TaxTMI 
TaxTMI 
2020 (5) TMI 524
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....003-SEZ of the 1st respondent. As a result of the impugned Guideline, the petitioner was required to procure High-Speed Diesel Oil (HSD) on payment of excise duty during the period in dispute between 1.4.2015 and 15.02.2016. 3. Since the petitioner had procured HSD Oil from Indian Oil Corporation Ltd. (IOCL)without payment of excise duty between 1.4.2015 and 3.10.2015, the 2nd respondent, the Development Commissioner, MEPZ, Chennai- 45 has issued the impugned SCN dated 30.3.2016 bearing reference No. 25/SO/2015-MP EZ-SEZ to the petitioner and has called upon the petitioner to pay a sum of Rs. 11,13,78,979/- in terms of Rule 27(3) of Special Economic Zone Rules, 2006 read with Section 26 of the Special Economic Zones Act, 2005. 4. The petitioner has therefore challenged the aforesaid show cause notice dated 30.3.2016 bearing reference No. 25/SO/2015-MPEZ- SEZ (hereinafter referred to as the impugned show cause) issued by the 2nd respondent, the Development Commissioner, MEPZ, Chennai- 45 in W.P.No 25838 of 2016. 5. The petitioner is a Co-Developer of Information Technology/Information Technology Enabled Services located in a Special Economic Zone (SEZ) in Pour, Chennai. ....
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....hich the status quo-ante that was prevailing immediately prior to the impugned 2015 Guideline has been partly restored. 13. It is therefore submitted that all procurement after 16.9.2016 are without payment of tax. It is therefore submitted that benefit of Guidelines dated 16.9.2016 should be allowed retrospectively. Under these circumstances, it is therefore submitted that even if the impugned 2015 Guidelines in valid, it is liable to be read down. Consequently, the demand proposed in the impugned show cause notice is liable to be quashed. 14. Learned counsel for the petitioner relied on the following case laws: i. GMR Aerospace Engineering Ltd. V. UOI - 2019VIL-489-TEL ii. Mahavir Prasad & Ors. - (1999) 8 SCC 266. iii. Jindal Stainless Limited Vs. UOI - 2017(51) S.T.R. 130(Del.) 15. The respondents have filed a detailed counter wherein it has been stated that exemptions, concessions and drawback incentives etc. as provided for in Section 26(1) of the SEZ Act, 2005 are subject to conditions prescribed. It is submitted that the Central Government may prescribe the manner in which, and the terms and conditions subject to which, the exemption, conc....
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....ayment of excise duty. A reference to the impugned Guideline will be made in the succeeding paragraph of this Order. The impugned guideline restores the position in 2009 Guidelines. 23. In 2009, the 1st respondent issued 2009 Guidelines dated 27.02.2009 under section 5 of the SEZ Act, 2005 read with Rule 12 of the Special Economic Zone Rules, 2006,. As per the aforesaid guidelines, a power plant to be set up by a Developer in a SEZ as a part of infrastructure facility was to be located in the Non-Processing area of SEZ and the developer which included co-developer like the petitioner were entitled to only certain fiscal benefits for initial setting up. 24. It clarified that no fiscal benefit would be admissible for operations and maintenance under rule 27(3) of the SEZ Rules, 2006. It also further stipulated that there will be no obligation to achieve positive Net Foreign Exchange Earning (NFE) for such power plants. 25. However, the 2009 Guideline was modified by 2012 Guideline dated 21.3.2012. Importantly it gave certain relaxation and stated as follows:- "i) Such a power plant set up in a processing area will be entitled to all the benefits available to develop....
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....challenged in W.P.No 25838 of 2016) calls upon the petitioner to show cause as to why "i. The power plants owned and operated by M/s.DLF Utilities Ltd., Co-developer, DLT IT/ITES situated in the processing area of M/s. DLF IT/ITES SEZ should not be considered as situated in Non processing area in as much as the Co Developer viz., M/s. DLF utilities Ltd., have failed to adhere to the conditions stipulated in the Ministry's guidelines dated 27.02.2009 as discussed above; ii. The exemption for Central Excise duty on the High Speed Diesel procured from DTA should not be held as ineligible as discussed above in terms of Rule 27(3) of SEZ Rules, 2006 read with Section 26 of the SEZ Act, 2005; iii. An amount of Rs. 11,13,78,979/- (Rupees Eleven crores thirteen lakhs seventy eight thousand nine hundred and seventy nine only) towards the Central Excise duty involved on the quantity of 10856 KLs of High Speed Diesel procured by them from DRA under ARE-1s during the period from 01.04.2015 to 03.10.2015 and detailed in the Annexure to this notice should not be demanded in terms of Rule 27(3) of SEZ Rules, 2006 read with Section 26 of the SEZ Act, 2005 as discussed ab....
