TaxTMI 
TaxTMI 
2015 (11) TMI 1466
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....ged in the activity of generating, transmitting and selling electrical energy. The petitioner No.2 is an Indian citizen and is shareholder of the Company. The plant of the Company is situated in Mundra Port and Special Economic Zone. The electricity generated, as permissible, is cleared/transferred from the Special Economic Zone to Domestic Tariff Area (for short 'DTA'). 3. Mundra Special Economic Zone (for short 'MPSEZ') had been established under the Special Economic Zones Act, 2005 (for short 'SEZ Act'). M/s. Mundra Port and Special Economic Zone Limited was the developer as defined in Section 2 (g) of the SEZ Act. Section 2 (p) of the SEZ Act provides that the developer had to ear mark processing and non-processing areas as well as it had to provide for infrastructural facilities. Rule 2(s) of the Special Economic Zone Rules, 2006 (for short 'SEZ Rules') lays down that "infrastructure" means facilities needed for development, operation and maintenance of the Special Economic Zone and includes industrial, business and social amenities like development of land, roads, buildings, sewerage and effluent treatment facilities, solid waste management ....
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....ring for the petitioners urged that as per the notification issued in the year 2002, Entry No.573 being 27160000 is relatable to energy mentioned in subheading 27.16 entitled as "Electricity Energy, No Customs Duty payable" of Chapter 27 entitled as "mineral fuel, mineral oils etc." He further urged that Section 30(a) provides that if any goods are removed from a Special Economic Zone to the Domestic Tariff Area, such goods will be chargeable to duties of customs including anti-dumping, countervailing and safeguard duties under the Customs Tariff Act, 1975 as leviable on such goods when imported, meaning thereby that if any goods are removed from the Special Economic Zone area to the Domestic Tariff Area, then the present customs duty will be leviable treating the goods to be imported from outside India. 8. Mr. Kamal B. Trivedi, learned Senior Counsel has further urged that if the same meaning is applied to the notification dated 27.2.2010, it provides that the Central Government if it is satisfied can grant exemption in public interest to the goods falling under the Tariff Item No.27160000 of the First Schedule to Customs Tariff Act, 1975 from whole of the duties which are spec....
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....at custom duty @ 16% was onerous and by Notification No.91 of 2010 Cus. Dated 16.9.2010 reduced the duty to 10 paisa per unit. The custom duty was further reduced to 3 paisa per unit by the Notification No.26 of 2012 Cus. Dated 18.4.2012. The learned counsel for the petitioner also urged that in case this writ petition succeeds, the petitioners are entitled for refund of the Bank Guarantee from the respondent authority as it had been furnished in compliance of the interim order dated 6.5.2010 passed by this Court. 10. Under the provisions of the Electricity Act, 2003 and the Rules/Regulations made thereunder a power plant in excess of 1000 MW is classified as Mega Power Plant (for short 'the MPP'). All MPPs are allowed to import or indigenously procure Capital Goods duty free as per Notification No.21/2002 dated 1.3.2002 for Customs Duty exemption and Notification No.6/2006 dated 1.3.2006 for excise duty benefit. The Company imported as well as indigenously procured Capital Goods (coal etc.) without payment of duty, customs and excise as the case may be, as provided under the provisions of SEZ Act and the SEZ Rules. 11. Section 26 of the SEZ Act reads as under :- ....
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.... clear that it provided exemptions, drawbacks and concessions in payment of duty of custom duty under the Customs Act, 1962 or the Customs Tariff Act, 1975 on goods imported into SEZ area by the developer or entrepreneur or goods exported or services provided within the SEZ zone or from a Unit. (i) Section 26(1)(c) and (d) provided exemption for payment of excise duty under the Central Excise Act, 1944 or the Central Excise Tariff Act, 1985 on goods brought from the Domestic Tariff Area to a SEZ area or a unit within the SEZ area by the developer or entrepreneur. It also provided that drawbacks and other benefits admissible from time to time on goods brought or service provided from the DTA to SEZ or unit or service provided in the aforesaid area by service providers located outside India to carry on the authorized operations by the Developer or entrepreneur. (ii) Section 26(1)(e), (f) and (g) lays down that exemption was provided on payment of service tax, exemption from securities transaction tax where the transactions are entered into by a non-resident through the International Financial Services Centre. It also provided that exemption from levy of taxes on sale or purchas....
