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Issues: (i) whether export duty is leviable under the Customs Act, 1962 on supplies made from the Domestic Tariff Area to a Special Economic Zone; (ii) whether the Special Economic Zones Act, 2005 or the Special Economic Zones Rules, 2006 authorise or contemplate such levy; and (iii) whether the definition of "export" in the Special Economic Zones Act, 2005 can be imported into the Customs Act, 1962 for imposing export duty.
Issue (i): whether export duty is leviable under the Customs Act, 1962 on supplies made from the Domestic Tariff Area to a Special Economic Zone.
Analysis: The charging provision under the Customs Act, 1962 levies export duty on goods exported from India, and the statutory definitions of "export" and "India" make the taxable event the taking of goods out of India to a place outside India. A supply from the Domestic Tariff Area to a Special Economic Zone does not answer that description. In the absence of an amendment to the charging section or the relevant definitions so as to treat such movement as export for Customs purposes, the levy cannot be sustained under that Act.
Conclusion: Export duty is not leviable under the Customs Act, 1962 on supplies from the Domestic Tariff Area to a Special Economic Zone.
Issue (ii): whether the Special Economic Zones Act, 2005 or the Special Economic Zones Rules, 2006 authorise or contemplate such levy.
Analysis: The Special Economic Zones Act, 2005 proceeds on a scheme of fiscal exemptions and concessions for units and developers, including procurement from the Domestic Tariff Area without payment of duty, taxes or cess, and it contains specific provisions for exemptions and for customs duties on removal from a Special Economic Zone to the Domestic Tariff Area. It does not contain a charging provision imposing export duty on movement from the Domestic Tariff Area into a Special Economic Zone. The statutory scheme and the Rules indicate the contrary legislative intent.
Conclusion: The Special Economic Zones Act, 2005 and the Special Economic Zones Rules, 2006 do not authorise levy of export duty on such supplies.
Issue (iii): whether the definition of "export" in the Special Economic Zones Act, 2005 can be imported into the Customs Act, 1962 for imposing export duty.
Analysis: A definition in one enactment cannot displace the express definition in another enactment when the latter is invoked for levy of tax. The deeming provision treating such supplies as export under the Special Economic Zones Act, 2005 is confined to the purpose for which it was created and cannot be extended to create a liability under the Customs Act, 1962. The overriding clause does not permit transplantation of a statutory definition into a separate charging statute.
Conclusion: The definition of "export" in the Special Economic Zones Act, 2005 cannot be imported into the Customs Act, 1962 to levy export duty.
Final Conclusion: The demand for export duty on supplies from the Domestic Tariff Area to Special Economic Zone units or developers was held unsustainable in law, and the petitions were allowed to that extent.
Ratio Decidendi: Export duty cannot be imposed unless the transaction falls within the express charging provision of the taxing statute, and a deeming fiction created for one enactment cannot be used to create a tax liability under another enactment.
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