apex Court made in Unicorn Industries case, and also filed additional written submissions (by the petitioner) and revised written submissions (by the respondent). Accordingly, the matter was reserved "for orders" on 18.12.2019. 11. In the revised written submission filed by the learned counsel for the revenue, apart from reiterating the earlier contentions, the learned counsel fairly submitted that the revenue can no longer rely upon the decisions of the Apex Court in SRD Nutrients Private Limited and Bajaj Auto Limited cases, in support of their contention that the Social Welfare Surcharge is not an independent levy but took the colour of the parent levy. However, the revenue sought to contend that the present issue is not a case of exemption of basic customs duty to test whether the exemption is at all applicable to social welfare surcharge and on the other hand, the issue revolves around the question whether the payment of SWS can be debited from the duty credit scrips like the customs duty. 12. In the additional written submissions filed on behalf of the petitioner, they relied on the recent decision of the Apex Court made....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er MEIS and SEIS. The Duty Credit Scrips and goods imported/domestically procured against them shall be freely transferable. The Duty Credit Scrips can be used for: (i) Payment of Basic Customs Duty and Additional Customs Duty specified under Sections 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 for import of inputs or goods, including capital goods, as per DoR Notification, except items listed in Appendix 3A. (ii) Payment of Central excise duties on domestic procurement of inputs or goods; (iii) Deleted (iv) Payment of Basic Customs Duty and Additional Customs Duty specified under Sections 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 and fee as per paragraph 3.18 of this Policy." 16. The Central Board of Indirect Taxes and Customs issued two notifications in Nos.24/2015 and 25/2015, both dated 08.04.2015. The petitioner seeks to rely on the above said notifications in support of their contention that the Social Welfare Surcharge (SWS) cannot be debited from the above duty credit scrips. 17. Notification No.24/2015-Customs dated 08.04.2015 reads as follows: "[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nditions as may be specified by him, permit import and export through any other seaport, airport, inland container depot or through any land customs station: Provided further that the exports of notified goods or products transacted through e-commerce platform as listed in Appendix 3C of Appendices and Aayat Niryat Forms of Foreign Trade Policy 2015-2020 are undertaken either through the courier mode from airports at Chennai, Mumbai or Delhi or through the Foreign Post Offices at Chennai, Mumbai or New Delhi; (4)that the said scrip is registered with the Customs Authority at the port of registration specified on the said scrip; (5) that the said scrip is produced before the proper officer of customs at the time of clearance for debit of the duties leviable on the goods and the proper officer of customs taking into account the debits already made under this exemption and debits made under the notification Nos.20/ 2015 - Central Excise, dated the 8th April, 2015 and 10/ 2015 -Service Tax, dated the 8thApril, 2015,shall debit the duties leviable on the goods, but for this exemption; (6) that the said scrip and goods imported against it shall be free....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Export Policy in ITC (HS), unless specifically notified in Appendix 3B of Appendices and Aayat Niryat Forms of Foreign Trade Policy 2015-2020; viii Service Export; ix Red sanders and beach sand; x Export product which are subject to Minimum export price or export duty; xi Diamond, Gold, Silver, Platinum, other precious metal in any form including plain and studded jewellery and other precious and semi-precious stones; xii Ores and concentrates of all types and in all formations; xiii Cereals of all types; xiv Sugar of all types and all forms; xv Crude/ petroleum oil and crude/primary and base products of all types and all formulations; xvi Export of milk and milk products; xvii Export of Meat and Meat products; xviii Products wherein precious metal/diamond are used or Articles which are studded with precious stones; and xix Exports made by units in FTWZ. [F.No.605/55/2014-DBK] (Sanjay Kumar) Under Secretary to the Government of India" 18. Notification No.25/2015-Customs dated 08.04.2015, reads as follows: "[TO BE PUBLISHED IN THE GAZETTE O....
