V.M. Sahai, C.J@mdashBy way of the present petition, the petitioners seek to challenge the constitutionality and legality of Government Notification No. 25/2010-Customs dated 27.2.2010 whereby customs duty at the rate of 16% advalorem has been levied on electrical energy removed from Special Economic Zone to Domestic Tariff Area and non-processing areas of the zone.
2. The petitioner No. 1 - M/s. Adani Power Limited (for short ''the Company'') is a Company incorporated under the provisions of the Companies Act, 1956 and is engaged in the activity of generating, transmitting and selling electrical energy. The petitioner No. 2 is an Indian citizen and is shareholder of the Company. The plant of the Company is situated in Mundra Port and Special Economic Zone. The electricity generated, as permissible, is cleared/transferred from the Special Economic Zone to Domestic Tariff Area (for short ''DTA'').
3. Mundra Special Economic Zone (for short ''MPSEZ'') had been established under the Special Economic Zones Act, 2005 (for short ''SEZ Act''). M/s. Mundra Port and Special Economic Zone Limited was the developer as defined in Section 2(g) of the SEZ Act. Section 2(p) of the SEZ Act provides that the developer had to ear mark processing and non-processing areas as well as it had to provide for infrastructural facilities. Rule 2(s) of the Special Economic Zone Rules, 2006 (for short ''SEZ Rules'') lays down that "infrastructure" means facilities needed for development, operation and maintenance of the Special Economic Zone and includes industrial, business and social amenities like development of land, roads, buildings, sewerage and effluent treatment facilities, solid waste management facilities, port, including jetties, single point moorings, storage tanks and inter-connecting pipelines for liquids and gases, Inland Container Depot or Container Freight Station, warehouses, airports, railways, transport system generation and distribution of power, gas and other forms of energy, telecommunication, data transmission network, information technology network, hospitals, hotels, educational institutions, leisure, recreational and entertainment facilities, residential and business complex, water supply, including desalination plant, sanitation facility.
4. MPSEZ is a multi-product SEZ covering an area of 6472.8684 hectares and electricity is required for both processing and non-processing areas. The Company therefore joined as Co-Developer to set up the Mundra Power Plant which is a coal based thermal power plant. This project was initially planned to generate 1320 MW which was increased to 2640 MW and ultimately to 4620 MW. In the year 2010, the petitioner Company was in the process of setting up thermal power plant with total capacity of 4620 MW, out of which two units of 330 MW each have been commissioned at Mundra within the SEZ.
5. The power supply from the power plant which is inside the SEZ area from where the power is supplied outside the SEZ area is in dispute in this petition. The petitioners have challenged the vires of Notification No. 25/2010-Customs dated 27.2.2010 on the ground that the notification is ultra vires to Entry 83 of List I of Schedule VII of the Constitution, Section 12 of the Customs Act, Section 30 of the Special Economic Zone Act, 2005 as well as violative of Article 14, 19(1)(g) and Article 265 of the Constitution of India. The petitioner has also prayed that Notification No. 21/2002 dated 1.3.2002 Serial No. 573 as amended by Clause 60 of the Finance Act, 2010 read with Notification No. 25/2010-Customs dated 27.2.2010 and had further prayed for quashing of the letters dated 26.2.2010 and 3.3.2010 issued by Specified Officer, MPSEZ, Mundra, Annexure D and F respectively to the petition.
6. We have heard Mr. Kamal B. Trivedi, learned Senior Counsel assisted by Mr. Uday Joshi for the petitioners and Mr. Devang Vyas, learned Assistant Solicitor General assisted by Mr. Kshitij Amin appearing for the respondents.
7. Mr. Kamal B. Trivedi, learned Senior Counsel assisted by Mr. Uday Joshi, learned counsel appearing for the petitioners urged that as per the notification issued in the year 2002, Entry No. 573 being 27160000 is relatable to energy mentioned in subheading 27.16 entitled as "Electricity Energy, No Customs Duty payable" of Chapter 27 entitled as "mineral fuel, mineral oils etc." He further urged that Section 30(a) provides that if any goods are removed from a Special Economic Zone to the Domestic Tariff Area, such goods will be chargeable to duties of customs including anti-dumping, countervailing and safeguard duties under the Customs Tariff Act, 1975 as leviable on such goods when imported, meaning thereby that if any goods are removed from the Special Economic Zone area to the Domestic Tariff Area, then the present customs duty will be leviable treating the goods to be imported from outside India.
