Customs duty on energy from SEZ to DTA ruled unconstitutional, petitioners granted refund.

The court held that the Government Notification No.25/2010-Customs levying customs duty on electrical energy removed from SEZ to DTA was unconstitutional and violated Articles 14 and 265 of the Constitution. The petitioners were granted exemption from paying customs duty for the specified period and were entitled to a refund of the duty paid on raw materials. The retrospective levy of customs duty was deemed illegal, and the Bank Guarantee furnished by the petitioners was ordered to be returned by the respondent authority.

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Issues Involved:
1. Constitutionality and legality of Government Notification No.25/2010-Customs dated 27.2.2010.
2. Applicability of customs duty on electrical energy removed from Special Economic Zone (SEZ) to Domestic Tariff Area (DTA).
3. Retrospective levy of customs duty.
4. Double taxation.
5. Refund of Bank Guarantee.

Detailed Analysis:

Constitutionality and Legality of Notification No.25/2010-Customs:
The petitioners challenged the constitutionality of Notification No.25/2010-Customs dated 27.2.2010, which levied a 16% ad valorem customs duty on electrical energy removed from SEZ to DTA. They argued that this notification is ultra vires Entry 83 of List I of Schedule VII of the Constitution, Section 12 of the Customs Act, Section 30 of the SEZ Act, and violates Articles 14, 19(1)(g), and 265 of the Constitution of India.

Applicability of Customs Duty:
The petitioners contended that under Section 30(a) of the SEZ Act, goods removed from SEZ to DTA should be treated as imported goods and thus should be exempted from customs duty as per Section 25(1) of the Customs Act. The respondents argued that Section 30 of the SEZ Act is a charging section akin to Section 12 of the Customs Act, and the duty is levied on goods removed from SEZ to DTA.

Retrospective Levy of Customs Duty:
The petitioners argued that the retrospective levy of customs duty from 26.6.2009 to 27.2.2010 is illegal and arbitrary. The court noted that any amendment imposing a new tax or duty must be prospective as it amounts to substantive law. The retrospective amendment in this case was deemed illegal and arbitrary.

Double Taxation:
The petitioners claimed that they were already paying duty on raw materials like coal under Rule 47(3) of the SEZ Rules, and the additional customs duty on electrical energy amounted to double taxation. The court agreed, stating that the petitioner should not suffer double taxation and is entitled to a refund of the duty paid on raw materials.

Refund of Bank Guarantee:
The court directed the respondent authority to return the Bank Guarantee furnished by the petitioners in compliance with the interim order dated 6.5.2010.

Conclusion:
The court held that the entire proviso to Government Notification No.25/2010-Customs dated 27.2.2010 is ultra vires Articles 14 and 265 of the Constitution of India and is quashed. The petitioners are entitled to exemption from payment of customs duty for the period from 26.6.2009 to 15.9.2010 on the electricity cleared to DTA from SEZ. The respondent authority is directed to return the Bank Guarantee furnished by the petitioners.

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