Orissa High Court
M/S. Dalmia Cement vs Union Of India And Others ..... Opposite ... on 20 November, 2024
Author: Arindam Sinha
Bench: Arindam Sinha, M.S.Sahoo
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.P.(C) No.19961 of 2019
M/s. Dalmia Cement ..... Petitioner
(Bharat) Limited
versus-
Union of India and others ..... Opposite Parties
Advocates appeared in this case:
For petitioner :Mr. V. Sridharan, Sr. Advocate
Mr. Mukesh Panda, Advocate
For opposite parties : Mr.T. K. Satapathy, Advocate
Senior Standing Counsel
CORAM:
THE HON'BLE MR. JUSTICE ARINDAM SINHA
AND
THE HON'BLE MR. JUSTICE M.S.SAHOO
JUDGMENT
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Dates of hearing :7th October, 2024, 29th October, 2024 and
20th November, 2024
Date of judgment: 20th November, 2024
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ARINDAM SINHA, J.
1. The writ petition was filed by petitioner challenging
requirement to pay Social Welfare Surcharge (SWS). Mr.
Sridharan, learned senior advocate appearing on behalf of petitioner
W.P.(C) no.19961 of 2019
had moved it on 7th October, 2024. Mr. Satapathy, learned
advocate, Senior Standing Counsel appears on behalf of revenue.
2. Petitioner says 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 is thereby exempted from whole
of the customs duty leviable thereon. The scrip is at annexure-1 and
clearly says it was issued in exercise of powers conferred under
sub-section (1) in section 25, Customs Act, 1962.
3. To import said goods petitioner used the scrip. There were
difficulties faced and it made representation dated 27th May, 2019.
The difficulties arose because of the additional levy of SWS, by
section 110 in Finance Act, 2018.
4. Drawing attention to cause of the difficulties Mr. Sridharan
referred to circular dated 10th January, 2020 issued by Government
of India, Ministry of Finance (Department of Revenue), Central
Board of Indirect Taxes and Customs. He pointed out from the
circular, revenue relies on judgment of the Supreme Court in
M/s. Unicorn Industries v. Union of India, reported in 2019
(370) ELT 3. It was said, ratio of the judgment is to be applied to
W.P.(C) no.19961 of 2019
the issue of levy of SWS on imported goods, when the basic
customs and additional duty of customs are debited in the scrip.
Paragraph 7 from said circular 2/2020-Cus. dated 10th January, 2020
is reproduced below.
"7. The ratio of the afore cited judgment is seen
to apply to the issue at hand of levy of SWS on imported
goods when the Basic Customs Duty and Additional
Duties of Customs are debited through duty credit
scrips."
5. Mr. Sridharan explained to us working of section 110 and
also section 136 in Finance Act, 2001. Section 136 is reproduced
below.
"136. National Calamity Contingent duty.-(1) In the case
of goods specified in the Seventh Schedule, being goods
manufactured or produced, there shall be levied and
collected for the purposes of the Union, by surcharge, a
duty of excise, to be called the National Calamity
Contingent duty (hereinafter referred to as the National
Calamity duty), at the rates specified in the said
Schedule.
(2) The National Calamity duty chargeable on the goods
specified in the Seventh Schedule shall be in addition to
any other duties of excise chargeable on such goods
W.P.(C) no.19961 of 2019
under the Central Excise Act, 1944 (1 of 1944) or any
other law for the time being in force.
(3) The provisions of the Central Excise Act, 1944 (1 of
1944) and the rules made thereunder, including those
relating to refunds and exemptions from duties and
imposition of penalty, shall, as far as may be, apply in
relation to the levy and collection of the National
calamity duty leviable under this section in respect of the
goods specified in the Seventh Schedule as they apply in
relation to the levy and collection of the duties of excise
on such goods under that Act or those rules, as the case
may be."
6. He drew attention to M/s. Unicorn Industries (supra), inter
alia, paragraph 40 (Manupatra print). We reproduce below a
passage from the paragraph.
"40. ... ... ... The provisions of Act of 1944 and the Rules
made thereunder shall be applicable to refund, and the
exemption is only a reference to the source of power to
exempt the NCCD, education cess, secondary and higher
education cess. A notification has to be issued for
providing exemption under the said source of power. In
the absence of a notification containing an exemption to
such additional duties in the nature of education cess and
secondary and higher education cess, they cannot be said
to have been exempted. ... ... ..."
W.P.(C) no.19961 of 2019
7. He then took us back to sub-section (3) in section 136. He
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 him, therefore, it is a charge on value of the specified
goods. In the case of his client, it is exempt from paying customs
duty. The SWS is a percentage of the customs duty. Customs duty
being zero, levy of SWS must also be zero.
8. Mr. Satapathy referred to section 110 in Finance Act, 2018.
In placing sub-section (3) he submitted, SWS levied under sub-
section (1) is to be calculated at a percentage, inter alia, on
aggregate duties, levied under section 12, including any sum
chargeable on the goods specified. As such, SWS is to be paid by
petitioner in spite of it entitled to benefit under the scheme.
