SEZ exemption limited to authorised operations; inter-State stock transfers from the domestic tariff area attracted purchase tax.

SEZ exemption provisions must be confined to goods used for authorised operations; inter-State stock transfers from a warehouse in the SEZ, after removal to the domestic tariff area, did not qualify for exemption and attracted the purchase tax consequences under the governing State and SEZ statutes. The challenge to rectification also failed because the petitions sought to reopen assessment conclusions, no mistake apparent on the face of the record was shown, and the assessee had an alternative appellate remedy. The Madras HC therefore sustained the assessment orders and the orders rejecting rectification.

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Issues: (i) Whether inter-State stock transfers from a warehouse located in a Special Economic Zone were exempt from purchase tax under the Tamil Nadu Special Economic Zones Act, 2005 read with the Tamil Nadu Value Added Tax Act, 2006. (ii) Whether rejection of the rectification petitions under Section 84 of the Tamil Nadu Value Added Tax Act, 2006 called for interference.

Issue (i): Whether inter-State stock transfers from a warehouse located in a Special Economic Zone were exempt from purchase tax under the Tamil Nadu Special Economic Zones Act, 2005 read with the Tamil Nadu Value Added Tax Act, 2006.

Analysis: The exemption under Section 12 of the Tamil Nadu Special Economic Zones Act, 2005 applies only to goods meant to carry on authorised operations. The goods in question were removed from the Special Economic Zone to the domestic tariff area and then transferred to branches in other States. Section 15 of the Tamil Nadu Special Economic Zones Act, 2005 specifically provides that goods removed from a Special Economic Zone to the domestic tariff area are chargeable to tax. The Court held that inter-State stock transfer was not part of the authorised operations covered by the exemption, and that accepting the petitioner's construction would defeat the scheme of the Special Economic Zone legislation and the levy contemplated by the State Act.

Conclusion: The levy of purchase tax was upheld and the exemption claim failed.

Issue (ii): Whether rejection of the rectification petitions under Section 84 of the Tamil Nadu Value Added Tax Act, 2006 called for interference.

Analysis: The rectification petitions sought to reopen conclusions already reached in the assessment orders. The petitioner had an efficacious statutory appellate remedy, and no mistake apparent on the face of the record was shown. The rejection of rectification was therefore consistent with the limited scope of Section 84 of the Tamil Nadu Value Added Tax Act, 2006.

Conclusion: The rejection of the rectification petitions was upheld.

Final Conclusion: The writ petitions were found to be without merit, and the assessment orders as well as the orders rejecting rectification were sustained.

Ratio Decidendi: Exemption provisions for Special Economic Zone units must be confined to transactions falling within authorised operations, and goods removed from a Special Economic Zone to the domestic tariff area attract the specific tax consequences provided by the governing special economic zone statute.

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