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....erred to DTA without payment of duty, keeping in consideration of the fact that no duty-free benefits on raw materials consumables et cetera have been availed for generation of such power . However, those power plants not having the capacity of the mega power plant, as given in DoR Notification No. 21/2002-Customs dated 1.3.2002 will be required to pay duty for sale in DTA, on account of duty-free import of capital goods as determined by DoR." 30. As far as exemptions under the Special Economic Zones Act, 2005 is concerned, there are two provisions which grant exemptions to Developers/Co-Developers in a Special Economic Zones. They are Section 7 in Chapter II and Section 26 in Chapter VII of the Act. They are reproduced below: Special Economic Zones Act, 2005. Chapter II: EXEMPTION FROM TAXES, DUTIES OR CESS. Chapter VII: SPECIAL PROVISION FOR FISCAL ECONOMIC ZONES. Section 7: Any goods or services exported out of, or imported into, or procured from the Domestic Tariff Area by, - (i) a Unit in a Special Economic Zone; or (ii) a Developer; shall, subject to such terms, conditions and limitations, as may be prescribed, be exempt from the p....
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....wback or other benefits shall be granted to the Developer or entrepreneur under sub-section (1). 31. As per Section 7 any goods or services exported out of, or imported into, or procured from the Domestic Tariff Area by either by a (i) a Unit in a Special Economic Zone; or (ii) a Developer shall, subject to such terms, conditions and limitations, as may be prescribed, be exempt from the payment of taxes, duties or cess under all enactments specified in the First Schedule. 32. In the First Schedule only the following enactments are specified: 1. The Agricultural Produce Cess Act, 1940 (27 of 1940). 2. The Coffee Act, 1942 (7 of 1942). 3. The Mica Mines Labour Welfare Fund Act, 1946 (22 of 1946). 4. The Rubber Act, 1947 (24 of 1947). 5. The Tea Act, 1953 (29 of 1953). 6. The Salt Cess Act, 1953 (49 of 1953). 7. The Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955). 8. The Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957). 9. The Sugar (Regulation of Production) Act, 1961 (55 of 1961). 10. The Textiles Committee Act, 1963 (41 of 1963). ....
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.... or Developer; or (iii) supplying goods, or providing services, from one Unit to another Unit or Developer, in the same or different Special Economic Zone; (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, Unit or Developer from another Unit or Developer of the same Special Economic Zone or a different Special Economic Zone; 38. An export is said to take place within the meaning of section 2 (m) of the Special Economic Zones Act, 2005 under the following circumstances:- "i. if goods are taken out or services supplied are exported by land, sea or air or any other mode, whether physical or otherwise from a Special Economic Zone; or ii. if there is a supply of goods or provision of services to unit or a developer situated in Special Economic Zone by a unit situated in Domestic Tariff Area ; or iii.in the case of supply of goods or there is a provision of service from one unit to another unit or Developer, within the same or different ....
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.... the Act are reproduced below:- Section 4 (2) Section 15 (9) After the appointed day, the Board may, authorise the Developer to undertake in a Special Economic Zone, "such operations" which the Central Government may authorise. The Development Commissioner may, after approval of the proposal referred to in sub-section (3), grant a letter of approval to the person concerned to set up a Unit and undertake "such operations" which the and every such operation so authorised shall be mentioned in the letter of approval. 46. As per Section15(3), the Approval Committee [constituted under Section 13(1)] may, either approve the proposal without modification, or approve the proposal with modifications subject to such terms and conditions as it may deem fit to impose, or reject the proposal in accordance with section 15(8)of the Act. 47. Thus, the "authorized operations" contemplated in Section 4(2) is the operations which the Central Government i.e. the 1st respondent may authorise a Developer. The Petitioner was given such a final approval and authorisation by the 1st respondent vide approval dated 7.10.2008 to locate 48MW capacity power plant in the "processing area". 4....
