TaxTMI 
TaxTMI 
2021 (2) TMI 655
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....rocured from the Domestic Tariff Area (DTA) by a unit in an SEZ or a developer of an SEZ. The issue that arises in this writ petition is the eligibility or otherwise to exemption of High Speed Diesel Oil (HSD)/fuel purchased from suppliers including the Indian Oil Corporation Limited, Chennai (IOCL), for operating equipment leased from contractors and sub-contractors, and exclusively used in authorized operations, from the payment of Duty under the Central Excise Act, 1944. 3. The authorized operations of the petitioner are set out in the approval granted, as follows: 'Government of India, Ministry of Commerce and Industry, . . . . . . . . Lr.No.8/2/2010/L & T Shipbuilding SEZ-II Dt. 31/3/2010 To M./s.Larsen & Toubro Limited, . . . . Sub: Your proposal for setting....
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....y of direct purchase as well as hire from contractor/sub-contractors. The requirement for exemption from Duty in respect of HSD/fuel purchased for running the capital equipment, was reiterated. 6. By letter dated 08.03.2017, the Development Commissioner invoked Rule 27 of the Rules to reject the claim stating that the proviso to Rule 27 granted an exemption from duty for goods and services of contractors only so far as they were utilized for setting up and maintenance of the factory building and not for regular production of finished goods. 7. On 14.09.2017 the petitioner reiterated its request yet again and on 01.05.2019, the impugned order has come to be passed in the following terms: 'No.K 43014(16)/26/2018-SEZ Government of India . . . . . . . Udyog Bhavan New Delhi Dated 1st May 2019 To . . . . L&T Hydrocarbon Engineering Ltd. Subject: Seeking clarification for the usage of diesel for hired equipment for manufacturing activity. Sir, I am directed to refer to your letter dated 13.11.2018 on the subject mentioned above and to stable that the issue was earlier examined in consultation with DGEP....
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.... (v) Fuel/HSD is required to run the capital equipment and no dispute has been raised by the respondents for exemption from duty in respect of the fuel/HSD procured and used in the equipment owned by the petitioner. The claim has been rejected only in regard to the fuel/HSD procured to run leased equipment. 9. The SEZ Act has been enacted to provide a fillip to economic activity and Section 7 of the Act exempts all goods and services exported out of or imported into or procured from the domestic tariff area by a unit therein or a developer, from all taxes, duties or cess. Section 26 of the Act extends available exemptions, drawbacks and concessions under all enactments to developers and entrepreneurs of an SEZ and exemption from any duty of excise, under the Central Excise Act, 1944 (1 of 1944) or the Central Excise Tariff Act, 1985 (5 of 1986) or any other law for the time being in force, on goods brought from Domestic Tariff Area to a Special Economic Zone or Unit is in terms of clause (c) thereof. 10. Rule 27(1) of the SEZ Rules extends the benefit of exemption to all types of goods including capital goods, both new and second hand, raw materials, semifinished goods, comp....
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.... yet another rejection dated 08.03.2017 wherein the reason stated is that the exemption is applicable only for setting up and maintenance of the factory building and not for regular production of finished goods. A cohesive reading of the provisions of the SEZ Act, Rule 27 and the proviso thereto reveals that the activities of setting up of an SEZ unit and carrying out of authorised operations are intended to be free of the fetters of taxation, subject of course, to strict compliance with all Rules, Regulations, terms and conditions. 13. In my understanding, the Rule grants a wide range of exemptions to a unit or developer, such exemptions covering the procurement of various goods, equipments, consumables, components, spaces and materials as required for authorized operations. The provisio extends such exemption to contractors appointed by the unit as well upon condition that the goods and services, procured are used only for setting up and maintenance of the factory building. The intention is evidently to ensure that contractors who play a role in the setting up and maintenance of the SEZ unit are given the benefit of exemption as well. 14. In the present case there is no dis....