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....hich reads as under :- "2(o) "import" means - (i) bringing goods or receiving services, in a Special Economic Zone, by a Unit or Developer from a place outside India by land, sea or air or by any other mode, whether physical or otherwise; or (ii) receiving goods, or services by a Unit or Developer from another Unit or Developer of the same Special Economic Zone or a different Special Economic Zone;" 17. Both the definitions of import if read in juxta position, then it is clear that under the Customs Act, if any goods are brought within the territory of India, then on it, customs duty shall be levied at such rate as may be specified under the Custom Tariff Act, 1975 under the law in force at that time on the goods imported into India, whereas under the SEZ Act, import is permissible within the SEZ area by Unit or a Developer or receiving of goods or services by a Unit or a Developer from another Unit or Developer of the same SEZ or a different SEZ. But it would be treated as import. The whole idea was that in SEZ, though goods may be imported from outside India within SEZ or from one SEZ to another, but no duty would be levied, otherwise, custom duty is....
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.... a form of method that provides for statutory custom duty. [Refund of custom duty paid in respect of mineral oil under sub-section (7) of Section 25 shall not be made.]. It is urged by the petitioners that the goods removed from SEZ into DTA or non-processing areas of SEZ are not imported into India as defined under Section 2(23) of the Customs Act. The custom duty can only be levied under the Customs Act on goods imported into India from a place outside India. It is vehemently urged that duty cannot be levied on goods removed from SEZ to DTA in exercise of powers conferred by Section 25 of the said Act. The power under Section 25 of the said Act is to exempt wholly or partially, conditionally or unconditionally the goods when imported into India from a place outside India from payment of customs duty which is leviable under Section 12 of the Act. Hence, duty on goods removed from SEZ into DTA or non-processing areas of SEZ cannot be levied under the Customs Act on account of the legislative mandate under Entry 83 of List 1 of Schedule VII to the Constitution of India. The impugned Notification is thus unconstitutional and ultra vires Entry 83 of List I of Schedule VII of the Const....
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....ed 1.3.2002 and Serial No.573 remained the same and Entry 573 is extracted below :- 573. 2716 0000 All goods Nil - - 25. The Finance Bill 2010 in paragraph 60 (1) provides as under :- "60 (1) The notifications of the Government of India in the Ministry of Finance (Department of Revenue) number G.S.R. 118(E), dated the 1st March, 2002 and number G.S.R. 92(E) dated the 1st March 2006, issued under sub-section (1) of section 25 of the Customs Act, shall stand amended and shall be deemed to have been amended retrospectively, in the manner specified in column (3) of the Second Schedule, on and from the corresponding date specified in column (4) of that Schedule, against each of the notifications specified in column (2) of that Schedule. (2) For the purposes of sub-section (1), the Central Government shall have and shall be deemed to have the power to amend the notification referred to in said sub-section (1) with retrospective effect as if the Central Government had the power to amend the said notifications under sub-section (1) of section 25 of the Customs Act, retrospectively, at all material times. (3) No suit or other proceed....
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.... mentioned at S. No.573 Nil - - 27. The aforesaid entries at Serial No.573 was split in two parts, 573 and 573A which was substituted (w.e.f. 26.6.2009) by Section 16 read with 2nd Schedule to the Finance Act, 2010 (14 of 2010) with validating and saving provision. Serial No.573 provided that customs duty at the rate of 16% would be levied on the electrical energy removed from a Special Economic Zone into Domestic Tariff Area or non-processing areas of Special Economic Zone and 573A provided rate of customs duty Nil on all goods other than goods mentioned at Serial No.573. From the perusal of the aforesaid amendment dated 26.6.2009, it is clear that the substitution made by splitting the entries which was at Serial No.573 of exemption notification dated 1.3.2002 which was split into 573 and 573A, was deemed to have been substituted with retrospective effect. 28. The Government of India by notification No.25/2010- Customs dated 27.2.2010, GSR (E) exercising powers under subsection (1) of Section 25 of the Customs Act, 1962 in public interest exempted goods falling under Tariff Item No.27160000 of the First Schedule to the Customs Tariff Act, 1975 when import....
