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Issues: (i) Whether sales by registered dealers to industrial units situated in a Special Economic Zone are deemed exports so as to attract the benefit of refund or set-off under the Kerala Value Added Tax Act, 2003. (ii) Whether amounts already refunded on the basis of the earlier clarification could be recovered from the assessees after the later clarification.
Issue (i): Whether sales by registered dealers to industrial units situated in a Special Economic Zone are deemed exports so as to attract the benefit of refund or set-off under the Kerala Value Added Tax Act, 2003.
Analysis: The statutory scheme of the Special Economic Zones Act, 2005 treats the zone as outside the customs territory only for authorised operations, and separately provides tax exemptions through specific provisions. The Central Sales Tax Act, 1956 expressly grants exemption for inter-State sales to SEZ units only in the manner contemplated by section 8(6), while the Kerala Value Added Tax Act, 2003 contains its own exemption provision for specified supplies to SEZ units in the State. The governing legal position is that SEZ supplies are not deemed exports for all purposes, but are taxable sales subject only to the exemptions specifically enacted.
Conclusion: The sale of goods to units in the SEZ does not constitute a deemed export; the assessees are governed only by the relevant exemption provisions and not by a general deemed-export treatment.
Issue (ii): Whether amounts already refunded on the basis of the earlier clarification could be recovered from the assessees after the later clarification.
Analysis: The earlier clarification had operated until it was modified by the impugned proceedings, and there was no indication that the later clarification was to operate retrospectively. As a result, refunds granted while the earlier clarification remained operative were supported by the then-prevailing departmental position.
Conclusion: The assessees are not liable to refund amounts already refunded to them on the strength of the earlier clarification.
Final Conclusion: The clarification treating SEZ sales as not being deemed exports is sustained, but the demand for repayment of refunds already granted under the earlier clarification is set aside; the appeals are thus disposed of with partial relief to the assessees.
Ratio Decidendi: A sale to an SEZ unit is not a deemed export for general tax purposes unless the governing statute expressly grants that treatment, and a later modification of clarification does not authorise retrospective recovery of refunds already granted under the earlier operative clarification absent such retrospective effect.
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