A person who gets an exemption is not considered to be fulfilling their duty to pay. The Orissa High Court has approved Dalmia Cement’s writ petition.
The Orissa High Court approved a petition from a Cement Trader, stating that the trader, who imports petroleum coke, does not need to pay the social welfare surcharge on customs duty that is exempt under the scrip from the Merchandise Exports from India Scheme (MEIS). The trader challenged the requirement to pay the Social Welfare Surcharge (SWS) in the writ petition. The Division Bench, which included Justice Arindam Sinha and Justice M.S. Sahoo, declared that the petitioner is not obligated to pay the SWS based on the customs duty that is exempted under the scrip. Senior Advocate V. Sridharan represented the petitioner, while Senior Standing Counsel T. K. Satapathy represented the opposing parties.
The petitioner argued that it imports petroleum coke needed for cement production. Since it is not an exporter, it obtained a duty credit scrip under the MEIS. This scrip exempted it from paying the full customs duty on the imported goods. The scrip was issued under the authority of sub-section (1) of section 25 of the Customs Act, 1962. The petitioner also referenced sub-section (3) of section 136 of the Finance Act, 2001, highlighting that the process is governed by the Central Excise Act, 1944, and its rules. The additional duty of NCCD applies to specific goods listed in the seventh schedule concerning excise duty. The petitioner claimed that since it was exempt from customs duty, and since the SWS is a percentage of that duty, the SWS should also be zero.
The respondent argued that the petitioner is not eligible for any exemption because the SWS charge is governed by the Finance Act of 2018, and no notification has been issued under this Act to exempt anyone from paying SWS. The debit in the scrip indicates that the payment has been made. The SWS charged represents the percentage of the duty that has been paid. The Bench referred to Sub-section (3) of Section 110, which outlines the charging provision. It states that the levy under Sub-section (1) is calculated at 10% of the total duties, taxes, and cesses collected by the Central Government in the Ministry of Finance (Department of Revenue) under Section 12 of the Customs Act, 1962. The Bench noted that there is no disagreement regarding the fact that the scrip held by the petitioner exempts them from customs duty collection.
The Bench also referenced the Madras High Court ruling in the case of M/s. Gemini Edibles and Fats India Pvt. Ltd. v. Union of India, where it was stated that using MEIS/SEIS scrips is a way to fulfill duty obligations under the Customs Act. The Bench expressed disagreement with the Madras High Court’s Division Bench decision from May 10, 2024. It stated, “If a person receives an exemption, they are not fulfilling their duty payment obligation. There is no collection following the levy. The charging provision in Sub-section (3) of Section 110 is based on the percentage of customs duty paid to the Central Government. Since the duty paid is zero, the collection is also zero, making the percentage zero as well.”
The Bench observed that the Petitioner is following the rules in section 110 of the Finance Act, 2018, which apply to its situation. However, the charging provision allows it to avoid paying SWS. The debits in the scrip are meant to measure the amount of exemption used. Since the petitioner was forced to make a payment, the Bench decided that the petitioner is entitled to a declaration stating that it does not need to pay SWS based on the customs duty that is exempt under the scrip it holds.
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
