Social Welfare Surcharge (SWS) applicable even when BCD is ‘Nil’: DRI
Issue
As per Section 110 of The Finance Act, 2018, SWS is to be calculated at the rate of 10% of the BCD.
With respect to goods being exempted through notification, for eg- Advance Authorisation, Export Promotion Capital Goods Scheme, Benefits under Preferential Tarde Agreements / Free Trade Agreements, where the notification only exempts BCD, SWS needs to be paid.
The reason for dispute is that while filling the Bill of Entry for import of such goods having NIL rate of BCD on Customs EDI System, the system calculates EC, SHEC and SWS payable as ‘NIL’.
DRI in few cases have raised demands with respect to SWS on such transaction. DRI seems to have referred to the Case of Unicorn Industries v. Union of India where the Supreme Court
ruled that in absence of notifications containing exemption to additional duties, they can’t be said to have been exempted since if a particular kind of duty has been exempted, other duties cannot be said to have been exempted.
Our View
The Hon’ble High Court of Gujarat in the case of Gujarat Ambuja Exports Ltd., v GOI quashed the portion of circular dated 31.01.2005 to the extent it insists for debiting the value of Education cess in the DEPB Scrips, on the ground that no Customs duty is payable when goods are imported under the DEPB Scrips. Drawing analogy from this case, it can be inferred that even SWS should be exempt if BCD is exempt
It is evident that authorities are taking a view which is pro-revenue. It will surely lead to unnecessary litigation on whether SWS is payable on the notional value of BCD which is not specifically exempt by the relevant notifications. In order to avoid such trade difficulties and unnecessary disputes, the Board may issue appropriate clarification on the subject matter in light of the judgements of various High Courts and its earlier circulars.
