Social Welfare Surcharge (SWS) introduced by Finance Bill 2018, is charged on the goods imported in India and is calculated at the rate of 10% on the aggregate of duties, taxes cesses levied and collected as per the Customs Act, 1962.
Until 10.01.20, there was a prevalent practice of paying off such surcharge by making debit of duty credit scrips of MEIS and SEIS, however vide release of circular no.02/2020-customs dated 10.01.2020 this practice has been curbed and such surcharge has to be paid mandatorily in cash.
The aforesaid change was brought in by the Ministry of Finance considering the fact that the duty credit scrips issued under MEIS and SEIS can be used for payment of Basic Customs Duty and Additional Customs Duty for import of inputs and for payment of Central Excise Duties on domestic procurement of inputs or goods as per the Foreign Trade Policy.1 Moreover, the use of duty credit scrip is envisaged by customs exemption notification which allows debit of Basic Customs Duty and additional customs duty from the duty credit scrip.2 Therefore, the debit of scrips for payment of Social Welfare Surcharge, was not mentioned either in the Foreign Trade Policy or in the Customs Notification.
Judgment of Hon’ble Supreme Court in the case of M/s Unicorn Industries Vs. Union of India and Others (Civil Appeal Nos. 9237 & 9238 of 2019):
In the aforesaid case, the Hon’ble Supreme Court held that if one kind of duty is exempt it cannot be interpreted that other kind of duties are automatically exempted. “A 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 different purpose cannot be said to have been exempted.” Therefore, it can be concluded that if the exemption of SWS is not specifically mentioned in the customs notification one cannot take exemption of the same or the payment of the same cannot be made by utilizing of duty credit scrip.
In relation to Past cases wherein SWS has been paid by utilizing of Duty Credit Scrip:
It has been categorically held by the Board that in respect to past cases, and for the objective of ease of doing business it should not be insisted that recoveries should be made in cash wherein duty has been paid by debiting of duty credit scrip. It may be inferred that payment by utilizing of duty credit scrips may be accepted as revenue collected.
On the above backdrop, one may conclude that from 10.01.20 the Social Welfare Surcharge is to be mandatorily paid in cash and the Directorate of Systems has been requested to make the relevant system level changes in this regard.
1. Para 3.15 of the FTP 2015-20.
2.Customs Notification No. 24/2015-cus dated 08.04.15
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