Customs duty on DTA to SEZ supplies requires clear statutory charging power, not legal fiction or delegated rules.

Customs duty could not be levied on supplies made by a Domestic Tariff Area unit to an SEZ unit for authorised operations because the Customs Act charging provisions apply only to goods crossing India's territorial limits. The SEZ Act provides exemptions and concessions but does not create an independent charging provision, and the Section 53 deeming fiction cannot be extended to impose tax liability. The non-obstante clause in Section 51 operates only where there is an actual inconsistency, which was absent here. Delegated rules could not enlarge the statutory charging power or justify collection of duty or bank guarantees without legislative authority.

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Issues: Whether goods supplied by a Domestic Tariff Area unit to a Special Economic Zone unit were liable to customs duty or export duty under the Special Economic Zones Act, 2005 or the Customs Act, 1962, and whether the authorities could demand bank guarantees and duty on that basis.

Analysis: Article 265 of the Constitution of India requires that tax or duty be levied and collected only by authority of law. The charging provisions of the Customs Act, 1962, particularly Section 12(1) read with the definitions of import and export in Sections 2(18), 2(23) and 2(27), apply only to goods crossing the territorial limits of India. Goods supplied by a DTA unit to an SEZ unit remain within India and do not satisfy that charging provision. The SEZ Act, 2005 grants exemptions, drawbacks and concessions, but it does not itself create a charging provision for levy of customs duty on such supplies. The deeming fiction in Section 53(1) is limited to authorized operations and cannot be extended to create a tax liability. The non-obstante clause in Section 51(1) operates only where there is inconsistency, and no such inconsistency exists because the SEZ Act does not impose the levy in the first place. The SEZ Rules and the Drawback Rules cannot enlarge the charging power or authorize collection of duty without statutory backing.

Conclusion: The DTA supplier was not liable to pay customs duty or export duty on supplies made to SEZ units for authorized operations, and the demand for bank guarantees and duty was authority and invalid.

Final Conclusion: The writ petitions were allowed and the impugned proceedings were quashed, leaving no levy of duty on the intra-India supply to SEZ units for authorized operations.

Ratio Decidendi: A taxing levy can arise only from clear statutory charging language, and a legal fiction or delegated rule cannot be used to create customs duty on supplies made within India to an SEZ unit for authorized operations where the parent statute does not impose such levy.

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