2024 (1) TMI 305 - HC - Customs

SEZ exemption from GST compensation cess: interpretation finds customs duty wording excludes GST compensation cess, so no exemption applies.

The text analyses whether SEZ units are exempt from GST compensation cess, distinguishing cess from general taxes and duties and explaining that exemption ... Exemption from taxes, duties or cess under the SEZ Act - interpretation of Section 26(1)(a) of the SEZ Act - distinction between duty and cess - requirement of inclusion in the First Schedule for exemption under Section 7Interpretation of Section 26(1)(a) of the SEZ Act - distinction between duty and cess - requirement of inclusion in the First Schedule for exemption under Section 7 - Whether SEZ units are exempted from payment of GST compensation cess on imported goods (coal) under the SEZ Act. - HELD THAT: - The court held that the SEZ Act is a self-contained code providing specified exemptions. Section 7 expressly exempts 'taxes, duties or cess' only insofar as the enactments imposing them are listed in the First Schedule; the GST (Compensation to States) Act, 2017 is not included in that Schedule. Section 26(1)(a), on which the petitioners chiefly relied, grants exemption only from any 'duty of customs' under the Customs Act, 1962 or the Customs Tariff Act, 1975. Applying the settled legal distinction between duties, taxes and cesses (as explained in Union of India v. Hind Energy and Coal Benefication (India) Ltd.), the court observed that 'cess' is a distinct levy raised for a specific purpose and cannot be read into the term 'duty of customs' used in Section 26(1)(a). The fact that the rate of the compensation cess appears in Section 3(9) of the Customs Tariff Act, 1975 does not convert the cess into a 'duty of customs' for the purposes of Section 26(1)(a). Consequently, exemption under Section 26(1)(a) does not encompass the GST compensation cess; relief under Section 7 would only be available if the GST Compensation Act were included in the First Schedule or by a valid amendment under Section 54 of the SEZ Act. Reliance on earlier authority concerning anti-dumping duties (Flextronics) was distinguished as not being on all fours with the compensation cess issue.The writ petitions were dismissed and the petitioners were held not entitled to exemption from payment of GST compensation cess on imports to SEZ units.Final Conclusion: The court dismissed the petitions, concluding that SEZ units are not exempt from the GST compensation cess on imports: Section 26(1)(a) exempts only 'duty of customs' and does not cover the compensation cess, and Section 7's exemptions require the enactment imposing the levy to be listed in the First Schedule, which the GST Compensation Act is not. Issues Involved:1. Exemption from GST Compensation Cess for SEZ Units.2. Maintainability of Writ Petitions due to availability of alternative remedies.3. Interpretation of relevant provisions of SEZ Act, 2005 and GST Compensation Act, 2017.Summary:1. Exemption from GST Compensation Cess for SEZ Units:The petitioners, SEZ units, claimed exemption from GST compensation cess on coal imports under Section 26 of the SEZ Act, 2005. They argued that Section 26(1)(a) of the SEZ Act exempts them from any duty of customs under the Customs Act, 1962 or Customs Tariff Act, 1975. The respondents contended that the exemption does not extend to compensation cess under the GST Compensation Act, 2017, as it is not included in the First Schedule of the SEZ Act. The court upheld the respondents' view, stating that the term 'duty' in Section 26(1)(a) does not encompass 'cess,' and the GST Compensation Act is not listed in the First Schedule of the SEZ Act.2. Maintainability of Writ Petitions due to availability of alternative remedies:The respondents argued that the impugned letters were appealable orders under Section 128 of the Customs Act, 1962, and hence, the writ petitions were not maintainable due to the availability of an alternative remedy. The court noted that while alternative remedies were available, writ petitions could still be entertained if the impugned orders were issued without jurisdiction, as claimed by the petitioners.3. Interpretation of relevant provisions of SEZ Act, 2005 and GST Compensation Act, 2017:The court examined the provisions of the SEZ Act, 2005, particularly Sections 7, 26, and 50, which provide exemptions on taxes, duties, and cess for SEZ units. The court also analyzed the GST Compensation Act, 2017, and relevant constitutional amendments. The court concluded that the term 'duty' in Section 26(1)(a) of the SEZ Act refers to customs duties under the Customs Act, 1962, and Customs Tariff Act, 1975, but does not include compensation cess under the GST Compensation Act, 2017. The court emphasized that the SEZ Act is a self-contained code, and exemptions must be derived from its provisions.Conclusion:The court dismissed the writ petitions, ruling that SEZ units are not exempt from paying GST compensation cess on coal imports under the current legal framework. The court also highlighted the distinction between 'duty' and 'cess' and the specific requirements for exemptions under the SEZ Act.