Customs authority can demand duty on bunkers from SEZ used for coastal runs, not exempt under SEZ Act.

The Tribunal held that the Customs authority has jurisdiction to demand duty on duty-free bunkers received from SEZ and used for coastal runs. It was determined that the SEZ Act, 2005, provisions were not applicable in this case as the bunkers were initially declared for foreign voyages and later converted to coastal runs, creating a duty liability under the Customs Act. The matter was remanded to the Commissioner (Appeals) for further consideration on all issues, including merit and limitation, with the impugned order set aside and Revenue's appeals disposed of by way of remand.

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Issues Involved:
1. Jurisdiction of the Customs Authority to demand duty on duty-free bunkers received from SEZ.
2. Applicability of Section 30 of the SEZ Act, 2005 versus the Customs Act, 1962.
3. Validity of the demand notice under Section 28 of the Customs Act, 1962.
4. Confiscation and penalty provisions under Section 111(o) of the Customs Act, 1962.
5. Limitation period for issuing the demand notice.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Customs Authority to demand duty on duty-free bunkers received from SEZ:
The primary contention revolves around whether the Customs authority has jurisdiction to demand duty on duty-free bunkers received from SEZ by vessels initially declared for foreign voyages but later converted to coastal runs. The Customs authority argued that the vessels received duty-free bunkers under the declaration of foreign voyages. However, the vessels were later converted to coastal runs, necessitating the duty payment on the bunkers. The respondents argued that the jurisdiction to question such duty-free clearance from SEZ units and demand duty lies with the Authorized Officers of the SEZ under the SEZ Act, 2005, and not with the Additional Commissioner Customs (Preventive) Jamnagar.

2. Applicability of Section 30 of the SEZ Act, 2005 versus the Customs Act, 1962:
The respondents contended that the charging provision for goods removed from SEZ to the domestic tariff area is Section 30 of the SEZ Act, 2005. They argued that the SEZ Act, 2005, being a special self-contained code, overrides the Customs Act, 1962, and the Customs authority does not have jurisdiction to demand duty on goods cleared from SEZ. The Customs authority, however, maintained that Section 30 of the SEZ Act, 2005, is not applicable in this case, as the goods were cleared from SEZ duty-free based on the declaration for foreign voyages, and the subsequent conversion to coastal runs created a liability for duty-free bunkers.

3. Validity of the demand notice under Section 28 of the Customs Act, 1962:
The respondents challenged the demand notice issued under Section 28 of the Customs Act, 1962, arguing that the taxable event is specified under Section 30 of the SEZ Act, 2005, and not under the Customs Act. They contended that the demand notice is without jurisdiction and barred by limitation, as the bunkers were cleared in June 2008, whereas the demand notice was issued on 18.09.2009. The Customs authority argued that the demand was correctly issued under the Customs Act, as the duty-free bunkers were used for coastal runs, creating a liability under the Customs Act.

4. Confiscation and penalty provisions under Section 111(o) of the Customs Act, 1962:
The respondents argued that Section 111(o) of the Customs Act, 1962, cannot be applied to goods cleared from SEZ, as the duty is leviable under Section 30 of the SEZ Act, 2005, and not under the Customs Act. The Customs authority maintained that the duty-free bunkers were received based on the declaration for foreign voyages, and the subsequent conversion to coastal runs without paying duty warranted confiscation and penalty under Section 111(o) of the Customs Act.

5. Limitation period for issuing the demand notice:
The respondents contended that the demand notice issued under Section 28 of the Customs Act, 1962, is barred by limitation, as the bunkers were cleared in June 2008, and the demand notice was issued on 18.09.2009. The Customs authority argued that the demand notice was issued within the permissible period, considering the circumstances and the subsequent conversion of the vessels to coastal runs.

Conclusion:
The Tribunal found that the Customs authority has jurisdiction to demand duty on the duty-free bunkers received from SEZ and used for coastal runs. The Tribunal held that the provisions of the SEZ Act, 2005, are not applicable in this case, as the goods were received based on the declaration for foreign voyages, and the subsequent conversion to coastal runs created a liability under the Customs Act. The Tribunal remanded the matter to the Commissioner (Appeals) to consider all issues raised, including merit and limitation, and record a finding on the same. The impugned order was set aside, and the Revenue's appeals were disposed of by way of remand.

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