TaxTMI 
TaxTMI 
2010 (7) TMI 290
X X X X Extracts X X X X
X X X X Extracts X X X X
.... an area as a SEZ, the Central Government is guided by the objects enumerated under Section 5 of the SEZ Act, viz., generation of additional economic activity, promotion of exports of goods and services, promotion of investment from domestic and foreign sources, creation of employment opportunities, development of infrastructure facilities and maintenance of the sovereignty and integrity of India including its security and friendly relations with foreign countries. Section 26 of the SEZ Act provides for duty exemptions, drawbacks and concessions to every 'developer', entrepreneur', 'co-developer' and an 'unit', as defined under the SEZ Act. There is exemption from duty of customs on goods imported into or services provided in a SEZ to carry on the authorised operations and exemptions from customs duty on goods exported from or services provided from a SEZ. Exemption from duty of central excise under the Central Excise Act, 1944 (hereinafter referred to as the '1944 Act' for brevity) or the Central Excise Tariff Act, 1985 (hereinafter referred to as 'the CET Act' for brevity), on goods brought from the 'Domestic Tariff Area' (hereinafter referred to as 'the DTA' for brevity), as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... authority under the SEZ Act, is wholly without jurisdiction and illegal. The said action defeats the provisions of Section 26 of the SEZ Act and the SEZ Rules thereunder, in particular Rule 22 thereof. It is contended that the instructions issued are contrary to the meaning and legal import of the definition of expressions used and postulated in the Customs Act, 1962, which are to be reconciled and applied to the provisions of the SEZ Act in terms of Section 2(zd) of the latter Act. As for instance "India" would have to be understood according to the provisions of the Customs Act read with Article 1 of the Constitution of India and it leads to an incongruity to equate the SEZ units, entrepreneurs or developers as being situate in a foreign territory so as to tax items received by them from indigenous manufacturers in India as import of goods and conversely tax supply of goods made by local manufacturers or suppliers in India as export of goods. It is contended that the petitioners are neither importers nor exporters under either the SEZ Act or the Customs Act, 1962 in respect of the notified items and hence cannot be called upon to pay export duty thereof. It is stated that the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....duly approved under the SEZ Act. By virtue of the impugned instructions, if implemented, would have the effect of depriving the petitioners of the benefits of duty exemption guaranteed to them by law and would result in converting a privilege into a disadvantage. The petitioners would there fore contend that the Doctrine of Promissory Estoppel would be applicable in the circumstances. It is pointed out that in respect of several compliances under various laws, the SEZ is considered as being an integral part of India as for instance, there is no exemption from stamp duty or relaxation under any Labour Laws. There is also no exemption from any provisions of the Factories Act, 1948, the Public Provident Fund Act, 1968 and so on. That being so, the SEZ unit being treated as being outside India for levy of export duty alone by the first respondent is wholly without jurisdiction and illegal. The learned counsel for the petitioner would submit that the Gujarat High Court has in the case of Essar Steel Limited v. Union of India, 2010 (249) E.L.T. 3 (Guj.), addressed the very same issues and has held that the action of the respondents in levying export duty on goods supplied from the domest....
X X X X Extracts X X X X
X X X X Extracts X X X X
....along with Special Economic Zones Rules, 2006, Chapter 7 of the FTP and Chapter XA of the Customs Act were rendered redundant. It is stated that the SEZ Act prescribes exemptions from customs, central excise and certain other duties under Section 26 of the SEZ Act. It also created a category of persons called "developer" who took over the responsibility for investing in and providing facilities in a SEZ that were used by the exporting units to be set up in the SEZ, both the developer and the exporting units are eligible for the exemptions. The SEZs are notified by the department of Commerce and there is compound wall to enclose the processing area of the SEZ. The SEZs are under the administrative control of a Development Commissioner, who is an officer of the Central Government. Developments are approved by the Board of Approvals, as are co-developers. They are authorised certain operations within the SEZ. The goods required for carrying out the authorised operations are eligible for exemptions under Section 26 of the SEZ Act. Section 2 of the SEZ Act defines 'imports' and 'exports' for the purpose of goods moving into and out of the SEZ. Likewise, an exporting unit is approved by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... It is emphasized that there is no attempt to use exemption provision in Section 25 of the Customs Act to impose a duty. The duty of export of these items are pre scribed under the amended Schedule of the Customs Tariff Act and the Notifications referred to above only fix the effective rate of duty to be levied within the ceiling of the prescribed rate of duty. Section 25 therefore has been pressed into service legally. The goods in question manufactured in India and supplied to SEZs are not subject to levy of Central Excise Duty by virtue of exemption under Section 26(1)(c) of the SEZ Act. It is contended that insofar as SEZs are concerned, the 'exports' and 'imports' are defined as including, bringing goods from a domestic tariff area into a SEZ in terms of Section 2(m) of the SEZ Act and such rates would not be covered by the exemptions on export duty granted under Section 26 for export out of the SEZ. The allegation that the impugned instructions seek to convert the SEZs into a foreign territory or a overseas territory is misplaced and incorrect. Duties of customs are levied under the Customs Act and the first respondent has merely conveyed the view of the Department of Reven....