9. For his submission he relied on M/s. Unicorn Industries
(supra), paragraph 41 (Manupatra print). The paragraph is
reproduced below.
"41. The Circular of 2004 issued based on the
interpretation of the provisions made by one of the
Customs Officers, is of no avail as such Circular has
W.P.(C) no.19961 of 2019
no force of law and cannot be said to be binding on
the Court. Similarly, the Circular issued by Central
Board of Excise and Customs in 2011, is of no avail
as it relates to service tax and has no force of law and
cannot be said to be binding concerning the
interpretation of the provisions by the courts. The
reason employed in SRD Nutrients Private Limited
(supra) that there was nil excise duty, as such,
additional duty cannot be charged, is also equally
unacceptable as additional duty can always be
determined and merely exemption granted in respect
of a particular excise duty, cannot come in the way
of determination of yet another duty based
thereupon. The proposition urged that simply because
one kind of duty is exempted, other kinds of duties
automatically fall, cannot be accepted as there is no
difficulty in making the computation of additional
duties, which are payable under NCCD, education
cess, secondary and higher education cess. Moreover,
statutory notification must cover specifically the duty
exempted. When a particular kind of duty is exempted,
other types of duty or cess imposed by different
legislation for a different purpose cannot be said to
have been exempted."
(emphasis supplied)
W.P.(C) no.19961 of 2019
10. Pursuant to above law declared, a learned single Judge of the
Madras High Court applied it. It was by judgment dated 3rd
January, 2020 in, inter alia, W.P. no.24490 of 2019 (M/s. Gemini
Edibles and Fats India Pvt. Ltd. v. Union of India and others),
made against petitioner therein. The judgment was confirmed in
appeal by the Division Bench. He submitted, SWS being a levy
under the Finance Act, it is a separate and distinct levy. The scrip
entitling holder of it benefit of exemption is pursuant to notification
dated 8th April, 2015 issued under the Customs Act. There is no
exemption notification under the Finance Act. M/s. Unicorn
Industries (supra) is clear declaration of law that exemption
pursuant to notification issued under a legislation cannot extend to
exemption of another levy imposed by a different legislation, for
different purpose. The levy of customs duty is for generation of
revenue and levy of SWS is for exactly the stated purpose, welfare.
11. We had made a query to Mr. Sridharan in respect of part of
the sentence in paragraph-41 of M/s. Unicorn Industries (supra)
saying, inter alia, "... ... ... additional duty can always be determined
and merely exemption granted in respect of a particular excise duty,
cannot come in the way of determination of yet another duty based
W.P.(C) no.19961 of 2019
thereupon. ... ... ..." Mr. Sridharan submitted, he would contend
the observation is distinguishable as not applicable to his client's
case. He added, in Union of India v. Modi Rubber Ltd., reported
in (1986) 4 SCC 66, issue before the Supreme Court was, where
there had been partial exemption of duty payable, whether
additional duty was also thus exempted. The Supreme Court upheld
revenue's contention that the additional duty by percentage was to
be calculated on the reduced duty payable. In M/s. Unicorn
Industries (supra) the Supreme Court followed Modi Rubber Ltd.
(supra).
12. Today Mr. Sridharan refers us to view taken by the Division
Bench of Madras High Court in confirming the learned single
Judges' view in M/s. Gemini Edibles and Fats India Pvt. Ltd.
(supra). View of the Division Bench was on judgment dated 10th
May, 2024 in, inter alia, W.A. no.830 of 2020 (M/s. Gemini
Edibles and Fats India Pvt. Ltd. v. Union of India (through its
Secretary), Assistant Commissioner of Customs and others. He
submits, the Division Bench differed from similar views taken by
the Andhra Pradesh, Gujarat and Bombay High Courts, including
earlier view taken by another Division Bench of the same Court in
W.P.(C) no.19961 of 2019
Commissioner of Customs, Tuticorin v. DCW, reported in (2014)
306 ELT 398.
13. He refers us to article 265 in the Constitution. The article is
reproduced below.
"265. Taxes not to be imposed save by authority of
law.--No tax shall be levied or collected except by
authority of law."
(emphasis supplied)
He submits, word 'collected' used in the article stood interpreted
by the Supreme Court in Somaiya Organics v. State of Uttar
Pradesh, reported in 2001 (13) E.L.T.3 (S.C.). Mr. Sridharan relies
on a passage in paragraph-28, reproduced below.
"... ... ... In taxing statute the words 'levy' and 'collect'
are not synonymous terms (refer to Assistant Collector of
Central Excise, Calcutta Division v. National Tobacco
Co. of India Ltd. 1978 (2) E.L.T. (J 416) (S.C.)= (1972) 2
SCC 560 at page 572, while 'levy' would mean the
assessment or charging or imposing tax, 'collect' in
Article 265 would mean the physical realization of the tax
which is levied or imposed. Collection of tax is normally
a stage subsequent to the levy of the same. The
enforcement of levy could only mean realisation of the tax
imposed or demanded. ... ... ..."
