SEZ tax exemption prevails for developer and co-developer where special statute grants relief on goods entering or leaving the zone

A Special Economic Zone developer or co-developer was held entitled to exemption from VAT where the special zone statute granted exemption from tax, duty, cess and other levies on goods imported into or exported out of the SEZ. Section 7(6) of the Haryana VAT Act was treated as confined to sales to a registered dealer for setting up or operating a unit and was not read to extend the general VAT exemption to a developer or co-developer. The clarification denying the benefit was therefore unsustainable, and the SEZ exemption under the special enactment prevailed to that extent.

---

---

Issues: Whether a developer or co-developer of a Special Economic Zone is entitled to exemption from payment of VAT under the Haryana Special Economic Zone Act, 2005, despite the limitation in Section 7(6) of the Haryana Value Added Tax Act, 2003.

Analysis: Section 7(6) of the Haryana Value Added Tax Act, 2003 exempts payment of tax in respect of sales made to a registered dealer for specified purposes connected with setting up and operation of a unit in a Special Economic Zone, and the exemption was construed as not extending to a developer or co-developer under that provision. However, Section 11(1)(i) of the Haryana Special Economic Zone Act, 2005 grants exemption from payment of tax, duty, cess and other levies under existing State law in respect of goods imported into or exported out of the Special Economic Zone. On that basis, the entitlement of a developer and co-developer to exemption was sustained, and the clarification denying such benefit was held unsustainable.

Conclusion: The developer and co-developer of a Special Economic Zone are entitled to exemption from payment of tax under the Haryana Value Added Tax Act, 2003 by virtue of Section 11(1)(i) of the Haryana Special Economic Zone Act, 2005.

Ratio Decidendi: A special economic zone enactment granting exemption for goods imported into or exported out of the zone prevails to the extent of that exemption, and a developer or co-developer cannot be denied the benefit where the special statute so provides, even if the general VAT provision is confined to an individual unit.

---