Upon A Person Obtaining Exemption, He Cannot Be Said To Be Discharging Liability To Pay Duty: Orissa HC Allows Dalmia Cement’s Writ Petition
The Orissa High Court allowed a petition filed by a Cement Trader and held that the trader, being an importer of petroleum coke, is not required to pay social welfare surcharge on customs duty which is exempted under scrip issued under Merchandise Exports from India Scheme (MEIS).
The writ petition, before the High Court, was filed by the petitioner challenging the requirement to pay Social Welfare Surcharge (SWS).
The Division Bench comprising Justice Arindam Sinha and Justice M.S. Sahoo said, “In the circumstances, petitioner is entitled to and gets declaration that it is not required to pay SWS calculated on customs duty, exempted under scrip held by it.”
Senior Advocate V. Sridharan represented the Petitioner while Senior Standing Counsel T. K. Satapathy represented the Opposite Parties.
It was the petitioner’s case that it imports petroleum coke required in the manufacture of cement. Not being an exporter it purchased duty credit scrip issued under Merchandise Exports from India Scheme (MEIS). In importing the goods, it was thereby exempted from whole of the customs duty leviable thereon. It was mentioned in the scrip that it was issued in exercise of powers conferred under sub-section (1) in section 25, Customs Act, 1962.
The Petitioner referred to sub-section (3) in section 136 of Finance Act, 2001 and laid emphasis that the mechanism is by provision in Central Excise Act, 1944 and rules made thereunder. The additional duty of NCCD is leviable in respect of goods specified in the seventh schedule as they apply in relation to levy and collection of duty of excise. According to the petitioner, it is a charge on the value of the specified goods. The Petitioner was exempted from paying customs duty. It was submitted that the SWS is a percentage of the customs duty. Customs duty being zero, levy of SWS must also be zero.
The respondent submitted that no exemption is available to petitioner since levy of SWS is under Finance Act, 2018 and there stood no notification issued under said Act exempting anyone from payment of SWS. Debit in the scrip denotes discharge of the payment. The percentage of the duty discharged is the SWS levied.
The Bench referred to Sub-section (3) of section 110 which is the charging provision. It says, the levy under sub-section (1) shall be calculated at 10% on the aggregate of duties, taxes and cesses, which are levied and collected by the Central Government in the Ministry of Finance (Department of Revenue) under section 12 of the Customs Act, 1962. “There is no dispute before us that the scrip petitioner holds, exempts it on collection from it, the customs duty levied”, it added.
Reference was made to the judgment of the Madras High Court in M/s. Gemini Edibles and Fats India Pvt. Ltd. v. Union of India (through its Secretary), Assistant Commissioner of Customs and others wherein it was observed that the debit of MEIS/SEIS scrips is one of the modes of discharging the duty obligation under the Customs Act. The Bench said, “We respectfully disagree with the view taken by the Division Bench in the Madras High Court on judgment dated 10th May, 2024 (supra).”
“Upon a person obtaining exemption, he cannot be said to be discharging liability to pay duty. There is no fact of collection following the levy. The charging provision by sub-section (3) in section 110 is a percentage of customs duty paid, as collected by the Central Government. The duty paid being zero, collection is zero and percentage of it must also be zero”, it further stated.
The Bench further noticed that the Petitioner’s case is of submitting to provisions in section 110 of Finance Act, 2018, as applicable to it but, working of the charging provision releasing it from paying SWS. Debits in the scrip is for purpose of measure of quantum of exemption utilized under it.
Noting that the petitioner was compelled to pay, the Bench held that the petitioner is entitled to and gets a declaration that it is not required to pay SWS calculated on customs duty, exempted under scrip held by it.
Cause Title: M/s. Dalmia Cement (Bharat) Limited v. Union of India and others [Case No. W.P.(C) No.19961 of 2019]
Appearance:
Petitioner: Senior Advocate V. Sridharan, Advocates Mukesh Panda, Shobhit Jain, Rahul Tangri
Opposite Parties: Senior Standing Counsel T. K. Satapathy