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....ical energy imported into India. The electrical energy is imported into India from countries such as Nepal and Bhutan and the "importers" thereof continue to enjoy the same benefit prior to the amendment by the impugned Notification and are wholly exempted from payment of Customs Duty. 31. By virtue of declaration under the Provisional Collection of Taxes Act, 1931 (for short 'PCT Act'), immediate effect has been given to Serial No.573 of Notification No.21/2002-Cus dated 1.3.2002, which when read with Notification No.25/2010-Cus has the effect of levying 16% customs duty on electrical energy removed from SEZ into DTA or removal to non-processing areas within SEZ. All references to the said Notification shall mean and include and refer to Notification No.21/2002-Cus as amended by Clause 60 of Finance Bill, 2010 read with Notification 25/2010-Cus dated 27.2.2010. The said Notification has immediate effect from 27.2.2010. By virtue of enactment of Clause 60 of the Finance Bill 2010, the amendment to the said Notification No.21/2002-Cus is given retrospective effect from 26.6.2009. 32. On 27.2.2010, the petitioner Company received letter dated 26.2.2010 from the responde....
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.... two parts. First part creates liability only on removal of goods from SEZ to DTA. Section 30 does not provide for levy of duty on goods removed from SEZ processing area into non-processing areas. To the extent of Section 30 provides for levy of duty on goods removed from SEZ into DTA for the purposes for levy of duty on goods removed from SEZ into DTA for the purposes of quantification by reference, the duty is to be calculated with reference to the provisions of the said Act and CTA for determining the rate of duty classification and valuation. This is referred to as incorporation of reference but Section 30 of the SEZ Act is independent from Section 12 of the said Act. Section 30 of the SEZ Act is distinct and different from Section 12 of the said Act and the two operate in different fields. Section 30 of the SEZ Act does not refer to the word "import". Section 30 of the SEZ Act does not provide for levy of goods imported into SEZ as per the word "import" defined in SEZ Act. For goods imported into SEZ, customs duty is levied under Section 12 of the said Act, but on account of Section 26 of the SEZ Act, there is an exemption from payment of such customs duty. The provisions of S....
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....far as procurement or import of capital goods are concerned as in the case of power plant situated outside SEZ. To further reinforce that the MPPs plants are on par irrespective of whether they are situated outside or inside SEZ the duty is payable on the raw materials and consumables by both to the extent the power is sold in DTA. The Mundra plant being a MPP stands on the same footing and similarly circumstanced as other MPPs in India. Therefore, there is no justification for discriminating against MPP situated inside a SEZ. 37. The impugned Notification amounts to double taxation in as much as the petitioners continue to be liable for payment of duty of raw materials and consumables, coal etc., under Rule 47(3) of the Rules and shall now be required to pay further customs duty @ 16% on electrical energy removed from SEZ and a totally new and additional liability in respect of electricity removed into nonprocessing areas of SEZ although there is no liability to do so under the SEZ Act and the SEZ Rules. Therefore, the impugned Notification is violative of Article 265 of the Constitution of India. The customs duty @ 16% has been made applicable to electrical energy removed from....
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....ting and selling electrical power and started clearance of electricity from June 2009 to DTA from SEZ. The Company has set up thermal power plant at Mundra within the Special Economic Zone ('SEZ' for short). It is the case of the petitioners that though Electrical Energy is classified under Tariff Item 27160000 of the Customs Tariff Act, 1975 and vide Government Notification No.21/2002-Customs dated 1.3.2002 as amended at Entry No.573 exempted all the goods falling under Tariff Item 27160000 from the whole of customs duty, the Specified Officer, Mundra Port and SEZ, has vide letter dated 26.2.2010 requested to pay duty immediately with retrospective effect from 26.6.2009 as in the Union Budget 2010, electrical energy removed from Special Economic Zone to Domestic Tariff Area and non processing areas of the zone would attract duty of 16% advalorem and this change is being made retrospectively with effect from 26.6.2009. In response, the petitioner Company informed the Specified Officer on 27.2.2010 that they are working out a mechanism and procedure for fulfillment of conditions and, therefore, presented a bond for the purpose of considering removal of electricity from SEZ t....
