TaxTMI 
TaxTMI 
2019 (8) TMI 748
X X X X Extracts X X X X
X X X X Extracts X X X X
....usiness of development of MRO facilities for various types of air crafts as a co-developer. The second petitioner is a developer of GMR Hyderabad Aviation SEZ. 4. The second petitioner was incorporated in December 2007 and was appointed as a developer of GMR Aviation SEZ and was issued with a certificate dated May 31, 2010 by the office of the Development Commissioner, who is the fourth respondent herein. 5. The first petitioner is a unit set up in the GMR Aviation SEZ and they happen to be a co-developer-cum-unit for maintenance, repair and overhaul services and facilities for various types of air crafts. The first petitioner was approved as a co-developer by a letter of approval dated September 20, 2010. The fourth respondent also issued a certificate dated September 29, 2010 to the first petitioner, by which the services consumed within the SEZ for carrying out authorised operations were exempt from the levy of service tax. 6. The second petitioner entered into a sub-lease agreement with the first petitioner on June 1, 2010 for rendering the services of (1) lease of land of an extent of 24.55 acres for setting up MRO facilities, (2) supply of electricity for commercial ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... issued under the Finance Act, 1994 to be eligible for the grant of exemption and that since those procedural requirements were not satisfied, the second petitioner was not entitled to exemption. In view of such a stand taken by the fifth respondent, the petitioners have come up with the above writ petition challenging (1) the notifications dated March 1, 2011, June 20, 2012 and July 1, 2013 issued under the Finance Act, 1994, (2) the decision of the Board of approval dated March 8, 2017 communicated by the letter dated April 6, 2017, and (3) the Order-in-Original dated February 20, 2018. 12. The main ground on which the petitioners challenge the impugned proceedings is that under section 26(1)(e) of the Special Economic Zones Act, 2005, (hereinafter called "the SEZ Act) every developer and entrepreneur shall be entitled to exemption from service tax under Chapter-V of the Finance Act, 1994 on taxable services provided to a developer or unit to carry on the authorised operations in a SEZ. But the grant of exemption will be subject to the terms and conditions as prescribed by the Central Government in terms of sub-section (2) of section 26. The Central Government has issued a set....
X X X X Extracts X X X X
X X X X Extracts X X X X
....und, we need not drive them to the alternative remedy available under the statute. If they fail on this ground, they can always be directed to avail the alternative remedy. 16. That takes us to the main contention revolving around the SEZ Act, 2005, SEZ Rules, 2006, Finance Act, 1994 and the notifications issued by the Government. Before looking at the interplay of all these, it may be useful to first take note of the scheme of the Act. The broad Scheme and the features of the SEZ Act, 2005 was taken note of by a Division Bench of the Madras High Court to which one of us (VRSJ) was a party, in Nokia India Sales Private Limited v. Assistant Commissioner (CT), Sriperumbudur Assessment, Chennai [2017] 101 VST 361 (Mad) (pages 370 and 371 in 101 VST) : "18. The Parliament enacted the Special Economic Zones Act, 2005 with a view to provide for the establishment, development and management of Special Economic Zones for the promotion of exports and for matters connected therewith or incidental thereto. Section 3(1) of the Act enables the Central Government, the State Government or any person, either jointly or severally, to establish a Special Economic Zone, for the manufactur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f any law, for the purposes of giving effect to the provisions of this Act. The reason as to why the Central enactment empowers the State Government to enact a law, is that in respect of taxes, levies and duties that could be imposed only by the State Government, by virtue of the relevant entries in List II of the VII Schedule to the Constitution, the Central Government is not competent to grant exemption. Therefore, while the Central enact ment provides for exemption to the units located in SEZs created thereunder, only in respect of the taxes, levies and duties that can be imposed by the Central Government, a State enactment alone can provide for exemption from payment of taxes, levies and duties that can be imposed exclusively by the State Government. 23. Section 51 of the Central enactment confers overriding effect upon the Act, vis-a-vis any other law. Section 53 declares a Special Economic Zone to be a territory outside the Customs Territory of India, for the purpose of undertaking the authorized operations. The Special Economic Zone will be deemed to be a port, inland container depot, land station and land customs station under section 7 of the Customs Act, 1962." ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... an answer to this question, one must understand in conceptual terms, what a Special Economic Zone is. As pointed out by the Madras High Court in Nokia India Sales Private Limited v. Assistant Commissioner (CT), Sriperumbudur Assessment, Chennai [2017] 101 VST 361 (Mad) a SEZ (1) is a territory outside the Customs Territory of India for the purpose of undertaking authorized operations ; and (2) is deemed to be a port, in land container depot, land stations and land customs station under section 7 of the Customs Act, 1962. This is by virtue of section 53 of the SEZ Act, 2005. Keeping this core concept in mind, let us now go to the provisions of the Act. Section 7 of the Act exempts from payment of taxes, duties or cess, under all enactments specified in the First Schedule, any goods or services exported out of or imported into or procured from domestic tariff area, by a unit in a SEZ or a developer. But the Finance Act, 1994 is not one of the enactments specified in the First Schedule. Therefore, section 7 has no application to the case on hand. 21. However, section 26(1) specifically allows exemptions, drawbacks and concessions to every developer and entrepreneur. These exemptio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on the authorised operations by the developer or entrepreneur. (2) The Central Government may prescribe the manner in which, and the terms and conditions subject to which, the exemptions, con cessions, drawback or other benefits shall be granted to the developer or entrepreneur under sub-section (1)." 22. It may be noted that sub-section (1) of section 26 begins with the words "subject to the provisions of sub-section (2)". Sub-section (2) authorizes the Central Government to prescribe the manner in which and the terms and conditions subject to which exemptions shall be granted to the developer or entrepreneur under sub-section (1). 23. As rightly pointed out by Sri S. Niranjan Reddy, learned senior counsel appearing for the petitioner, the word "prescribe" appearing in sub-section (2) of section 26 has to be understood with reference to the definition of the word "prescribed" appearing in section 2(w) of the SEZ Act, 2005. Section 2(w) of the Act reads as follows : "'prescribed' means prescribed by rules made by the Central Government under this Act." 24. Therefore, the terms and conditions subject to which the exemptions are to be granted under....
