2009 (11) TMI 141 - HC - Customs

Export duty on goods moved from Domestic Tariff Area to SEZ ruled unjustified; no duty to be imposed or recovered

HC held that levy of export duty on goods supplied from Domestic Tariff Area to Special Economic Zone is unjustified; petitioners need not be called upon ... Notification No. 66/2008-Cus, dated 14.05.2008- Whether export duty can be levied on goods supplied from Domestic Tariff Area to Special Economic Zone? Held that, levy of export duty on goods supplied from the Domestic Tariff Area to the Special Economic Zone is not justified. The petitioner, are therefore not to be called upon to pay export duty on movement of goods from Domestic Tariff Area to Special Economic Zone Units or developers. Issues: Whether export duty is leviable on movement of goods from the Domestic Tariff Area to a Special Economic Zone (SEZ) units or developers.Analysis: The Customs Act, 1962 levies export duty on goods exported from India, with 'export' defined in that Act as taking goods out of India to a place outside India; the taxable event under the Customs Act arises on movement of goods outside territorial waters. The SEZ Act, 2005 contains a separate, statutory deeming fiction treating certain movements to or from SEZs as 'export' for purposes of granting exemptions and export benefits, and provides specific fiscal provisions (including exemptions and chargeability for removals from SEZ to DTA) and rules (including Rule 27 permitting procurement from DTA without payment of duty). A deeming fiction in one statute is confined to the purposes and scope of that statute and cannot be adopted to expand the charging provision of another statute. There is no charging provision in the SEZ Act imposing export duty on DTA-to-SEZ supplies and Chapter X-A of the Customs Act (which had contained SEZ-specific charging provisions) was omitted; absent an express charging provision or amendment in the Customs Act redefining 'export' for that Act, export duty cannot be imposed on DTA-to-SEZ movements. The non obstante provision in the SEZ Act does not authorize transposing the SEZ Act definition to create a new taxable event under the Customs Act where no such charging provision exists.Conclusion: Export duty is not leviable on supplies from the Domestic Tariff Area to Special Economic Zone units or developers; decision is in favour of the assessee.Ratio Decidendi: In the absence of an express charging provision treating DTA-to-SEZ movement as export under the Customs Act, and because a statutory deeming fiction in the SEZ Act is confined to that Act's purposes, export duty cannot be imposed on such movement; taxing provisions must be strictly construed and cannot be extended by adopting definitions or fictions from another enactment to create a new taxable event.