8. Mr. Kamal B. Trivedi, learned Senior Counsel has further urged that if the same meaning is applied to the notification dated 27.2.2010, it provides that the Central Government if it is satisfied can grant exemption in public interest to the goods falling under the Tariff Item No. 27160000 of the First Schedule to Customs Tariff Act, 1975 from whole of the duties which are specified in the First Schedule. Meaning thereby, with regard to tariff Item No. 27160000 if the goods are imported in India, then those goods will be exempted from payment of customs duty. If we apply the same analogy to Section 25(1) of the Customs Act, 1962, which provides for exemption from payment of customs duty and in view of Section 30(a) since the goods are being brought from the Special Economic Zone to Domestic Tariff Area, then it has to be treated as imported goods which has come from outside India and, therefore, item No. 27160000 which is the goods known as electrical energy removed from the Special Economic Zone to the Domestic Tariff Area would be exempted as it will be treated to be imported from outside India and 16% advalorem custom duty cannot be charged by the respondent because Section 25(1) is not charging Section, but it is the section which grants exemption from payment of customs duty. It is not disputed by Mr. Devang Vyas, learned Assistant Solicitor General of India for the respondents that proviso to Notification dated 27.2.2010 exempted electrical energy which is imported into India from the whole of payment of customs duty. It is urged by the counsel for the petitioners that the proviso to Notification No. 25/2010 Customs, New Delhi dated 27.2.2010 is violative of provisions of Section 25(1) of the Customs Act, 1962 and arbitrarily imposes customs duty treating electrical energy falling under Tariff Item No. 20170000 removed from the Special Economic Zone to the Domestic Tariff Area chargeable to customs duty. Therefore, entire proviso to Notification No. 25/2010 of the Customs New Delhi dated 27.2.2010 is violative of Section 25(1) read with Section 30(a) of the SEZ Act, arbitrary and liable to be quashed.
9. Mr. Kamal B. Trivedi, learned Senior Counsel has lastly urged that by Notification dated 27.2.2010, custom duty could not be levied at the rate of 16% advalorem on electrical energy removed from Special Economic Zone to Domestic Tariff Area and non-processing areas of the zone retrospectively w.e.f. 26.6.2009 as the duty was not known to be payable prior to 27.2.2010. The levy of custom duty is illegal as it amounts to levying custom duty on electrical energy which can only be levied by a substantive provision of law and custom duty could be levied only prospectively and not retrospectively. The Central Government realized that custom duty @ 16% was onerous and by Notification No. 91 of 2010 Cus. Dated 16.9.2010 reduced the duty to 10 paisa per unit. The custom duty was further reduced to 3 paisa per unit by the Notification No. 26 of 2012 Cus Dated 18.4.2012. The learned counsel for the petitioner also urged that in case this writ petition succeeds, the petitioners are entitled for refund of the Bank Guarantee from the respondent authority as it had been furnished in compliance of the interim order dated 6.5.2010 passed by this Court.
10. Under the provisions of the Electricity Act, 2003 and the Rules/Regulations made thereunder a power plant in excess of 1000 MW is classified as Mega Power Plant (for short ''the MPP''). All MPPs are allowed to import or indigenously procure Capital Goods duty free as per Notification No. 21/2002 dated 1.3.2002 for Customs Duty exemption and Notification No. 6/2006 dated 1.3.2006 for excise duty benefit. The Company imported as well as indigenously procured Capital Goods (coal etc.) without payment of duty, customs and excise as the case may be, as provided under the provisions of SEZ Act and the SEZ Rules.
