Court grants petitioner exemption for High Speed Diesel Oil (HSD) in SEZ leased equipment.

The court allowed the writ petition, granting the petitioner the exemption for High Speed Diesel Oil (HSD) used in leased equipment for authorized operations within a Special Economic Zone (SEZ). The court found that the SEZ Act and Rule 27 provide broad exemptions for procuring goods necessary for authorized operations, including HSD for manufacturing activities. The respondent's differing stands and narrow interpretation were deemed unjustified, leading to the favorable outcome for the petitioner without costs awarded.

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Issues Involved:
1. Eligibility of High Speed Diesel Oil (HSD) for exemption from Central Excise Duty under the SEZ Act and Rules.
2. Interpretation of Rule 27 of the SEZ Rules regarding exemption eligibility.
3. The respondent's differing stands on the exemption claim.
4. The plea of alternate remedy by the respondent.

Detailed Analysis:

1. Eligibility of High Speed Diesel Oil (HSD) for Exemption from Central Excise Duty:
The petitioner, engaged in manufacturing Offshore Structures within a Special Economic Zone (SEZ), sought exemption from Central Excise Duty for HSD/fuel used in operating equipment leased from contractors and sub-contractors, exclusively for authorized operations. The SEZ Act, 2005, and SEZ Rules, 2006, govern these activities, providing tax exemptions for goods and services exported from, imported into, or procured from the Domestic Tariff Area (DTA) by an SEZ unit.

2. Interpretation of Rule 27 of the SEZ Rules:
Rule 27(1) of the SEZ Rules allows SEZ units to procure goods, including capital goods and consumables, without payment of duty, provided they are used for authorized operations. The proviso to Rule 27 extends this exemption to contractors for setting up and maintaining the factory building. The petitioner argued that HSD used in leased equipment for manufacturing activities should be exempt from duty, as it is essential for running the capital equipment involved in authorized operations.

3. The Respondent's Differing Stands on the Exemption Claim:
The respondent initially confirmed that HSD could be procured without duty if not used for internal/external transport to employees and goods provided by service providers. However, the Development Commissioner later rejected the claim, stating that the exemption applies only to setting up and maintaining the factory building, not regular production. The impugned order further stated that diesel, being a consumable, should be used directly in manufacturing activities to qualify for exemption. The petitioner countered that HSD is used to run capital equipment directly involved in manufacturing, making it eligible for exemption.

4. The Plea of Alternate Remedy by the Respondent:
The respondent argued that the petitioner should have approached the Unit Approval Committee and Board of Approval for redressal instead of filing a writ petition. However, the court found that the petition raised a question of interpretation of the SEZ Act and Rules, with no factual disputes, making the writ petition maintainable.

Conclusion:
The court concluded that the SEZ Act and Rule 27 provide broad exemptions to SEZ units for procuring goods and consumables necessary for authorized operations, including HSD used in leased equipment for manufacturing. The respondent's differing stands and narrow interpretation were found unjustified. The writ petition was allowed, granting the petitioner the sought exemption for HSD used in leased equipment for authorized operations, with no costs awarded.

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