X X X X Extracts X X X X
X X X X Extracts X X X X
....os.21 of 2015 - Central Excise, dated the 8th April, 2015 and 11 of 2015 -Service Tax, dated the 8thApril, 2015,shall debit the duties leviable on the goods, but for this exemption; (5) that the said scrip and goods imported against it shall be freely transferable ; (6)that where the importer does not claim exemption from the additional duty of customs leviable under section 3 of the said Customs Tariff Act, he shall be deemed not to have availed the exemption from the said duty for the purpose of calculation of the said additional duty of customs; (7)that the importer shall be entitled to avail drawback of the duty of customs leviable under the First Schedule to the said Customs Tariff Act against the amount debited in the said scrip; (8)that the importer shall be entitled to avail drawback or CENVAT credit of additional duty leviable under section 3 of the said Customs Tariff Act against the amount debited in the said scrip. (9)that the benefit under this notification shall not be available to the items listed in Appendix 3A of Appendices and Aayat Niryat Forms of Foreign Trade Policy 2015-2020. Explanation.- In this notificat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s exempted, in effect, it is only the payment of such duty in cash alone is exempted and on the other hand, such duty leviable and payable has to be debited from the value of the above scrips every time. In other words, the scrips in the hands of the importer, loaded with the FOB value of exports in free foreign exchange or the FOB value of exports as given in the shipping bills in free foreign exchange, realized by the importer are allowed to be utilized for paying the Duty. To put it simply, the incentives/benefits derived out of the exports in free foreign exchange are valued, calculated and loaded in a format given as the scrips, which could be used for payment of basic customs duty and additional customs duty, evidently as referred in Clause 3.02 of the Foreign Trade Policy, as extracted supra. These scrips are transferable commodities. 21. The case of the petitioner is that the above two notifications grant exemption from payment of duty and additional duty of customs leviable under the First Schedule to the Customs Tariff Act, 1975 and therefore, when there is a total exemption granted for payment of basic customs duty and additional customs duty, the Social Welfare Surch....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Section 25(1) of the Customs Act, 1962 grants exemption of Basic Customs Duty (BCD) subject to debit of the BEPD Licence? (3) Whether the Tribunal erred in not considering the Board Circular No. 5/2005 dated 31- 1-2005?" The Tribunal rejected the Revenue's appeal, thereby upholding the contention of the assessee that the levy of education cess under Section 84 of the Finance (No. 2) Act, 2004 was not to be levied on the exempted items. In so holding, the Tribunal followed the decision of the Mumbai Tribunal reported in 2005 (188) E.L.T. 449 - Commissioner of Customs, Mumbai v. Reliance Industries Limited. On the admitted fact position that the assessee herein is covered by DEPB scheme and that the liability thereon is NIL, in other words, totally exempted from payment of duty, as per Notification No. 96/2004, dated 17-9- 2004, the Tribunal held that question of levy of education cess as per Finance Act did not arise. 2. We have perused the decision of the Mumbai Tribunal. We find that Ministry of Finance clarified in the proceedings dated 8-7-2004 in D.O.F. No. 334/3/2004-TRU on the specific issue as to whether goods that are fully exempted from exci....
X X X X Extracts X X X X
X X X X Extracts X X X X
....credits in the DEPB scrips for the purpose of adjustment against the customs duty liability on the goods imported for the ultimate purpose of export on value addition. 17. We may recall that Chapter 7 of the Export- Import Policy pertains to duty exemption/remission schemes. Para 7.1 thereof provides that the duty exemption scheme enables import of inputs required for export production. The duty remission scheme enables post export replenishment/remission of duty on inputs used in the export product. Such remission schemes include Advance Licence Scheme and Duty Free Replenishment Certificate Scheme as also the Duty Entitlement Passbook Scheme. Para 7.14 of said Chapter 7 of the Export-Import Policy pertains to Duty Entitlement Passbook Scheme. It states at the outset that for the exporters not desirous of going through the licensing route, an optional facility is given under DEPB. The object of DEPB scheme is to neutralise the incidence of customs duty on the import component of the export product. It further provides that such neutralisation shall be provided by way of grant of duty credit against the export product. 18. From the nature of DEPB scheme n....