TaxTMI 
TaxTMI 
2017 (2) TMI 7
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....and also on the ground of having not followed the procedure prescribed under the SEZ Act and SEZ Rules for imposing or issuing guidelines as per Section 5 of the SEZ Act as referred in the Policy itself. 2. Pursuant to the notice issued by this Court, the respondents have filed their affidavits-in-reply and opposed grant of any relief. Rejoinders thereto have also been filed by each of the petitioners. 3. Since the issues involved in these petitions are common, facts of each petitions are not referred date wise and the same have been dealt in general. 3.1 Since around 1997, about 20 units have been manufacturing recycled plastic raw material from the imported plastic scrap in the zone which was earlier known as Kandla Free Trade Zone. These units were established in the area which was treated as an Export Processing Zone (EPZ). Permission to each petitioner was granted for establishing the units on certain terms and conditions. 3.2 In the year 2000, the Government of India came out with a special economic zone scheme under the Export Import Policy. Under the scheme, SEZs were set up in India for the first time. The Government of India issued a public advertisement and declared ....
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....said Rules which compels a unit to achieve positive Net Foreign Exchange (for short 'NFE'). The petitioners continued to manufacture the plastic raw material and did follow the conditions imposed by the letter of approval in accordance with Act and Rules and always maintained the positive NFE. 3.5 The manufacturing units were permitted to broad band the additional products by permission letters in the year 2003, 2004, 2007 etc. However, the Government of India (Department of Commerce, SEZ Division) distinguished the additional products which were permitted for broad banding into related and unrelated products and accordingly, a communication dated 4.11.2010 was issued to all the Development Commissioners. After issuance of the said letter, the respondent No.3 suspended all proceedings of broad banding of additional products granted to the petitioner and directed the petitioner to follow all the conditions of the said letter which is treated as Instruction No.69. 3.6 The petitioners requested the authority to permit to do broad banding as far as related Projects are concerned which was accepted by the authority by a communication dated 25.10.2012. However, a specific instruction w....
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....e would further submit that DTA is defined under Section 2 (i) of the Act and under Rule 47, a unit is permitted to sell the goods in DTA on payment of custom duties under Section 30 of the Act. He would submit that the purpose of giving benefits to the Units which are established in SEZ is to achieve maximum Foreign Exchange and, therefore, under Rule 53, a unit has to achieve positive NFE which the petitioners in each case are strictly following and getting positive NFE. Rule 53 (n) also makes it clear that the supply of the goods to DTA should be against payment in Foreign Exchange only and, therefore, the policy in question by condition is imposed to the units to physically export 100% manufactured goods is contrary to the provisions of the SEZ Act as well as SEZ Rules. He would submit that the SEZ Act and SEZ Rules themselves permit sale of the goods manufactured in SEZ in DTA subject to payment of custom duty and that too in foreign currency. Therefore, there was no reason for the respondent No.1 to issue the policy under challenge without amending the Act and Rules. By taking me through the provisions of Section 55 (3) of the Act, he would submit that even if the Central Gov....
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.... letter of permission was granted in favour of the petitioners, all those conditions referred in the Policy have been imposed which would create closure of the units and would affect 5,000 employees working in different units. 4.6 He would further submit that the Policy is unreasonable and arbitrary since the Central Government is not going to lose any Foreign Exchange earnings. He would submit that the units manufacturing recycled plastic raw material from the imported plastic scrap have huge demand in India, especially in the agriculture sector and when the units are selling the goods in DTA and paying the custom duty as well as the transactions are being entered in foreign currency only, imposition of such conditions is an arbitrary one. The objectives of Section 5 of the Act are totally frustrated by imposing such condition and that too only to plastic unit manufacturers. He, therefore, would submit that the Policy be quashed and set aside and the respondents be directed to issue fresh Letter of Allotment in accordance with the SEZ Act and SEZ Rules. 4.7 Mr. Thakore also argued that imposing condition of not allowing broad banding of unrelated products is also contrary to pro....
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....e units are thereby contributing in reducing the dependence on import of recycled plastic raw material from other countries and also reducing the foreign exchange outflow of the Government on procuring imported raw material. Further, the petitioner and the other units in the area produce raw material at a lower cost in view of which the Indian small scale manufacturers that buy plastic raw material from them are able to procure raw material at a lower cost than in case of purchase of imported raw material. Therefore, the supply of raw material manufactured by plastic recycling units in SEZs is in the interest of the public, the Indian consumers of plastic raw material and the country in general. The impugned policy directs that the plastic recycling unit must send their entire turnover out of the country and is unreasonable and against public interest. The impugned policy results in discouraging Indian manufacturers and encouraging foreign manufacturers as the demand for imported raw material will naturally go up if the Indian SEZ Units are not permitted to sell in India. The impugned policy results in a situation where the Indian small scale manufacturers will be made to import ra....