11. Section 26 of the SEZ Act reads as under:-
"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 authorized operations by the Developer or entrepreneur;
(b) 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 exported from, or services provided, from a Special Economic Zone or from a Unit, to any place outside India;
(c) 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, to carry on the authorized operations by the Developer or entrepreneur;
(d) drawback or such other benefits as may be admissible from time to time on goods brought or services provided from the Domestic Tariff Area into a Special Economic Zone or Unit or services provided in a Special Economic Zone or Unit by the service providers located outside India to carry on the authorized operations by the Developer or entrepreneur;
(e) exemption from service tax under Chapter V of the Finance Act, 1994 (32 of 1994) on taxable services provided to a Developer or Unit to carry on the authorized operations in a Special Economic Zone;
(f) exemption from the securities transaction tax leviable under section 98 of the Finance (No. 2) Act, 2004 (23 of 2004) in case the taxable securities transactions are entered into by a non-resident through the International Financial Services Centre;
(g) exemption from the levy of taxes on the sale or purchase of goods other than newspapers under the Central Sales Tax Act, 1956 (74 of 1956) if such goods are meant to carry on the authorized operations by the Developer or entrepreneur."
12. From reading of Section 26(1)(a) and (b) of the SEZ Act, it is clear that it provided exemptions, drawbacks and concessions in payment of duty of custom duty under the Customs Act, 1962 or the Customs Tariff Act, 1975 on goods imported into SEZ area by the developer or entrepreneur or goods exported or services provided within the SEZ zone or from a Unit.
(i) Section 26(1)(c) and (d) provided exemption for payment of excise duty under the Central Excise Act, 1944 or the Central Excise Tariff Act, 1985 on goods brought from the Domestic Tariff Area to a SEZ area or a unit within the SEZ area by the developer or entrepreneur. It also provided that drawbacks and other benefits admissible from time to time on goods brought or service provided from the DTA to SEZ or unit or service provided in the aforesaid area by service providers located outside India to carry on the authorized operations by the Developer or entrepreneur.
(ii) Section 26(1)(e), (f) and (g) lays down that exemption was provided on payment of service tax, exemption from securities transaction tax where the transactions are entered into by a non-resident through the International Financial Services Centre.
It also provided that exemption from levy of taxes on sale or purchase of goods other than newspapers under the Central Sales Tax Act, 1956.
(iii) All these exemptions were provided to every Developer and entrepreneur to claim exemptions, drawbacks and concessions where either the goods were imported from outside India to SEZ area or goods exported from SEZ area to outside India.
(iv) From the aforesaid facts, it is clear that the Act clearly provided exemptions to a Developer or the entrepreneur exemptions from payment of custom or excise duty, service tax, securities transaction tax, taxes on sale or purchase of goods which are meant to carry on the authorized operation by the Developer or the entrepreneur within the SEZ area or the unit. Therefore, goods can be imported within SEZ area and exported outside the SEZ area on which no duty were leviable as mentioned above and exemptions were granted by the SEZ Act. But, these exemptions would not be available to a Developer or a unit situated within the SEZ area if it removes any goods from SEZ to DTA than duty or tax was leviable on the Developer or the unit.
13. The petitioner had commissioned two units of 330 MW each at Mundra Plant. A part of the electricity is sold outside the SEZ to Gujarat Urja Vikas Nigam Limited (GUVNL), a Distribution Company/Licencee of the Government of Gujarat and others. Section 30 of the SEZ Act provides for levy of duty on goods removed from SEZ area into DTA.
14. From the perusal of Section 30 of the SEZ Act, it is clear that any goods removed from SEZ to DTA are chargeable to duties of customs including anti-dumping, countervailing and safeguard duties under the Customs Tariff Act, 1975 and the duty was leviable on such goods as treating them to be imported goods. Thus, if any goods is removed or supplied from SEZ to DTA, then custom duty was leviable on the goods treating them to be imported goods under the Customs Tariff Act, 1975 as per valuation applicable to such goods at the rate of duty and tariff valuation which was in force as on the date of removal and if the date is not certain, then on the date of payment of duty.
