SEZ to DTA removal does not create fresh customs duty where goods were exempt on entry and remained duty-free as scrap.

Customs duty on goods removed from a Special Economic Zone to the Domestic Tariff Area depends on whether duty was otherwise leviable when the goods entered the SEZ. Goods imported for authorised operations are exempt under Section 26(1)(a) of the Special Economic Zones Act, 2005, and Section 30(a) permits duty on removal only where customs duty would have been chargeable on import. On the stated facts, the goods were scrap machine parts that had not attracted customs duty on entry into the SEZ, so their later removal as scrap did not create a fresh customs liability. The duty collected from the auction purchaser was therefore unwarranted and refundable.

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Issues: Whether goods removed from a Special Economic Zone to the Domestic Tariff Area after auction were chargeable to customs duty.

Analysis: The chargeability of customs duty on removal from a Special Economic Zone depends on whether the goods were duty-liable when imported into the Special Economic Zone, subject to the exemption scheme under the Special Economic Zone Act, 2005. Goods imported into the Special Economic Zone for authorised operations are entitled to exemption under Section 26(1)(a), while Section 30(a) permits duty on removal to the Domestic Tariff Area only where customs duty would otherwise be leviable on such goods when imported. On the facts found, the goods consisted of scrap machine parts and had not attracted customs duty on entry into the Special Economic Zone. Their subsequent removal as scrap did not create a fresh customs liability.

Conclusion: The customs duty collected from the auction purchaser was unwarranted and liable to be set aside, and refund was directed.

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