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....not say that the authorized operations are restricted to the business of recycling of plastic. Condition No.25 is also in breach of the principles of promissory estoppel for the same reasons as are mentioned in the above ground on promissory estoppel and legitimate expectation. Respondent No.3 has no power to impose conditions not prescribed under the Act or the Rules. The contents of this paragraph are without prejudice to the submission that the letter of extension is bad in law to the extent the same is contrary to or goes beyond the Act, the Rules and Form G of the Rules and to the extent the same imposes conditions that are contrary to or go beyond the Act, the Rules and Form G of the Rules. 4.11. He, therefore, would submit that there is no satisfactory answer in the affidavit-in-reply filed by the respondent authorities about imposing such conditions and hence, the petitions be allowed. 5. On the other hand, Mr. P. Y. Divyeshvar, learned Central Government Standing Counsel appearing for the respondents would submit that the Government has to follow the guidelines referred in Section 5 of the SEZ Act. He would further submit that imposing certain conditions for the units es....
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....he whole intention of developing certain areas would be frustrated. 5.2 He would submit that the Ministers and highest Officers from the concerned departments have considered various aspect and has issued the policy and, therefore, the Court would be at loath to interfere with such decision. By relying upon a decision in the case of Government of Andhra Pradesh and others v. Smt. P. Laxmidevi, 2008 (2) GLH 167, he would submit that there is a question of interpretation of statute and particularly with regard to physical and economic statute, the scope of Courts would be limited. Therefore, the Court should not exercise its power under Article 226 of the Constitution of India in the present case also. 5.3 He has also relied upon the decision in the case of P.T.R. Exports (Madras) Private Limited v. Union of India, AIR 1996 SC 3461 and submitted that it has been held by the Apex Court that the Court would not interfere with the change in policy by the Government. He, therefore, would submit that the petitions be dismissed. 6. Having heard learned advocates appearing for the respective parties, the question involved in the present petitions is with regard to the mandatory direction....
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....aterial which were manufactured from imported plastic scrap. By a Resolution dated 1.11.2000 itself, the Government of India declared that Kandla Free Trade Zone is converted to Special Economic Zone. It was also resolved that the units in SEZ shall be obliged to achieve positive NFE earnings and certain facilities shall be given to those units. 11. When the SEZ Act came into force, the petitioners were manufacturing the goods and, therefore, can be treated as existing unit as defined under Section 2 (l) of the SEZ Act. Since a mandatory provision was enacted in Rule 18 (4) of SEZ Rules that a proposal shall not be considered for setting up a new unit in SEZ for recycling of plastic scrap or waste, a meeting of Board of approvals was held on 8.8.2006 as per proviso to Rule 18 (4) (a) of the SEZ Rules. The issue with regard to the extension of letter of approval was discussed in the meeting headed by Special Secretary of Department of Commerce and decided to extend such approvals by recording following facts :- "(iv) Extension of Letter of Proposals of the Plastic Units in the Kandla SEZ. It was informed that SEZ Rules, 2006 provide that cases of extension of Plastic recycling un....
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....ment opportunities; (e) development of infrastructure facilities; and (f) maintenance of sovereignty and integrity of India, the security of the State and friendly relations with foreign States." 13. From the above provision, the Central Government while notifying any area as Special Economic Zone etc. has to consider generation of additional economic activity, permission of export of goods and services referred herein above. It is true that the important feature of establishing SEZ is to promote the activities of export on goods and services but it does not prevent the units established in SEZ to sell such goods in domestic tariff area (DTA). The DTA is defined under Section 2 (i) of the SEZ Act which reads as under :- "2 (i) "Domestic Tariff Area" means the whole of India (including the territorial waters and continental shelf) but does not include the areas of the Special Economic Zones;" 14. The units which are established in Special Economic Zone, if remove the goods from SEZ to DTA, would be subject to conditions specified in Rules as per Section 30 of the SEZ Act. Section 30 of the SEZ Act reads as under :- "30. Domestic clearance by Units :- Subject to the conditions....
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.... 30 of the Act. Chapter V of Economic Zone Rules deals with conditions subject to which goods can be removed from SEZ to DTA that means the goods manufacturing in SEZ can be removed in accordance with Rules 47 to 52 of Chapter V of the said Rules. 18. Chapter VI of the Rules which is an important Chapter, deals with Foreign Exchange earning requirements and monitoring thereof. In my opinion, by incorporating Rule 53, the intention of the legislating Act is followed since each unit is bound to achieve positive NFE to be calculated referred under the said Rule itself. Rule 53 A (n) of the SEZ Rules is reproduced herein below :- "53. Net Foreign Exchange Earnings :- The Unit shall achieve Positive Net Foreign Exchange to be calculated cumulatively for a period of five years from the commencement of production according to the following formula, namely :- Positive Net Foreign Exchange = A - B > 0 where : A : is Free on Board value of exports, including exports to Nepal and Bhutan against freely convertible currency, by the Unit and the value of following supplies of their products, namely :- (a) to (m) ................................. (n) supply of goods to Domestic Tariff Area ....