AI Drafter 
TaxTMI 
TaxTMI 
2024 (1) TMI 305
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.... Economic Zones Act, 2005 (for short, 'the SEZ Act') on obtaining letter of approval. As per Section 26 of the SEZ Act, the petitioner's unit is exempt from paying any duty, tax or cess under the Customs Act, 1962 or Customs Tariffs Act, 1975. (a) While so, the petitioner sent two letters dated 05.07.2017 and 09.08.2017 seeking clarification from Director (SEZ) for exemption of cess payable under Goods and Services Tax (Compensation to States) Act, 2017 (for short "the GST Compensation Act") on import of coal under the Customs Act, 1962 or Customs Tariff Act, 1975. (b) With regard to the above letters, 2nd respondent issued impugned letter dated 04.09.2017 stating that Section 26(1)(a) of SEZ Act, 2005 provides exemption to SEZ units from any duty of Customs under Customs Act, 1962 or Customs Tariff Act, 1975. Further, under notification No.64/2017 dated 05.07.2017, the IGST leviable U/s 3(7) of Customs Tariff Act, 1975 is exempted on all the goods imported into India by a SEZ unit. However no such exemption for compensation cess leviable U/s 3(9) of Customs Tariff Act, 1975 is provided either under Customs Act or IGST Act. Hence the cess on coal under GST Compens....
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....stoms Act, 1962 and Customs Tariff Act, 1975. The 2nd respondent sent the impugned letter dated 04.09.2017 denying such exemption. Hence, the petitioner submitted bond along with bank guarantee in respect of compensation cess leviable for import of each consignment of coal and then filed the W.P. No. 1009 of 2019. (d) U/s 26(1)(a) of SEZ Act, 2005, a SEZ unit is entitled for exemption from any duty of Customs Under the Customs Act, 1962 or Customs Tariff Act, 1975 or any other law on goods imported into or services provided in a SEZ Unit. However, there is no exemption of payment of cess under GST Compensation Act. (e) The Government of India issued notification No.64/2017 dated 05.07.2017 only exempting IGST leviable u/s 3(7) of the Customs Tariff Act, 1975 on all gods imported into India by a SEZ unit for authorized operations. However, no such exemption was granted in respect of compensation cess leviable under Section 3(9) of the Customs Tariff Act. (f) Further, as per Section 7 of the SEZ Act, 2005, the taxes, duties or cess under the enactments specified in the 1st Schedule are only exempted for the SEZ developer / SEZ unit. However, the SEZ payable....
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....da after obtaining a letter of approval as per SEZ Act, 2005. This petitioner also, as in the above two writ petitions, questions the levy of cess under GST Compensation Act on import of coal. (j) Petitioner's case is that it addressed letters dated 14.05.2019, 31.12.2019, 03.07.2020, 23.11.2020 and 31.12.2020 to the 2nd respondent requesting to waive the compensation cess under the Customs Act. However, the 2nd respondent issued the impugned letter dated 04.01.2021 rejecting the petitioner's request stating that although Section 26(1)(a) of SEZ Act provides exemptions to SEZ unit from any duty or customs under Customs Act, 1962 or the Customs Tariff Act, 1975, the notification No.64/2017 dated 05.07.2017 only exempts IGST but no such exemption is granted in respect of compensation cess and hence such cess cannot be exempted. Such stand taken by the 2nd respondent is illegal and contrary to the relevant enactments. Hence the writ petition. 4. Counters of respondents 1 and 4 in W.P. No. 2631 of 2021: While admitting that the petitioner established SEZ unit in Vakalapudi Village, Kakinada and that the petitioner addressed letters dated 14.05.2019, 31.12.2019, 03.07.2020, ....
