CBEC’s Circular on CVD on Steam Coal boosts Importers’ Interest

In Depth

CBEC’s Circular on CVD on Steam Coal boosts Importers’ Interest

Srinivas Kotni | December 2013

Introduction

A new circular — Circular No. 41 of 2013 — issued by the Central Board of Excise & Customs (CBEC) reaffirms the settled proposition of law that an assessee can avail a more beneficial disposition when two options are available.

The circular is significant in the sense that it enables an assessee to avail Basic Customs Duty (BCD) exemption under one Free Trade Agreement (FTA) notification and Additional Customs Duty (CVD) exemption under a totally different general exemption notification, even though both the notifications exempt BCD, though at different rates.

THE SETTLED LEGAL POSITION

The cardinal principle of fiscal law in India has been to entitle an assessee a more beneficial disposition. In case two options are available as per law, the assessee, whether as a manufacturer, importer or a service provider, can choose the option which is more beneficial out of the two. This position of law has been confirmed by the Supreme Court of India in various cases like CCE, Baroda Vs. Indian Petrochemicals – 1997 (92) ELT 13 (SC); HCL Limited Vs. COC, New Delhi – 2001 (130) ELT 321 (SC) and Share Medical Care Vs. Union of India – 2007 (209) ELT 321 (SC), among others.

MEAT OF THE MATTER

The factual background before the CBEC was Chapter 27 of the Central Excise Tariff which provides that excise duty shall be paid @ 6% on steam coal falling under chapter sub-heading 27011920. Similarly, the Customs Tariff provides 10% Basic Customs Duty on the said item. However, item No. 123 of the Notification No. 12/2012- Customs dated March 17, 2012 provides that steam coal falling under subheading 27011920 attracts BCD at 2% and CVD (equivalent to Excise Duty) also at 2%. This exemption is a general exemption which is available to importers at large.

Further, a different FTA Notification No. 46/2011-Customs dated June 1, 2011, provides that an importer can enjoy preferential BCD @ 0% in case of steam coal imported from Indonesia. This exemption extends FTA benefit for imports from specified countries only.

In this background, the CBEC was required to clarify whether an importer while availing the BCD exemption as provided under FTA Notification No. 46/2011 can simultaneously avail the benefit of concessional CVD @2% as per the General Exemption Notification No.

12/2012-Customs dated March 17, 2012, even though the later notification also provides for BCD exemption though at 2%. To put it in simple words, whether an importer can avail two different exemption notifications, one for availing 0% BCD under FTA and the other for 2% CVD under General Exemption, though the later general exemption notification also covers BCD @ 2%.

The CBEC, after examining the matter has issued Circular No. 41/2013-Customs, dated October 21, 2013, on the subject of applicability of CVD on steam coal imported from Indonesia under FTA.

Through this circular, the CBEC has removed ambiguity as to whether an importer, while availing of the BCD exemption @ 0% under FTA, can simultaneously avail the benefit of concessional CVD @ 2% as per general exemption notification No.12/2012 Customs, or he/she has to pay the CVD at 6%, which is equal to the rate of excise duty applicable on steam coal when CENVAT facility has been availed of.

The CBEC has clarified that an importer, while availing the BCD exemption on steam coal under FTA notification No. 46/2011- Customs, can simultaneously avail the concessional CVD at 2% under general exemption notification No. 12/2012- Customs.

CONCLUSION

This clarification is significant in as much as importers can now avail a part of an exemption notification only for CVD and a totally different exemption for BCD like in the case of FTA exemptions. It has been now conclusively clarified that an importer paying BCD on a concessional rate under a notification can also avail the benefit(s) of another notification regarding payment of CVD at concessional rate and the department will not deny the benefit and/or restrict the importer on the ground that the importer cannot avail the benefits of two notifications simultaneously regarding payment of customs duty at a concessional rate.