15. The expression "import" had been defined in Section 2(23) of the Customs Act, 1962 as under:-
"2(23) "import", with its grammatical variations and cognate expressions, means bringing into India from a place outside India;"
16. Section 2(o) of the SEZ Act defines the expression "import" which reads as under:-
"2(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 a Unit or Developer from another Unit or Developer of the same Special Economic Zone or a different Special Economic Zone;"
17. Both the definitions of import if read in juxta position, then it is clear that under the Customs Act, if any goods are brought within the territory of India, then on it, customs duty shall be levied at such rate as may be specified under the Custom Tariff Act, 1975 under the law in force at that time on the goods imported into India, whereas under the SEZ Act, import is permissible within the SEZ area by Unit or a Developer or receiving of goods or services by a Unit or a Developer from another Unit or Developer of the same SEZ or a different SEZ. But it would be treated as import. The whole idea was that in SEZ, though goods may be imported from outside India within SEZ or from one SEZ to another, but no duty would be levied, otherwise, custom duty is leviable.
18. The Customs Act was enacted by the Parliament under Entry 83 of List I of Schedule VII of the Constitution of India which provides "Duties of customs including export duties". Section 12 of the Customs Act is the charging section which provides for levy of customs duty on goods imported into India, which means, goods brought from a territory outside India into India.
19. A conjoint reading of Entry 83 of List I of Schedule VII and Section 12 of the Customs Act shows that the levy under the said Act is on goods which are physically imported from territory outside India into India. On the other hand, duty under Section 30 of the SEZ Act is not on import of goods into India because the word "import" as defined in the SEZ Act does not cover removal of goods from SEZ in DTA. Section 30 of the SEZ Act is a special provision which provides for levy of duty without any specific name thereto. Section 30 is Legislation by legislative reference in as much as it seeks to adopt and borrow the provisions of the Customs Tariff Act for the purpose of quantification of the duty levied there under. In calculating the duty liability under Section 30, the rate of duty as specified in Customs Tariff Act has to be read with another Notification issued under Section 25 of the said Act for the time being in force in relation to the goods sought to be removed from SEZ into DTA.
20. By virtue of Entry 83 of List I of Schedule VII to the Constitution of India, the said Act has been enacted to provide for levy of customs duty on goods imported into India. The word "import" in the context of Entry 83 of List I means bringing into India from a territory outside India. This is also the scope and ambit of the charging section. The customs duty under Section 12 of the Customs Act read with Section 83 of the List I can only be levied on goods imported into India.
21. Section 25 of the Customs Act, 1962 lays down the power of the Central Government to grant exemption from custom duty in public interest by Notification in the Official Gazette to exempt any goods mentioned in the Notification either absolutely or subject to conditions mentioned in the Notification. It is open to the Government to exempt either the whole or any part of the customs duty. It is also within the powers of the Central Government for levy of custom duty on such goods at the rate expressed in a form of method that provides for statutory custom duty. [Refund of custom duty paid in respect of mineral oil under sub-section (7) of Section 25 shall not be made.]. It is urged by the petitioners that the goods removed from SEZ into DTA or non-processing areas of SEZ are not imported into India as defined under Section 2(23) of the Customs Act. The custom duty can only be levied under the Customs Act on goods imported into India from a place outside India. It is vehemently urged that duty cannot be levied on goods removed from SEZ to DTA in exercise of powers conferred by Section 25 of the said Act. The power under Section 25 of the said Act is to exempt wholly or partially, conditionally or unconditionally the goods when imported into India from a place outside India from payment of customs duty which is leviable under Section 12 of the Act. Hence, duty on goods removed from SEZ into DTA or non-processing areas of SEZ cannot be levied under the Customs Act on account of the legislative mandate under Entry 83 of List 1 of Schedule VII to the Constitution of India. The impugned Notification is thus unconstitutional and ultra vires Entry 83 of List I of Schedule VII of the Constitution of India.
22. Before we examine the rival contentions of learned counsel for the parties, we deem it necessary to advert to Rule 47(3) of the SEZ Rules which provides for payment of customs duty on raw material and consumables used in the generation of electricity supplied outside SEZ. Rule 47(3) of the SEZ Rules is extracted below:-
"47(3) Surplus power generated in a Special Economic Zone''s Developer''s Power Plant in the SEZ or Unit''s captive power plant or diesel generating set made by transferred to Domestic Tariff Area on payment of duty on consumables and raw materials used for generation of power subject on the following conditions, namely:-
(a) Proposal for sale of surplus power received by the Development Commissioner, shall be examined in consultation with the State Electricity Board, wherever considered necessary;
PROVIDED that consultation with State Electricity Board shall not be required for sale of power within the same Special Economic Zone;
(b) norms for production of a unit of power shall be approved by the Approval Committee;
(c) sale of surplus power to other Unit or Developer in the same or other Special Economic Zone or to Export Oriented Unit or to Electronic Hardware Technology Park Unit or to Software Technology Park Unit or Bio-technology Park Unit, shall be without payment of duty;
(d) for sale of surplus power in Domestic Tariff Area, the Unit shall obtain permission from the Specified Officer and the State Government authority concerned;
(e) duty on sale of surplus power to the Domestic Tariff Area shall be as provided for in this rule."
