SEZ de-notification and cancellation of allotment require fair reconsideration where commercial unviability and revenue safeguards are in issue

A SEZ unit's cancellation and eviction were challenged where the intended customer units had exited the SEZ, leaving the project commercially unviable. The text notes that de-notification under Rule 8 of the SEZ Rules requires a developer's application and Board recommendation, but also records that substantial investment had been made and the claimed prejudice to SEZ contiguity was not persuasive on the facts. It further states that post-GST supplies to DTA units remain subject to the GST framework, and that revenue interests may be protected through conditions and recovery of concessions with interest. The cancellation and eviction were quashed, and de-notification was remitted for fresh consideration.

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Issues: Whether the cancellation of the land allotment and refusal to de-notify the unit from the Special Economic Zones regime were sustainable, and whether the consequential eviction steps could stand.

Analysis: The land was allotted for a SEZ unit, but the intended customer units had exited the SEZ, making the petitioner's unit commercially unviable as an SEZ unit. The statutory scheme under Rule 8 of the Special Economic Zones Rules, 2006 contemplates de-notification only on the recommendation of the Board and on an application by the developer; however, the Court found that the petitioner had made substantial investment and that the asserted prejudice to SEZ contiguity was not convincing on the facts. It further noted that post-GST supplies to a DTA unit would be subject to the applicable GST framework, and that revenue interests could be protected by appropriate conditions and recovery of concessions with interest, if warranted.

Conclusion: The cancellation order and the consequential eviction action were quashed, and the matter was remitted to the first respondent for fresh consideration of de-notification with liberty to impose suitable conditions to safeguard SEZ interests.

Final Conclusion: The petitioner obtained relief against the cancellation and eviction measures, but the question of de-notification was left to be reconsidered afresh by the developer in accordance with the SEZ law and conditions to protect revenue and the integrity of the zone.

Ratio Decidendi: Where a SEZ unit has become commercially unviable and the statutory mechanism permits de-notification through the developer's application and Board recommendation, the authority must reconsider the request fairly on relevant facts and cannot sustain cancellation merely on a mechanical refusal when revenue interests can be protected by conditions.

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