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... would further go to show that while no customs duty is paid, there would be no question of availing Modvat credit on such duty. 21. We may notice that vide circular dated 8-7- 2004, the Ministry of Finance, in a question whether goods that are fully exempt from excise/customs duty or are cleared without payment of such duty would be subject to Education Cess, clarified that the Education Cess is leviable at the rate of 2% of the aggregate of the duties of excise/customs levied and collected. If goods are fully exempted from excise duty or customs duty or are chargeable to nil rate of duty or are cleared without payment of duty under specified procedure such as clearance bond, there is no collection of duty and, therefore, no Education Cess would be leviable on such clearances. 22. In view of such clarification by the Government and in view of our conclusions herein above that against an import made under the DEPB scheme, of the goods which are fully exempt from payment of customs duty and therefore no customs duty is levied and collected, the Education Cess at the prescribed rate also cannot be levied. 23. We are not unmindful of the decision of Madras H....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ption notification. Such exemption is, of course, subject to fulfillment of certain conditions. One of the conditions includes that of adjustment of credit in the DEPB scrip. This, however, is merely procedural in nature and would not change the nature of benefit from one being of exemption." d) Perusal of the above decision made in Gujarat Ambuja Exports Ltd. case would show that the Division Bench of the Gujarat High Court had considered the Division Bench decision of this Court made in TANFAC Industries Ltd., Vs. Assistant Commissioner of Customs, Cuddalore, 2009 (240) E.L.T. 341 (Mad.) taking a different view that on the imports under the DEPB Scheme, the importers should pay the duty not by cash, but by way of credit and therefore, the goods cleared under the DEPB scheme cannot be treated as exempted goods. However, the Gujarat High Court did not concur with the above view of this Court made in Tanfac Industries Ltd. case and given its reasoning for differing so. It is relevant to note at this juncture that Notification No.32/2005-Customs dated 08.04.2005 referred to in Pasupati Acrylon Ltd., case by the Gujarat High Court also reads similar to the subject matter Noti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s inter alia, exempting duties leviable subject to the conditions that the duties leviable were debited from the relevant pass book under a scheme known as DEPB Scheme. The Education Cess at 2% on these duties was also debited from the duties of DEPB as per clause of the Finance Bill, 2004. 5. The respondent protested against the debit of education cess by submitting various letters addressed to the Assistant Commissioner of Customs. They did not insist on issuance of show cause notice. However, they did not get satisfactory solution and therefore, preferred an appeal. That appeal has been allowed, inter alia, holding that debit of education cess and in terms DEPB Scheme so also exemption notification was impermissible in law. 6. The Tribunal has upheld this view in the impugned order. 7. The Tribunal has in dealing with this controversy referred extensively to the salient features of the DEPB Scheme, relevant provisions of the Finance Act, 2004 and the Exemption Notification dated 22nd April, 2002. The Tribunal has held as under :-- "We find that the DEPB Scheme operates under an exemption Notification No. 45/2002-Customs, dated 22nd Ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat these duties are not legally recoverable. Therefore, the education cess also could have been levied and recovered. The Tribunal's view is therefore, erroneous in law. 9. On the other hand, Mr. Patel appearing on behalf of the respondent assessee submits that the Tribunal's view as taken above has found favour at least with three High Courts in India and in that regard he invites our attention to the judgment of High Court of Gujarat in the case of Gujarat Ambuja Exports Ltd. v. Government of India 2013 (289) E.L.T. 273 (Guj.) and Commissioner of Customs v. Pasupati Acrylon Ltd., 2013 (296) E.L.T. 182 (Guj.). He submits that the view taken by Gujarat High Court in Pasupati (supra) has been not interfered with by the Hon'ble Supreme Court and the revenue's appeal is dismissed on 8th May, 2013. 