X X X X Extracts X X X X
X X X X Extracts X X X X
....issued under section 93 of the Finance Act, 1994, if the conditions stipulated in those notifications are fulfilled. 28. The SEZ Act, 2005 is also a parliamentary enactment issued later in point of time to the Finance Act, 1994 and section 51 of the Act declares that the provisions of the SEZ Act, 2005 shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act. Section 51 reads as follows : "51. Act to have overriding effect.-The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act." 29. The contention of Smt. Sundari R. Pisupati, learned senior standing counsel is that there is no inconsistency between (i) the terms and conditions prescribed in the notifications issued under section 93 of the Finance Act, 1994, and (ii) the terms and conditions prescribed in rules 22 and 31 of the SEZ Rules, 2006, and that therefore, section 51 of the SEZ Act, 2005 cannot be pressed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....exported out of, or imported into or procured from a DTA by a unit in a Special Economic Zone or a developer under section 7 ; (2) exemption from payment of duties under the Customs Act, 1962, Customs Tariff Act, 1975, Central Excise Act, 1994, Central Excise Tariff Act, 1985, Finance Act, 1994, Finance (No. 2) Act, 2004 and Central Sales tax Act, 1956, covered by section 26(1) ; and (3) exemption from payment of State taxes, levies and duties covered by section 50, provided there is a State enactment to the said effect. 33. The word "prescribe" is used in the present tense in section 26(2) and in the past tense in section 7. Both will have the same meaning as assigned to the word under section 2(w). The moment a set of rules is issued either in respect of matters covered by section 7 or in respect of matters covered by section 26(1), there is no scope for invoking any other law for imposing any other condition. 34. The benefit of exemptions granted under the notifications issued under section 93 of the Finance Act, 1994, are available to any one and not necessarily confined to a unit in a special economic zone. Section 93 of the Finance Act, in that sense i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pects of the purpose sought to be achieved by that law and its dependence on other legislations is either absent or minimal, the same can be said to be a complete code. 37. Even if apply the parameters indicated in Girnar Traders [2011] 3 SCC 1, the case on hand would pass the test. Section 26(1) of the SEZ Act indicates (1) persons who are entitled to exemptions ; (2) the duties in respect which exemption is available; (3) the circumstances under which exemption is available ; and (4) the provisions of law subject to which the exemptions are available. To put it in simple terms, section 26(1) identifying the persons, who are eligible for exemption. They are the developer and entrepreneur. Section 26(1) identifies the duties from which exemption is available. They are the duties under the Customs Act, Customs Tariff Act, etc. Section 26 (1) also indicates the circumstances under which the exemptions are available. These circumstances vary from clause to clause under section 26(1). This can be best understood by providing a tabulation as follows : Duty exempted Circumstances under which exempted (1) Duty under Customs Act, 1962 (1) On goods imported into or services p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6. This sub-rule (5) inserted in rule 47 of the SEZ Rules, 2006 reads as follows : "(5) Refund, demand, adjudication, review and appeal with regard to matters relating to unauthorized operations under Special Economic Zones Act, 2005, transactions, and goods and services related thereto, shall be made by the jurisdictional Customs and Central Excise Authorities in accordance with the relevant provisions contained in the Customs Act, 1962, the Central Excise Act, 1944, and the Finance Act, 1994 and the rules made thereunder or the notifications issued thereunder." 41. On the strength of the aforesaid circular and the amendment to the Rules, it was contended by the learned senior standing counsel that the machinery provisions for working out refund, drawback, etc., are not avail- able either in the SEZ Act or the Rules framed thereunder and that there- fore, the operation of the Act is subject to the provisions of the other enactments. 42. But, we do not agree. Though the "section title" to section 26 reads as "exemptions, drawbacks and concessions", clauses (a) to (g) except clause (d) speak only about exemptions. It is only clause (d) of sub-section (1) of section 26....