23. The provisions of Rule 47(3) of the SEZ Rules are designed to align the power plants located within SEZ to be at par with power plants located outside SEZ, both being located within India. Just as MPP imports or procures capital goods without payment of duty, but pays customs duty or excise duty, on the raw materials and consumables used to generate electricity so also MPP located within SEZ imports or procures capital goods without payment of duty but is required to pay duty on raw materials and consumables to the extent the electricity generated by it is removed/supplied/sold outside SEZ.
24. By notification No. 21/2008-Customs dated 1.3.2008, the Central Government amended the Notification No. 21 of 2002 dated 1.3.2002 and Serial No. 573 remained the same and Entry 573 is extracted below:-
25. The Finance Bill 2010 in paragraph 60 (1) provides as under:-
"60(1) The notifications of the Government of India in the Ministry of Finance (Department of Revenue) number G.S.R. 118(E), dated the 1st March, 2002 and number G.S.R. 92(E) dated the 1st March 2006, issued under sub-section (1) of section 25 of the Customs Act, shall stand amended and shall be deemed to have been amended retrospectively, in the manner specified in column (3) of the Second Schedule, on and from the corresponding date specified in column (4) of that Schedule, against each of the notifications specified in column (2) of that Schedule.
(2) For the purposes of sub-section (1), the Central Government shall have and shall be deemed to have the power to amend the notification referred to in said sub-section (1) with retrospective effect as if the Central Government had the power to amend the said notifications under sub-section (1) of section 25 of the Customs Act, retrospectively, at all material times.
(3) No suit or other proceedings shall be instituted, maintained or continued in any court, tribunal or other authority for any action taken or anything done or omitted to be done, in respect of any goods, under any such rule, regulation, notification or order and no enforcement shall be made by any court, of any decree or order relating to such action taken or anything done or omitted to be done as if the amendment made in said notifications had been in force at all material times.
(4) Recovery shall be made of the amount which has not been paid but which would have been paid as if the amendment made in the manner specified in said sub-section (1) had been in force at all material times.
Explanation:- For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable if the notifications referred to in this section had not been amended retrospectively."
26. The Government of India by GSR No. 118 (E) dated 1.3.2002 (21/2002-Customs dated 1.3.2002) issued the Notification which provided electrical energy when imported into India is exempt from whole of the customs duty in terms of Serial No. 573 of the Table annexed to the said Notification. This Notification was amended with effect from 26.6.2009, splitting Serial No. 573 of the Table of Notification dated 1.3.2002 with retrospective effect from 26.6.2009 by Notification No. 25 of 2012-Customs GSR (E) dated 27.2.2010 which is reproduced as under:-
27. The aforesaid entries at Serial No. 573 was split in two parts, 573 and 573A which was substituted (w.e.f. 26.6.2009) by Section 16 read with 2nd Schedule to the Finance Act, 2010 (14 of 2010) with validating and saving provision. Serial No. 573 provided that customs duty at the rate of 16% would be levied on the electrical energy removed from a Special Economic Zone into Domestic Tariff Area or non-processing areas of Special Economic Zone and 573A provided rate of customs duty Nil on all goods other than goods mentioned at Serial No. 573. From the perusal of the aforesaid amendment dated 26.6.2009, it is clear that the substitution made by splitting the entries which was at Serial No. 573 of exemption notification dated 1.3.2002 which was split into 573 and 573A, was deemed to have been substituted with retrospective effect.