10. The Tribunal's view is endorsed not only by the High Court of Gujarat but equally by the High Court of Madras in Commissioner of Customs, Tuticorin v. DCW Ltd., 2014 (306) E.L.T. 398 (Mad.) and the High Court of Andhra Pradesh in Commissioner of C. Ex., Visakhapatnam v. Kedia Overseas Ltd., 2014 (305) E.L.T. 268 (A.P.). Our attention is invited to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioner of Central Excise, Visakhaptnam, Vs. Kedia Overseas Ltd., 2011-TIOl-1063-HC-AP-CUS has observed that the Education Cess was not leviable in respect of duty free imports under DEPB scheme. Notification No. 45/2002 dated 22.04.2002 was the relevant notification considered therein. The Division Bench of the Andhra Pradesh High Court in the above case observed as follows: "2. The respondent is importer of edible refined oil. They imported crude palm oil through their agents, M/s. D.S. Narayana & Co. Pvt. Ltd., Ka- kinada under various bills of entry. The customs duty payable was discharged through Duty Entitlement Pass Book (DEPB) scrips under Notification No. 45/2002-Cus, dated 22-4- 2002. 3.The provisional assessments were finalized by discharging the duty through a debit made in DEPB. However, education cess @ 2% on the customs duty was charged and collected by the Revenue. On a request made by the respondent the assessment was finalized/but their plea for noncharging of education cess on the payments/debits made through DEPB was not accepted purporting to place reliance on the Central Board for Excise & Custom's Circular No. 5/2005-Cus., dated 3....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty free imports under DEPB. scheme. Further there is no dispute that the ruling of South Zone Bench of CESTAT in Ruchi Health Foods Ltd. and that of the Mumbai Bench in Reliance Industries Ltd. have become final and the Revenue has not challenged the same. Therefore, this appeal is misconceived. 7. The appeal, for the above is reasons, is dismissed." 23. On the other hand, the learned counsel for the Revenue, in support of her contention that the duty credit scrips scheme cannot be treated as exemption from payment of duty, relied on the following decisions. a) In the case of TANFAC Industries Ltd., Vs. Assistant Commissioner of Customs, Cuddalore, 2009 (240) E.L.T. 341 (Mad.), the Division Bench of this Court has observed that the goods cleared under DEPB Scheme cannot be treated as an exempted goods, but they can only be treated to be duty paid goods. At paragraph Nos.5, 6, 10 & 12, the Division Bench has observed as follows: "5. The learned Counsel appearing for the appellant strenuously contended that the debit entries and the DEPB scrips shall be treated as payment of duty only for the purpose of availment of CENVAT credit and as far as l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ods and, accordingly, no CENVAT or drawback was allowed for such payments. Para 4.3.5., of the Foreign Trade Policy, 2004-09 was amended allowing additional Customs duty paid through debit under DEPB to be adjusted as Cenvat credit or duty drawback. The said position was clarified vide Circular No. 59/2004-Cus., dated 21.10.2004 (2004 (173) E.L.T. T9). It implies that the goods cleared by debits through DEPBs are not to be treated as exempted but duty paid. 4. Section 61 of the Customs Act, 1962 provides for charging of interest on duty payable on clearance of warehoused goods. Section 61(d)(i) and (ii) provides that the interest shall be payable on the amount of duty payable at the time of the clearance of the goods from the warehouse. In case of clearances under DEPB Scheme, the amount of duty payable is required to be debited from DEPB scrip. Therefore, it cannot be considered that the duty payable is nil or exempted. This is further supported by the fact that the CENVAT credit or duty drawback is available even when the additional Customs duty is debited under DEPB. 5. The issue regarding interest on warehoused goods has already been clarified by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....follows: "7. In this connection, learned counsel appearing for the assessee placed reliance on the decision of this court reported in [2010] 2 GSTR 468 (Mad) : [2009] 240 ELT 341 (Mad) Tanfac Industries Ltd. v. Assistant Commissioner of Customs, wherein this court had referred to the decision of the apex court reported in [2008] 11 RC 285 : [2008] 229 ELT 3 (SC) Commissioner of Customs v. Indian Rayon and Industries Ltd., and held that when a clearance is allowed in the DEEC Scheme, even if the duty is not paid in cash but only by way of credit, the same would tantamount to payment of duty in cash. Consequently, unlike the DEEC Scheme, the debit of additional customs duty liability under the DEPB Scheme is a mode of payment of duty on the imported goods. He also took us through the decision of the Gujarat High Court reported in [2012] 16 GSTR 279 (Guj) : [2013] 289 ELT 273 (Guj) Gujarat Ambuja Exports Ltd. v. Government of India as well as the decision of the Supreme Court reported in [2008] 11 RC 285 : [2008] 229 ELT 3 (SC) Commissioner of Customs v. Indian Rayon and Industries Ltd., to emphasise his submission that the duty credit under the scheme has to be treated as pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