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....oms Tariff Act, 1975. Therefore, those provisions cannot be relied upon by the petitioner. It is further stated that DGFT (Director General of Foreign Trade) issued notification No. 57/2015/20 dated 20.03.2019 extending exemption of IGST and compensation cess under advance authorization, ETCG and to 100% EOU upto 31.03.2020. However, no such notification was issued by the Government exempting compensation cess to the SEZ units. The respondents prayed to dismiss the writ petitions. The respondents 2 and 3 also filed their counter with averments similar to respondents 1 and 4. 5. Heard arguments of Sri Vikram Poosarla, learned counsel for petitioners in W.P. No. 1009/2019 and WP No. 6216/2021 and Sri Challa Gunaranjan, learned counsel for petitioner in W.P. No. 2631/2021 and Sri O. Udaya Kumar, learned Central Government Counsel representing 1st respondent and Sri Suresh Kumar Routhu, learned Senior Standing Counsel for CBIC. 6. The point for consideration is whether the petitioners in W.P. No. 1009 of 2019 and W.P. Nos. 2631 & 6216 of 2021 being SEZ units are exempted from payment of GST compensation cess? 7. Point: Admittedly, the petitioners have established SEZ uni....
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....rticles 246A, 269A and 279A were inserted. 11. (a) Article 246A is a special provision with respect to goods and services tax. In essence, this provision creates legislative power on the States to legislate taxing law on intra-state sale of goods and supply of services. This provision also created exclusive legislative power on the Parliament to make laws with respect to goods and services tax leviable on sale of goods or supply of services in the course of inter- state trade or commerce. (b) Article 269A speaks of levy and collection of goods and services tax in the course of inter-state trade or commerce. It lays down that such goods and services tax shall be levied and collected by Govt. of India and same shall be apportioned between Union and States in the manner provided by the Parliament by law on the recommendation of Goods and Services Tax Council. (c) Then Article 279A speaks of constitution of Goods and Services Tax Council headed by Union Finance Minister to make recommendations to Union and States on the subjects mentioned in the said Article. (d) Clause 18 of Amendment Act, 2016 is akin to Clause 19 of Amendment Bill, 2014. It reads thus: "18. Parl....
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....nsition period. (vi) Section 8 deals with levy and collection of cess. This section says that (i) cess shall be levied on intra-state supplies of goods or services or both as provided for in Section 9 of CGST Act and (ii) inter-state supplies of goods and services or both as provided for in Section 5 of IGST Act and collected in the manner prescribed on the recommendations made by GST council for a period of five years or for such period as may be prescribed on the recommendation of the council. The cess shall be levied on such supplies of goods or services or both as are specified in the schedule of this Act. Provided that the cess on goods imported into India shall be levied and collected in accordance with the provisions of Section 3 of Customs Tariff Act, 1975 at the point when duties or customs are levied on the said goods U/s 12 of Customs Act, 1962 on a value determined under Customs Tariff Act, 1975. 14. It should be noted in Union of India v. Hind Energy and Coal Benefication (India) Ltd., AIR 2018 SC 5318 = MANU/SC/1118/2018 the constitutional validity of GST Compensation Act, 2017 and its rules was challenged on the ground that the same were beyond the legisl....
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....iolate Constitution and it was not a colourable legislation. 17. Issue No. 4 is concerned, it is contended that the Goods and Services Tax being already imposed by the three Acts i.e., CGST Act, IGST Act and UTGST Act, imposition of GST Compensation Cess on the same taxing event amounts to double taxation and having overlapping effect. This contention was also discarded by the Apex Court observing that two separate imposts in law are not prohibited by any law so as to declare it invalid. 18. Issue No. 5 is concerned, it was contended that the petitioner having paid Clean Energy Cess till 30.06.2017 on the stock of coal, they are entitled to set off in payment of Compensation to States Cess. The said argument was discarded on the ground that the Clean Energy Cess and States Compensation Cess are collected wholly for different purposes. Thus Hon'ble Apex Court upheld the constitutional validity of GST Compensation Cess. Thus it has now to be seen whether the petitioners can seek exemption of payment of GST Compensation Cess in the light of provisions contained in SEZ Act, 2005. 19. As stated supra, the petitioners are operating units in the SEZ. A special economic zone (SEZ)....
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.... Exemption from taxes, duties or cess:- 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 payment of taxes, duties or cess under all enactments specified in the First Schedule. (vii) Then Section 26 also deals with certain exemptions drawbacks and concessions which reads thus: "26. Exemptions, drawbacks and concessions to every Developer and entrepreneur.- (1) Subject to the provisions of sub-section (2), every Developer and the entrepreneur shall be entitled to the following exemptions, drawbacks and concessions, namely:- (a) exemption from any duty of customs, under the Customs Act, 1962 (52 of 1962) or the Customs Tariff Act, 1975 (51 of 1975) or any other law for the time being in force, on goods imported into, or service provided in, a Special Economic Zone or a Unit, to carry on the authorised operations by the Developer or entrepreneur; (b) exemption from any duty of customs, under the Customs Ac....