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....conomic Zone where any manufacturing activity or any services is rendered may be demarcated as a "processing area". A non processing area is an area where neither of the activities specified in section 6(a) and (b) are carried out. Where any manufacturing activity or any service is rendered within a Special Economic Zone, it has to be necessarily declared as a processing area. 54. As per Section 2 (r) of the Act the expression "manufacture" means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, cutting, polishing, blending, repair, remaking, re-engineering and includes agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining. Since the definition of manufacture being very wide, both generation of power and supply qualifies as manufacture and supply of services respectively being the petitioner. 55. The power that is exercised by the Central Government under section 15(8)(b) of the Special Economic Zones, 2005 is different from the power vested with th....
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....y by the manufacturer. 62. Further, the exemption under Section 26(1) is subject to the restriction in section 26(2) of the Act. The phrase used in section 26(2), is "the Central Government may prescribe the manner in which, and the terms and conditions subject to which, the exemptions, concessions, drawback or other benefits shall be granted to the Developer or entrepreneur under sub-section (1)". 63. Rule 30 of the SEZ Rules, 2006 prescribes the manner in which and the terms and conditions subject to which the benefit can be granted to a Developer or an entrepreneur while procuring goods from the Domestic Tariff Area. Rule 30 of the SEZ Rules,2006 reads as under: "30. Procedure for procurements from the Domestic Tariff Area.- "(1) The Domestic Tariff Area supplier supplying goods to a Unit or Developer shall clear the goods, as in the case of exports, either under bond or as duty paid goods under claim of rebate on the cover of ARE-1 referred to in Notification number 42/2001-Central Excise (NT) dated the 26th June, 2001 in quintuplicate bearing running serial number beginning from the first day of the financial year. (2) Goods procured by a Unit ....
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....ved by the Approval Committee for the Developer. (7) On arrival of the goods procured from the Domestic Tariff Area at the Special Economic Zone gate, the Authorized Officer shall examine the goods in respect of description, quantity, marks and other relevant particulars given in the ARE-1, invoice, Bill of Export of packing list and also as per the examination norms laid down in respect of export goods in cases where the goods are being procured under claim of an export entitlement. (8) Drawback or Duty Entitlement Pass Book credit against supply of goods by Domestic Tariff Area supplier shall be admissible provided payments for the supply are made from the Foreign Currency Account of the Unit. Provided that the reimbursement of duty in lieu of drawback or Duty Entitlement Pass Book credit against supply of goods by Domestic Tariff Area supplier to Special Economic Zone developers shall be admissible even if payment is made in Indian Rupees. Reimbursement of duty in lieu of drawback against supply of goods to Special Economic Zone developer shall be made as per the procedure prescribed by the Central Government. (9) A copy of the Bill of Export ....
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....(14) A Special Economic Zone Unit or Developer may also procure goods from international exhibitions held in India following the procedures under sub-rule (12). (15) A Unit or Developer may also procure goods or services, without payment of duty from an Export Oriented Unit or Software Technology Park Unit or Bio-Technology Park Unit, by following procedures under sub-rule (12). (16) A Unit or Developer may procure goods and services from another Unit located in the same or any other Special Economic Zone, subject to following conditions, namely:- (i) the receiving Unit or Developer shall file Bill of Entry for home consumption with the Authorized Officer, in quintuplicate, giving description of the goods along with an invoice and packing list for assessment; (ii) on the basis of such assessed Bill of Entry, the goods shall be allowed to be transferred to the receiving Unit or Developer under transhipment permit; (iii) there shall be no requirement to file any additional document or bond(s) for the purpose of transhipment of goods and the transhipment permission shall be stamped on the Bill of Entry itself; (iv) the sup....
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....d Rules. 66. That apart procurement of HSD by the petitioner from IOCL did not qualify as an import within the meaning of Section 2(o) of the Special Economic Zones Act, 2006. Therefore, there cannot be a demand for customs duty and interest thereon on the excise duty foregone by IOCL at the time of clearance of HSD from its factory/refinery to the petitioner under section 28 or 28AA of the Customs Act, 1962. 67.Though, in a slightly different context, the Honourable Supreme Court In WPIL Industries versus Commissioner of Central Excise 2005 (181) ELT 359 (SC) while dealing with scope of Notification No. 46/94-CE dated 1.3.1994 and Notification No. 95/94-CE dated 25.4.1994 issued under Section 5A of the Central Excise Act, 1944, held that "In view of the consistent policy of the Government of exempting parts of power driven pumps utilised by the factory within the factory premises, it could not be said that while issuing Notification No. 44/96 of 01/03/1994, the exemption in respect of the said item which was operative was either withdrawn or revoked. The action was taken only with the view to rescinding several notifications and by issuing a composite notification. The polic....