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nging into India from a place outside India and "imported goods" is defined under Section 2(25) to mean any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption. "Importer" is defined under Section 2(26) to mean in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner or any person holding himself out to be the importer. "India" is defined under Section 2(27) to include the territorial waters of India. Section 12 contained in Chapter V of this Act pro vides that except as otherwise provided under the Act, or any other law for time being in force, the duties of customs shall be levied at such rates, as may be specified under the Customs Tariff Act, 1975, or any other law for the time being in force on goods imported into or exported from India. Section 14 of the Act pro vides for the valuation of the goods for the purposes of assessment and it is pro vided therein that for the purposes of Customs Tariff Act, 1975 or any other [ for the time being in force wherein a duty of customs is chargeable on any goods by reference to other val....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a unit or a developer from a place outside India by land, sea or air by any other mode whether physically or otherwise or receiving goods or services by a unit or developer from another unit or developer of the same SEZ or a different SEZ. Section 2(zd) provides that all the other words and expressions used and not de fined under the Act, but defined under the Central Excise Act, 1944, the Indus tries (Development and Regulation) Act, 1951, the Income-tax Act, 1961, the Customs Act, 1962, and the Foreign Trade (Development and Regulation) Act, 1992, shall have the meanings respectively assigned to them in those Acts. For the sake of convenience, the definition of the expressions - "export" and "import" as defined under the SEZ Act and the expressions - 'export', 'export goods', 'import' and 'imported goods' as defined under the Customs Act, 1962, are reiterated hereunder in a tabular form, to readily discern the differences between the definitions under the two Acts :- The Special Economic Zones Act, 2005 The Customs Act, 1962 Import import means - (i) bringing goods or receiving ser- vices, in a Special Economic Zone, by a Unit or Developer from a p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ducts. It is in that background that the petitioners were before this court. The levy of goods ex ported from India would be as per the definition of 'export' under the Customs Act, 1962 under Section 2(18) of the Customs Act, as already seen, "export" is defined as taking goods out of India to a place outside India. And "export goods" are likewise defined. In the absence of any definition of "export" would necessarily have to be as defined under the Customs Act, 1962. For purposes of the SEZ Act and to facilitate various benefits that are intended to be conferred on a SEZ territory in order to keep the costs from artificially increasing in relation to the operations from SEZ, the SEZ Act has been introduced in order not to impose any kind of domestic duties on the supplies made to the SEZs. Apparently, the definition of "export" under the SEZ Act was meant also to cover supply of goods from the Domestic Tariff Area to SEZ. Thus, under Section 26 of the SEZ Act, corresponding exemptions have been granted, keeping in view that the goods used by the SEZ should not be fastened with domestic duty liability, nor from any import duties when the SEZ imports and export duty was also exempt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d so on. If export duty is to be levied under Schedule II to the Customs Tariff Act, 1975 it is only if the goods supplied from the DTA to SEZ are treated as if they are in export out of India. In the absence of definition of "export" under the SEZ Act, rendering the transaction of goods from a DTA into a SEZ to an export outside India, it would be wholly incongruous. As seen from the definition of "export", it indicates a supply of goods from DTA to the SEZ unit. But, it does not indicate that such a supply ought to be treated as supply of goods being exported outside the territory of India as is the definition of "export" under the Customs Act. Hence, it is not possible to hold that by a deeming fiction the supply to a SEZ unit from DTA would amount to goods moving outside India. Therefore, it is emphasized that Section 26 itself providing that no customs duty is payable by the SEZ unit by way of exemption. When the goods are re-imported into the SEZ unit and like wise, exports from SEZ also not subject to the duty under Section 26. It was wholly unnecessary to provide for such exemptions if the SEZ was treated as being outside India, in which case, there would neither be any imp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....being outside India and re-processing activity had taken place outside India, was turned down by a Division Bench of the Delhi High Court in the case of Plastic Processors and Others v. Union of India, 2002 (143) E.L.T. 521 (Del.), which attained finality before the Supreme Court in Union of India v. Plastic Processors, 2005 (186) E.L.T. A27 (S.C.). In the absence of any amendment of the expressions -"export" and "India" under the Customs Act, 1962, or any amendment under the charging Section 12, contemplating the movement of goods from the DTA to a SEZ as a taxable event en tailing a levy of export duty, as in the case of export, the levy of export duty can not be justified under the provisions of the Customs Act, 1962. This is apparent from the circumstance that such a charging provision namely. Section 76F as was introduced by inserting Chapter-XA under the Customs Act, 1962, being a special provision relating to the SEZs, that Chapter having been omitted by the Finance Act, 2007 and in the absence of the newly added provision, contemplating the movement of goods as aforesaid, would amount to a taxable event, attracting levy of excise duty, it cannot be said that it is a taxa....