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....rs conferred upon any person or authority under any State Act to the Development Commissioner in relation to the Developer or the entrepreneur." 21. Thus it is obvious that Sections 7, 26 and 50 are the three main provisions which allow the SEZ Units to claim the exemptions on duties, tax, cess and certain drawbacks and concessions. 22. In GMR Aerospace Engineering Limited v. Union of India 2019(2)ALD 537 = MANU/HY/0419/2018 speaking through the Division Bench of High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh, Hon'ble Sri Justice V. Ramasubramanian (as His Lordship was then) observed that the exemptions are covered by the above three sections. It was observed thus: "32. A combined reading of Sections 7, 26 and 50 of the SEZ Act, 2005, would show that SEZ Act 2005 speaks of three different types of exemptions. They are,- (1) exemption from payment of taxes under the enactments specified in the First Schedule, in respect of goods and services 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 ....
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....r the Central Sales Tax Act, 1956 6) If such goods are meant to carry on authorized operations by the Developer or entrepreneur. 23. From the above jurisprudence, it is pellucidly clear that, the SEZ Act is a self-contained Act whereunder exemptions on taxes, duties, cess, drawbacks and concessions are provided on imports and exports of the goods and on supply of services to the Developers and SEZ units. Therefore the exemptions etc., have to be looked into from the provisions of the said Act and not from elsewhere. 24. Now the claim of the petitioners is concerned, though at the inception the petitioners claimed exemption on payment of cess under GST Compensation Act U/s 7 of the SEZ Act, however later they have desisted their claim for the reason that the Goods and Services Tax (Compensation to States) Act, 2017 is not specified in the First Schedule of SEZ Act which is the sine qua non for claiming exemption. The petitioners have also not staked their claim U/s 50 of the SEZ Act as they have not produced any enactments made by the State Government for the purpose of giving effect to the provisions of the SEZ Act. 25. However, the petitioners braced their claim much U....
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....toms Tariff Act, 1975 but not the "cess" payable under GST Compensation Act, 2017. They argued that the origin of the cess is traceable to GST Compensation Act, 2017 and Section 3 (9) of Customs Tariff Act, 1975 only prescribes the rate as is leviable under Section 8 of GST Compensation Act, 2017. They vehemently argued that since cess is different from duty and what is exempted U/s 26(1)(a) is only a customs duty, the petitioners cannot claim exemption from payment of the said cess unless the SEZ Act is suitably amended to provide for such exemption. 26. We have cogitated upon the respective arguments. In Union of India v. Hind Energy and Coal Benefication (India) Ltd (supra 1) while upholding the constitutional validity of GST Compensation Act, 2017, Hon'ble Apex Court has drawn the subtle distinction between tax/duty and cess by referring several decisions. In the above decisions, it was observed thus: "36. P. Ramanatha Aiyar, Advanced Law Lexicon, 3rd Edition defines cess as follows: "Cess" is "An assessment tax; levy; specifically: (a) A rate or local tax (b) In Scotland, the land tax. (c) in India, a tax for a special object; as....
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....n Para 19, which is quoted as below: 19. Here, we are concerned with cess on royalty. One can have an idea as to what cess is, from the observations of Hidayatullah, J., as the learned Chief Justice then was, in Guruswamy & Co. v. State of Mysore where at page 571, the learned Judge observed: The word 'cess' is used in Ireland and is still in use in India although the word rate has replaced it in England. It means a tax and is generally used when the levy is for some special administrative expense which the name (health cess, education cess, road cess etc.) indicates. When levied as an increment to an existing tax, the name matters not for the validity of the cess must be judged of in the same way as the validity of the tax to which it is an increment. 39. The meaning of "cess" as noticed above was again reiterated by a Two Judge Bench judgment of this Court in Vijayalashmi Rice Mill and Ors. v. Commercial Tax Officers, Palakol and Ors., MANU/SC/3847/2006 : (2006) 6 SCC 763, in paragraph 13, following has been laid down: 13. Hence ordinarily a cess is also a tax, but is a special kind of tax. Generally tax raises revenue which can be used....