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.... SEZ Act is a charging Section akin to Section 12 of the Customs Act, 1962. In fact, the duty is being charged under Section 30 of the SEZ Act and not under Section 12 of the Customs Act, 1962 or any notification. The reference to the Customs Tariff Act under Section 30 of the SEZ Act is only with reference to a measure and not the chargeability of duty. The provisions of Section 30 provide that the goods cleared from SEZ to DTA are chargeable to duty as is leviable to the goods imported into India. The chargeability of goods to duty arises when they are removed from SEZ to DTA. Therefore, the notification issued by the Government is just and not discriminatory in nature as it is permissible to grant different exemption to different categories or classes as long as all those within a particular class are treated equally and uniformly. 43. Section 30 of the SEZ Act, 2005 is the charging section whereby duty is imposed in respect of goods removed from SEZ to DTA. Section 30(a) provides that any goods removed from SEZ to DTA shall be chargeable to customs duties, etc. as leviable on such goods when imported. Section 30(b) provides that the rate of duty applicable shall be the rate ....
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....isfied that it is necessary in the public interest so to do, hereby exempts, goods falling under Tariff Item 27160000 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), when imported into India, from the whole of the duty of customs leviable thereon which is specified in the said First Schedule; Provided that nothing contained in this Notification shall apply to electrical energy falling under tariff item 27160000 removed from a Special Economic Zone to the Domestic Tariff Area or non-processing areas of Special Economic Zones. [F. No.334/1/2010-TRU] Sd/- (Prashant Kumar) Under Secretary to Government of India" 47. The SEZ Act was enacted with a view to provide an internationally competent environment for exports and for promoting export led growth. The term "Domestic Tariff Area" is defined in Section 2(i) as to mean the whole of India (including the territorial waters and continental shelf) but does not include the areas of the Special Economic Zones. The term "Special Economic Zone" is defined in Section 2(za) as to mean an economic zone notified under the proviso to sub-section (4) of Section 3 and subsection (1) of Section 4 (including ....
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....ught to be replaced by Government Notification No.25/2010-Customs dated 27.2.2010. 50. Chapter V of the Customs Act, 1962 relates to levy and exemption from customs duties. Section 12 pertains to dutiable goods, which is reproduced below :- "Section 12. Dutiable goods. - (1) Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975) or any other law for the time being in force, on goods imported into, or exported from India. (2) The provision of sub-section (1) shall apply in respect of all goods belonging to Government as they apply in respect of goods not belonging to Government." 51. Section 25 of the Customs Act, 1962 pertains to the power of the Central Government to grant exemption from payment of customs duty. Section 25(1) of the said Act reads as under :- "25. Power to grant exemption from duty :- (1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to ....
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.... be leviable treating the goods to be imported from outside India. If the same meaning is applied to the Government Notification No.25/2010-Customs dated 27.2.2010, Annexure A to this writ petition, it provides that the Central Government if it is satisfied can grant exemption in public interest to the goods falling under the tariff Item No.27160000 of the First Schedule to Customs Tariff Act, 1975 from whole of the duties which are specified in the First Schedule. Meaning thereby, with regard to tariff item No.27160000 if the goods are imported in India, then those goods will be exempted from payment of customs duty. If we apply the same analogy to Section 25(1) of the Customs Act, 1962 which provides for exemption from payment of customs duty and in view of Section 30(a) of the SEZ Act, since the goods are being brought from SEZ to DTA, then it has to be treated as imported goods which has come from outside India and, therefore, item No.27160000 which is the goods known as electrical energy removed from the SEZ to DTA would be exempted as it will be treated to be imported from outside India and 16% advalorem cannot be charged by the respondents because Section 25(1) of the Custom....
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....t of the amendment operates. 56. Where there is challenge to the constitutional validity of a law enacted by the legislature, the Court must keep in mind that there is always a presumption of constitutionality of an enactment, and a clear transgression of constitutional principles must be shown. The fundamental nature and importance of the legislative process needs to be recognized by the Court and due regard and deference must be accorded to the legislative process. Where the legislation is sought to be challenged as being unconstitutional and violative of Article 14 of the Constitution, the Court must remind itself to the principles relating to the applicability of Article 14 in relation to invalidation of legislation. The two dimensions of Article 14 in its application to legislation and rendering legislation invalid are now well recognized and these are (i) discrimination, based on an impermissible or invalid classification and (ii) excessive delegation of powers; conferment of uncanalised and unguided powers on the executive, whether in the form of delegated legislation or by way of conferment of authority to pass administrative orders if such conferment is without any guid....
