SEZ unit denied EPCG scheme clearance; liable for customs duty.

The Tribunal dismissed the appeal, affirming that the SEZ unit is not eligible to clear capital goods under EPCG scheme without exiting SEZ and is liable for customs duty and interest. The Commissioner (Appeals) order was found to be valid and correctly reasoned.

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Issues Involved:

1. Eligibility of SEZ unit to clear capital goods under EPCG scheme without exiting SEZ.
2. Liability for customs duty and interest on clearance of capital goods from SEZ to DTA.
3. Validity of the Commissioner (Appeals) order being non-speaking and alleged violation of natural justice principles.

Summary:

Issue 1: Eligibility of SEZ Unit to Clear Capital Goods under EPCG Scheme without Exiting SEZ

The appellant argued that SEZ law permits the sale of capital goods from SEZ to DTA under EPCG authorization, citing Section 30 of the SEZ Act and Rules 47, 48, and 49 of SEZ Rules. They contended that judicial decisions support the interpretation that exemptions available at the time of import should also apply to DTA clearances. They further argued that Rule 74 does not restrict EPCG benefits only to the time of exit from SEZ, and the DTA buyer can obtain EPCG authorization for indigenous procurement of capital goods.

The Tribunal, however, held that Rule 74(4) of SEZ Rules explicitly allows EPCG benefits only at the time of exit from SEZ. Accepting the appellant's interpretation would render the specific provision of "one time option to exit" redundant. The Tribunal emphasized that statutory provisions must be interpreted to give effect to every word, following the principle "ut res magis valeat quam pereat."

Issue 2: Liability for Customs Duty and Interest on Clearance of Capital Goods from SEZ to DTA

The appellant argued that the duty liability lies with the DTA unit, which filed the Bill of Entry for home consumption, and has fulfilled its Export Obligation under the EPCG authorization. They contended that the SEZ unit should not be liable for duty as it operates as a separate entity from the DTA unit. Furthermore, they claimed that customs authorities cannot demand duty from the SEZ unit as the EPCG authorization was valid and not canceled by DGFT.

The Tribunal found that the appellant violated the bond-cum-undertaking conditions under Rule 22 of SEZ Rules by clearing capital goods under EPCG without exiting SEZ or obtaining permission from the Development Commissioner. It held that the SEZ unit is liable for customs duty and interest, as Rule 34 requires duty payment on goods used for unauthorized purposes as if cleared for home consumption.

Issue 3: Validity of Commissioner (Appeals) Order being Non-Speaking and Alleged Violation of Natural Justice Principles

The appellant claimed that the Commissioner (Appeals) order was non-speaking, violating principles of natural justice, and did not address specific submissions made by the appellant.

The Tribunal upheld the Commissioner (Appeals) order, finding that it correctly addressed the issues and interpreted the statutory provisions. It concluded that the appellant's arguments lacked merit and dismissed the appeal.

Conclusion:

The Tribunal dismissed the appeal, affirming that the SEZ unit is not eligible to clear capital goods under EPCG scheme without exiting SEZ, and is liable for customs duty and interest. The Commissioner (Appeals) order was found to be valid and correctly reasoned.

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