28. The Government of India by notification No. 25/2010 Customs dated 27.2.2010, GSR (E) exercising powers under subsection (1) of Section 25 of the Customs Act, 1962 in public interest exempted goods falling under Tariff Item No. 27160000 of the First Schedule to the Customs Tariff Act, 1975 when imported into India from the whole of the duty of customs leviable on it. However, a proviso was added to this notification that this exemption under Tariff Item No. 27160000 shall not apply to electrical energy removed from a Special Economic Zone to the Domestic Tariff Area or non-processing areas of Special Economic Zones. The learned Senior counsel for the petitioners has vehemently urged that the Specified Officer, MPSEZ, Mundra, on 26.2.2010 illegally demanded duty, though in Union Budget 2010, electrical energy removed from the Specified Economic Zone to the Domestic Tariff Area and non-processing area of SEZ would not attract duty of 16% advalorem and a change has been made retrospectively w.e.f. 26.6.2009 and directed the petitioner No. 1 to start the payment of duty from SEZ to DTA and non-processing areas of SEZ w.e.f. 26.6.2009. This letter dated 26.2.2010 was written by the Specified Officer, MPSEZ, Mundra one day prior to issuance of the exemption notification No. 25/2010 : Customs dated 27.2.2010. The Specified Officer on 3.3.2010 stated in his letter that the petitioner is not entitled to exemption provided by Notification No. 25/2010 Customs dated 27.2.2010 directed the petitioners to file the Bill of entries for electrical energy cleared from 26.6.2009 and pay the applicable custom duty as well as the custom duty be paid on electrical energy cleared from 27.2.2010. Both these letters have been challenged by the petitioner on the ground that the petitioner is entitled for exemption.
29. Relevant Entry No. 573 of the said Notification, prior to its amendment in the year 2010 is extracted below:-
30. The impugned Notification, however, now provides for levy of customs duty at the rate of 16% advalorem on electrical energy removed from SEZ into DTA or non-processing areas of SEZ whereas electrical energy imported from outside India continues to be wholly exempted i.e. chargeable Nil rate of duty when imported from outside India. For this reason, the impugned Notification seeks to split and/or bifurcate the existing Entry 573 into 573 and 573A is illegal and arbitrary. Entry 573 deals with electricity removed from SEZ and Entry 573A deals with electrical energy imported into India. The electrical energy is imported into India from countries such as Nepal and Bhutan and the "importers" thereof continue to enjoy the same benefit prior to the amendment by the impugned Notification and are wholly exempted from payment of Customs Duty.
31. By virtue of declaration under the Provisional Collection of Taxes Act, 1931 (for short ''PCT Act''), immediate effect has been given to Serial No. 573 of Notification No. 21/2002-Cus dated 1.3.2002, which when read with Notification No. 25/2010-Cus has the effect of levying 16% customs duty on electrical energy removed from SEZ into DTA or removal to non-processing areas within SEZ. All references to the said Notification shall mean and include and refer to Notification No. 21/2002-Cus as amended by Clause 60 of Finance Bill, 2010 read with Notification 25/2010-Cus dated 27.2.2010. The said Notification has immediate effect from 27.2.2010. By virtue of enactment of Clause 60 of the Finance Bill 2010, the amendment to the said Notification No. 21/2002-Customs is given retrospective effect from 26.6.2009.
32. On 27.2.2010, the petitioner Company received letter dated 26.2.2010 from the respondent No. 4 requesting to start payment of duty immediately with retrospective effect from 26.6.2009. The petitioner Company addressed letter dated 27.2.2010 to the respondent No. 4 informing that the petitioner Company was working out the mechanism and procedure for fulfillment of conditions and, therefore, presented a Bond for the purpose of considering removal of electricity from Special Economic Zone to Domestic Tariff Area. Thereafter, the petitioner Company received a letter dated 3.3.2010 returning the aforesaid bond presented before the respondent No. 4 and further requesting the petitioner Company to file Bills of Entry for the Electrical Energy cleared from 27.2.2010 onwards and pay applicable duty immediately.