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.... transactions carried on upon the faith of the then existing law. 57.1 We would also like to point out, for the sake of completeness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Government of India and others v. Indian Tobacco Association (2005) 7 SCC 396, the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra and others (2006) 6 SCC 286. It was held that where a law is enacted for the benefit of community as a whole, even ....
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....in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is 'to explain' an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language 'shall be deemed always to have meant' is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the pre-amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law which the Constitution came into force, the amending Act also will be part of the exi....
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....C.I.T., Bombay v. Scindia Steam Navigation Co. Ltd. [1962 (1) SCR 788], this Court held that as the liability to pay tax is computed according to the law in force at the beginning of the assessment year, i.e., the first day of April, any change in law affecting tax liability after that date though made during the currency of the assessment year, unless specifically made retrospective, does not apply to the assessment for that year. 57.7 At the same time, it is also mandated that there cannot be imposition of any tax without the authority of law. Such a law has to be unambiguous and should prescribe the liability to pay taxes in clear terms. If the concerned provision of the taxing statute is ambiguous and vague and is susceptible to two interpretations, the interpretation which favours the subjects, as against there the revenue, has to be preferred. This is a well established principle of statutory interpretation, to help finding out as to whether particular category of assessee are to pay a particular tax or not. No doubt, with the application of this principle, Courts make endeavour to find out the intention of the legislature. At the same time, this very principle is based on....
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....parently within the spirit of the law the case might otherwise appear to be. 57.11 "Notes on Clauses" appended to Finance Bill, 2002 while proposing insertion of proviso categorically states that "this amendment will take effect from 1st June, 2002". These become epigraphic words, when seen in contradistinction to other amendments specifically stating those to be clarificatory or retrospectively depicting clear intention of the legislature. It can be seen from the same notes that few other amendments in the Act were made by the same Finance Act specifically making those amendments retrospectively. For example, clause 40 seeks to amend S.92F. Clause iii (a) of S.92F is amended "so as to clarify that the activities mentioned in the said clause include the carrying out of any work in pursuance of a contract." This amendment takes effect retrospectively from 01.04.2002. Various other amendments also take place retrospectively. The Notes on Clauses show that the legislature is fully aware of 3 concepts:- (i) prospective amendment with effect from a fixed date; (ii) retrospective amendment with effect from a fixed anterior date; and (iii) clarificatory amendments which are retrospecti....
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.... every statute is prima facie prospective unless it is expressly or by necessary implication made to have a retrospective operation. But the rule in general is applicable where the object of the statute is to affect vested rights or to impose new burdens or to impair existing obligations. Unless there are words in the statute sufficient to show the intention of the legislature to affect existing rights, it is deemed to be prospective only - "nova constitutio futuris formam imponere debet non praeteritis" - a new law ought to regulate what is to follow, not the past. 59. The Apex Court in Union of India and others v. Martin Lottery Agencies Ltd. (2002) 9 SCC 209, held in paragraphs 36 to 39, 45, 50 to 52 as under :- "36.... The speech of the Hon'ble the Finance Minister would have been relevant for the purpose of opining as to whether the court independently would have arrived at a conclusion that organizing lottery would amount to rendition of service but not otherwise. 37. As it is not possible for us to arrive at the said conclusion, we have no other option but to hold that by inserting the explanation appended to clause (19) of Section 65 of the Act, a n....
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....ld, however, show that a Three Judge Bench of this Court noticed that the Act intended to make the position explicit which otherwise was implicit. The Bench went back to the provisions of the Original Act to hold that the clarification issued by the Parliament was in tune with the actual interpretation of the original provision. 50. It is, therefore, evident that by reason of an explanation, a substantive law may also be introduced. If a substantive law is introduced, it will have no retrospective effect. The notice issued to the assessee by the appellant has, thus, rightly been held to be liable to be set aside. 51. Subject to the constitutionality of the Act, in view of the explanation appended to this [sic Section 65(19)(ii) of the Finance Act, 1994] we are of the opinion that the service tax, if any, would be payable only with effect from May, 2008 and not with retrospective effect. In a case of this nature, the Court must be satisfied that the Parliament did not intend to introduce a substantive change in the law. 52. As stated herein before, for the aforementioned purpose, the expressions like for the removal of doubts are not conclusive. The said e....