........ 12. As is evident from the reading of the scheme, it is an export oriented scheme. The objective of the scheme is to neutralise the incidence of customs duty on the import content of the export product. A reading of the scheme shows that although DEPB holder is allowed to import without payment of basic customs duty, credit is available as regards the additional customs duty payable and the scheme further recognises that the holder has the option to pay additional customs duty, if any, in cash as well. A reading of paragraph 7.25 as extracted above thus shows that the scheme of DEPB, works on the adjustment of debit entry as against credit entry available. The credit entry includes basic customs duty as well as additional duty of customs. Thus, with the option available, clause 7.41 provides that additional customs duty paid in cash on export made under the DEPB Scheme shall be adjusted as Modvat credit. Clause 7.41 of the Export and Import Policy with Handbook of Procedures dealt with the applicability of drawback, reads as under: "Applicability of drawback The exports made under the DEPB Scheme shall not be entitled for drawback. The addit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ati, reported in 2018 (1) SCC 105 and in the case of Bajaj Auto v. Union of India reported in 2019 (366) E.L.T. 577 (SC), in support of her contention that Social Welfare Surcharge is also having the colour of duty of customs and thus, is not an independent levy, has however fairly submitted subsequently that in view of the recent decision of the Hon'ble Apex Court made in the case of Unicorn Industries v. Union of India & others (Civil Appeal No.9237 of 2019 dated 06.12.2019), the revenue is not pressing the above point. At this juncture, it is relevant to quote the above recent decision of the Apex Court dated 06.12.2019, wherein at paragraph Nos.22, 28, 29, 38, 41, 42, 43, it has been observed as follows: "22. The main question arising for consideration is when 100 per cent exemption had been granted for excise duty for a period of 10 years, whether the exemption notification issued for the State of Sikkim on 9.9.2003 shall be confined to the basic excise duty under the Act of 1944, additional duty under the Act of 1957 and additional duty under the Act of 1978, which were specifically mentioned in the notification issued on 9.9.2003, or it also include cess/duty im....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Excise Rules, 1944 without reference to any other statute, the exemption must be read as limited to the duty of excise payable under the Central Excises and Salt Act, 1944. It cannot cover such special or another kind of duty of excise. This Court in Modi Rubber Limited (supra) has discussed the provisions of the Finance Act, 1979 thus: "9. We have already pointed out, and this is one of the principal arguments against the contention of the respondents, that by reason of the definition of "duty" in clause (v) of Rule 2 which must be read in Rule 8(1), the expression "duty of excise" in the notifications dated August 1, 1974 and March 1, 1981 must be construed as duty of excise payable under the Central Excises and Salt Act, 1944. The respondents sought to combat this conclusion by relying on sub section (4) of Section 32 of the Finance Act, 1979 - there being an identical provision in each Finance Act levying special duty of excise - which provided that the provisions of the Central Excises and Salt Act, 1944 and the rules made thereunder including those relating to refunds and exemptions from duties shall, as far as may be, apply in relation to the levy and collection of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....have to be to Rule 8(1) read with subsection (4) of Section 32 or other similar provision. It is significant to note that during all these years, whenever exemption is sought to be granted by the Central Government from payment of special duty of excise or additional duty of excise, the recital of the source of power in the notification granting exemption has invariably been to Rule 8(1) read with the relevant provision of the statute levying special duty of excise or additional duty of excise, by which the provisions of the Central Excises and Salt Act, 1944 and the rules made thereunder including those relating to exemption from duty are made applicable. Take for example, the Notification bearing No. 63/78 dated August 1, 1978 where exemption is granted in respect of certain excisable goods "from the whole of the special duty of excise leviable thereon under subclause (1) of clause 37 of the Finance Bill, 1978". The source of the power recited in this notification is "subrule (1) of Rule 8 of the Central Excise Rules, 1944 read with subclause (5) of clause 37 of the Finance Bill, 1978". So also in the Notification bearing No. 29/79 dated March 1, 1979 exempting unmanufactured tob....