SEZ units exempt from CVD duty if local manufacturers are exempt

The court held that SEZ units should not be liable to pay CVD if local manufacturers of similar goods are exempt from such duty. The petition was allowed, the order was quashed, and respondents were restrained from levying CVD on goods cleared from the SEZ unit to DTA.

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Issues Involved:
1. Chargeability of additional customs duty (Countervailing Duty or CVD) on clearances from SEZ to DTA.
2. Applicability of exemption notifications to SEZ units.
3. Legislative amendments and their impact on SEZ units' duty liabilities.

Issue-wise Detailed Analysis:

1. Chargeability of Additional Customs Duty (CVD) on Clearances from SEZ to DTA:
The petitioner challenged an order dated 23rd January 2013, where the Specified Officer (SEZ) of Customs rejected the petitioner's request for a refund of additional customs duty (CVD). The petitioner argued that since local manufacturers are exempt from excise duty on the same goods, the SEZ unit should not be liable for CVD on clearances to the Domestic Tariff Area (DTA). The SEZ authorities held a different view, leading to the petition for quashing the order and restraining the respondents from levying CVD on such clearances.

2. Applicability of Exemption Notifications to SEZ Units:
The petitioner contended that CVD is imposed to balance the excise duty burden of local manufacturers. Since local manufacturers are exempt from excise duty under specific notifications, the SEZ unit should also be exempt from CVD. The SEZ Act, 2005, and corresponding amendments in the Central Excise Act were cited to support this argument. The respondent argued that Section 30 of the SEZ Act and Section 5A of the Central Excise Act clearly mandate the payment of CVD on DTA clearances by SEZ units.

3. Legislative Amendments and Their Impact on SEZ Units' Duty Liabilities:
The SEZ Act was enacted to provide a stable policy framework for SEZs, defining SEZs as territories outside the customs territory of India for authorized operations. Section 30 of the SEZ Act stipulates that goods removed from an SEZ to a DTA are chargeable to duties of customs, including CVD. Section 3 of the Customs Tariff Act imposes additional duty equal to the excise duty on like articles produced or manufactured in India. Exemption notifications under the Central Excise Act exempted the product in question from excise duty, implying no CVD should be levied on SEZ clearances to DTA.

The court noted that Section 5A of the Central Excise Act, which allows the Central Government to grant exemptions, continues to state that such exemptions do not apply to goods produced in SEZs unless specifically provided. However, the SEZ Act and subsequent amendments to the Central Excise Act have changed the legislative scheme, indicating that SEZ units should not be liable for CVD if local manufacturers are exempt.

Conclusion:
The court concluded that the legislative intention is that SEZ units should not be liable to pay CVD if local manufacturers of like goods are exempt from such duty. The petition was allowed, and the impugned order dated 23rd January 2013 was quashed. The respondents were restrained from levying CVD on the goods cleared by the petitioner from its SEZ unit to DTA.

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