W.P.(C) no.19961 of 2019
14. He again draws attention to section 25 to submit, there can
either be levy and collection of tax or exemption. His client being
holder of the scrip is entitled to exemption of duty to extent
provided for in it. Fulfillment of requirement under clause 5 in
General Exemptions no. 162 of notification no.24 of 2015-Cus.,
dated 8th April, 2015 as amended is only for purpose of keeping
track of quantum exemption availed by holder of the scrip. No tax
can be said to have been paid, when exempt. Article 265 in the
Constitution and this aspect of exemption was not considered by the
Division Bench in formulating the view by paragraph-7.51 on
judgment dated 10th May, 2024 (supra). Said paragraph 7.51
(taxmanagementindia.com print) is reproduced below.
"7.51. The above would clearly show that the debit of
MEIS/SEIS scrips is one of the modes of discharging the
duty obligation under the Customs Act. The contention
of the appellant that there is no payment although the
duty credit scrips is debited is ill-founded and runs
counter to the notifications, provisions of the Customs
Act, the FTP and the binding decision of this Court in
TANFAC Industries, supra.
(d) Whether forming part of the Consolidated Fund of
India is a sine qua non for a levy to operate/exist?"
(emphasis supplied)
W.P.(C) no.19961 of 2019
15. Mr. Satapathy submits as rejoinder that above view is correct.
Debit in the scrip is in fact discharge of the requirement to pay
customs duty. He relies on Foreign Trade Policy, Chapter-3 on
Exports from India Schemes, paragraph-3.02. The paragraph
'Nature of Rewards' is reproduced below.
"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 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
W.P.(C) no.19961 of 2019
Tariff Act, 1975 and fee as per paragraph
3.18 of this Policy.
Merchandise Exports from India Scheme
(MEIS)"
(emphasis supplied)
He reiterates, 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.
16. We understand that petitioner is not claiming exemption.
Petitioner's contention is based on section 110 of Finance Act,
2018. Reproduced below are sub-sections (1) and (3) of section
"110. (1) There shall be levied and collected, in
accordance with the provisions of this Chapter, for the
purposes of the Union, a duty of Customs, to be called a
Social Welfare Surcharge, on the goods specified in the
First Schedule to the Customs Tariff Act, 1975
(hereinafter referred to as the Customs Tariff Act), being
the goods imported into India, to fulfil the commitment of
the Government to provide and finance education, health
and social security.
W.P.(C) no.19961 of 2019
(2) ... ...
(3) The Social Welfare Surcharge levied under sub-
section (1), shall be calculated at the rate of ten per
cent. 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 and any sum
chargeable on the goods specified in sub-section (1)
under any other law for the time being in force, as an
addition to, and in the same manner as, a duty of
customs, but not including--
(a) the safeguard duty referred to in sections 8B
and 8C of the Customs Tariff Act;
(b) the countervailing duty referred to in section 9
of the Customs Tariff Act;
(c) the anti-dumping duty referred to in section 9A
of the Customs Tariff Act;
(d) the Social Welfare Surcharge on imported
goods levied under sub-section (1).
... ... ..."
(emphasis supplied)
17. We see from relevant provisions in section 110 reproduced
above that the levy and collection is provided by sub-section (1).
The levy is to be on goods imported into India and accordingly
collected. Sub-section (3) is the charging provision. It says, the levy
W.P.(C) no.19961 of 2019
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.
18. In M/s. Unicorn Industries (supra) case of appellant
before the Supreme Court was in resisting the levy and
collection of National Calamity Contingency duty (NCCD). A
finding by the Supreme Court that appeared to be obvious from
the beginning was, absence of any notification issued under the
legislation or Act providing for the levy and charge for
collection of NCCD, being Finance Act, 2001. On behalf of
petitioner clear submission is, for furthering challenge in the
writ petition reliance is not placed on M/s. Unicorn Industries
(supra) nor SRD Nutrients Private Limited vs. Commissioner
of Central Excise, Guwahati, reported in (2018) 1 SCC 105.
The challenge mounted is on case that where the charge is on
amount of customs duty paid and such duty is exempt, the
charge being a percentage of duty paid, must be zero. No duty
W.P.(C) no.19961 of 2019
was paid so there cannot be a percentage of it, to result in any
sum payable as SWS.
19. We respectfully disagree with 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. Our reasoning might appear
to be similar to that made by the Supreme Court in SRD Nutrients
(supra) but petitioner is not relying on the judgment, understandably
so. 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.
20. Having said that, it appears petitioner has prayed for
exemption in its prayer. It is competent for us to mould the prayer.
On query made Mr. Sridharan submits, his client protested but the
new system in place does not permit registration of any protest. As
W.P.(C) no.19961 of 2019
such, his client was compelled to pay. 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.
21. The writ petition is allowed and disposed of.
( Arindam Sinha )
Judge
( M.S. Sahoo )
Judge
Jyostna/Gs
asant
W.P.(C) no.19961 of 2019