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... interpretation was also raised in regard to the Notification bearing No. 249/67 dated November 8, 1967 exempting tyres for tractors from "so much of the duty leviable thereon under item 16 of the First Schedule to the Central Excises and Salt Act, 1944 as is in excess of 15 per cent". The argument of the respondents in the appeals was that the exemption granted under this notification was not limited to the duty of excise payable under the Central Excises and Salt Act, 1944 but it also extended to special duty of excise, additional duty of excise and auxiliary duty of excise leviable under other enactments. This argument plainly runs counter to the very language of this notification. It is obvious that the exemption granted under this notification is in respect of "so much of the duty leviable thereon under item 16 of the First Schedule to the Central Excises and Salt Act, 1944 as is in excess of 15 per cent" and these words describing the nature and extent of the exemption on their plain natural construction, clearly indicate that the exemption is in respect of duty of excise leviable under the Central Excises and Salt Act, 1944 and does not cover any other kind of duty of excise....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er incuriam in Subhash Chandra & Ors. v. Delhi Subordinate Services Selection Board & Ors. (2009) 15 SCC 458, Dashrath Rupsingh Rathod v. State of Maharashtra (2014) 9 SCC 129, and Central Board of Dawoodi Bohra Community & Ors. v. State of Maharashtra & Ors. (2005) 2 SCC 673. It was held that a smaller bench could not disagree with the view taken by a larger bench. 43. Thus, it is clear that before the Division Bench deciding SRD Nutrients Private Limited and Bajaj Auto Limited (supra), the previous binding decisions of three- Judge Bench in Modi Rubber (supra) and Rita Textiles Private Limited (supra) were not placed for consideration. Thus, the decisions in SRD Nutrients Private Limited and Bajaj Auto Limited (supra) are clearly per incuriam. The decisions in Modi Rubber (supra) and Rita Textiles Private Limited (supra) are binding on us being of Co ordinate Bench, and we respectfully follow them. We did not find any ground to take a different view." Thus, from the above recent decisions of the Apex Court, it is clear that the Social Welfare Surcharge is not in the nature of duty of customs and on the other hand, it is an independent levy, imposed and collected under....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ays customs duty on the imports on purchased DEPB credits, he essentially pays customs duty by adjustment of the credit in the pass-book. It would therefore, be incorrect to state that the imports made in such fashion have not suffered the customs duty." (emphasis supplied) 24. Going by the above case laws cited on both sides and considering the submissions made by the learned counsels appearing on either side, the following questions need to be answered for the disposal of these writ petitions. (a) Whether the petitioner is correct in claiming that the customs duty for the subject matter imported goods is exempted in total and not paid by them? (b) If the customs duty is totally exempted and not paid, as claimed by the petitioner, whether the Revenue is justified in making deduction towards Social Welfare Surcharge out of the value of the scrips, apart from deducting the customs duty? (c) Whether Notification Nos.24/2015 and 25/2015 dated 08.04.2015 empower the Revenue to deduct SWS, apart from the duty of customs and additional duty of customs? d) Whether SWS is an independent levy or it also takes the colour of the parental levy vi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m payment of the duty of customs and on the other hand, such exemption is subject to certain conditions stipulated in those two notifications. One of the conditions specifically contemplates that the importer should produce the scrips before the proper officer of the customs at the time of clearance "for debit of the duties leviable on the goods" and the proper officer of customs, taking into account the debits already made under the exemption notification, "shall debit the duties leviable on the goods", but for the exemption. I have already pointed out that under Clause 3.02 of the Foreign Trade Policy, it is clearly stated that duty credit scrips are granted as rewards under MEIS and SEIS and the duty credit scrips and goods imported domestically shall be freely transferable and that the duty credit scrips can be used for Payment of Basic Customs Duty and Additional Customs Duty and Payment of Central Excise Duties. For better clarity, let me reproduce Clause 3.02 of the said policy as hereunder: "3.02 Nature of Rewards Duty Credit Scrips shall be granted as rewards under MEIS and SEIS. The Duty Credit Scrips and goods imported/domestically procured against them....
X X X X Extracts X X X X
X X X X Extracts X X X X
....goes to the Government exchequer. It is true that it may give an impression, as pointed out by the learned counsel for the petitioner, that it is the Duty Forgone. 30. In my considered view, the above claim of the petitioner though appears to be fascinating, in effect it is not so, more particularly, to sustain their contention that the duty paid is Nil in view of exemption. As already discussed supra, in view of the exports made under free foreign exchange, the exporter is given incentives in the form of duty credit scrips under MEIS and SEIS schemes. The very term "duty credit scrips" would undoubtedly, indicate that those scrips are loaded with money value and the same can be used for payment of customs and excise duties, when the import is made against those scrips. Therefore, insofar as the importer is concerned, when the value of the duty, leviable on such goods of import, is debited from the scrips, he stands as a person discharging his duty liability through the duty credit scrips. Therefore, he cannot contend that the duty paid is Nil. Neutralization of duty does not mean that there was no duty levied and collected at all. On the other hand, when such duty is debi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed on, no doubt is by the Division Bench of this Court made in DCW Ltd., case. It is true that in the above said decision, the Division Bench of this Court found that when the goods are fully exempted from excise duty and customs duty, the question of levying Educational Cess does not arise. However, it is to be noted that well before the said decision made in DCW Ltd., case, already another Division Bench of this Court in TANFAC Industries Ltd., Vs. Assistant Commissioner of Customs, Cuddalore, reported in 2009 (240) E.L.T. 341 (Mad.) had taken a different view and found that the goods cleared under the DEPB scheme cannot be treated as exempted goods, but they can only be treated to be duty paid goods. It was observed therein that the debit of any amount under the DEPB scheme is a mode of payment of duty on the imported goods and cannot be treated as exempted goods. It was also observed therein that the importers, who used DEPB scrips, pay duty not by cash, but only by way of credit. In support of such conclusion, the Division Bench relied on the decision of the Apex Court in the case of Pratibha Processors case, reported in 1996 (88) E.L.T. 12 (SC). A challenge made against the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ince the same is in line with TANFAC Industries Ltd., decision rendered by the Division Bench of this Court confirmed by the Apex Court. Hence I am bound to follow the above binding decision of this Court made in Tanfac Industries Ltd. Case. It appears that the other Division Bench decision of this Court made in DCW Ltd., case seems to have not reached the Apex Court. Under such circumstances, when there are two Division Bench decisions of this Court, out of which, one is confirmed by the Apex Court, I am bound to follow the decision of the Division Bench which is confirmed by the Apex Court. 33. At this juncture, it is to be noted further that TANFAC Industries Ltd., decision has been considered by another Division Bench decision of this Court made in the case of CCE v. SPIC, Heavy Chemicals Division, [2014] 25 GSTR 538 (Mad.), as extracted supra. In that case, the assessee therein placed reliance on the decision made in TANFAC Industries Ltd., in support of their claim for Modvat credit, based on the payment of duty through DEPB scheme. The Division Bench has taken note of the finding rendered in TANFAC Industries Ltd. Case, that when a clearance is allowed in a DEEC scheme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....from payment of duty of excise in respect of certain products and pharmaceuticals products. A condition for debiting the value of the duty from the scrips, as in the present case is not a condition or a condition similar in nature, was stipulated therein. 36. Likewise, the decision of the Apex Court in 1988 (3) SCC 570, Assistant Commissioner Commercial Taxes vs. Dharmendra Trading Company, is also not applicable to the present facts and circumstances, since in the case of the petitioner herein, exemption granted is not an exemption from payment of duty in toto and on the other hand, it is in respect of mode of paying such duty. In other words, the duty paid in this case is admittedly by debiting from the scrips. 37. The main issue involved in this case is not against the collection of customs duty, whether it is exempted in toto or not. The grievance is only against the collection of SWS, that too, by making debit out of total value of scrips along with the customs duty. Therefore, it is to be seen as to whether the Revenue is justified in making debit of the Social Welfare Surcharge from the value of the scrips. 38. I have already pointed out that SWS is an indepen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ions are conditional one as discussed supra. There is no dispute to the fact that the petitioner is not questioning the debiting of duty liability out of the value of the scrips produced by them. Their only dispute is against debiting SWS also. Under such circumstances, I am of the view that even without taking aid the facts and circumstances of any of the decisions, whether it has been dealt with the said issue or not, this Court can safely come to the conclusion and decide that exemption granted herein is not against payment of duty in toto and on the other hand, it is against the payment of the same in cash, so as to enable the petitioner to use those scrips for debiting the quantum of duty. 40. Likewise, in view of the recent decision rendered by the Apex Court in Unicorn Industries Ltd. Case, consideration of the other decisions relied on by both sides, in support of their respective contentions regarding the nature and status of SWS, does not arise. 41. Let me, now, consider the other issue as to whether the Revenue is entitled to collect the Social Welfare Surcharge from the petitioner under the present facts and circumstances, if not by way of debiting the same fro....