33. The effect under Section 26 cannot exceed the charging provision. Section 25 contains a power to issue subordinate legislation which must be within the power to levy and cannot exceed the power to levy. If the power to levy duty under Section 12 of the Customs Act is extended to provide for levy on goods removed from SEZ into DTA, it shall render Section 12 beyond legislative competence since Entry 83 of List I of Schedule VII of the Constitution of India and the powers the Parliament only to provide for levy of customs duty on goods imported from a country or territory outside India, into India. It is also equally settled law that liability and exemption are two different aspects as held by the Apex Court in
34. Section 30 of the SEZ Act is divided into two parts. First part creates liability only on removal of goods from SEZ to DTA. Section 30 does not provide for levy of duty on goods removed from SEZ processing area into non-processing areas. To the extent of Section 30 provides for levy of duty on goods removed from SEZ into DTA for the purposes for levy of duty on goods removed from SEZ into DTA for the purposes of quantification by reference, the duty is to be calculated with reference to the provisions of the said Act and CTA for determining the rate of duty classification and valuation. This is referred to as incorporation of reference but Section 30 of the SEZ Act is independent from Section 12 of the said Act. Section 30 of the SEZ Act is distinct and different from Section 12 of the said Act and the two operate in different fields. Section 30 of the SEZ Act does not refer to the word "import". Section 30 of the SEZ Act does not provide for levy of goods imported into SEZ as per the word "import" defined in SEZ Act. For goods imported into SEZ, customs duty is levied under Section 12 of the said Act, but on account of Section 26 of the SEZ Act, there is an exemption from payment of such customs duty. The provisions of Section 12 of the said Act are applicable to SEZ only in so far as and limited to import of goods into SEZ from a place outside India. The provisions of the said Act are not applicable at any stage thereafter in so far as SEZ Act is concerned. At the point of entry of the goods into the territorial waters of India from a place outside India where the provisions of the Customs Act are applicable in so far as SEZ is concerned, no customs duty is payable by virtue of the exemption under Section 26 thereof. The provisions of the Customs Act are thereafter exhausted and have no further role to play. Consequently, when goods are removed from SEZ into DTA, it is the provision of Section 30 of the SEZ Act which shall prevail. This is also provided for in Section 51 of the SEZ Act which contains the overriding provision. Section 51 of the SEZ Act provides that notwithstanding anything contained in any other law for the time being, the provisions of SEZ Act shall prevail. Therefore, the Parliament cannot make any law providing for levy of customs duty on removing the goods from SEZ into DTA, and any such law being so made shall be ultra vires Entry 83 of List I of Schedule VII of the Constitution of India read with Section 12 of the said Act. Thus, impugned Notification cannot provide for levy on goods removed from SEZ into DTA or non-processing areas which is a field covered and occupied by Section 30 of the SEZ Act. The impugned Notification is also ultra vires Section 30 of the SEZ Act which has an overriding effect and shall prevail.
35. The impugned notification is discriminatory in as much as electrical energy imported into India from a place outside India continues to be wholly exempted from payment of customs duty. There is no rational or intelligible differentia in levying customs duty on electrical energy removed from SEZ into DTA or non-processing areas of SEZ. Even on the assumption that removal of goods from SEZ into DTA or non-processing areas of the SEZ amounts to "Import" into India. There is no difference between power producers in Nepal and Bhutan or the power producers in SEZ. Rather power producers in SEZ have contributed to the development and growth of the area and have enriched the country or capital contribution and generation of employment.
36. The Notification is also discriminatory because all MPPs in India enjoy the same benefits in so far as procurement or import of capital goods are concerned as in the case of power plant situated outside SEZ. To further reinforce that the MPPs plants are on par irrespective of whether they are situated outside or inside SEZ the duty is payable on the raw materials and consumables by both to the extent the power is sold in DTA. The Mundra plant being a MPP stands on the same footing and similarly circumstanced as other MPPs in India. Therefore, there is no justification for discriminating against MPP situated inside a SEZ.
37. The impugned Notification amounts to double taxation in as much as the petitioners continue to be liable for payment of duty of raw materials and consumables, coal etc., under Rule 47(3) of the Rules and shall now be required to pay further customs duty @ 16% on electrical energy removed from SEZ and a totally new and additional liability in respect of electricity removed into non-processing areas of SEZ although there is no liability to do so under the SEZ Act and the SEZ Rules. Therefore, the impugned Notification is violative of Article 265 of the Constitution of India. The customs duty @ 16% has been made applicable to electrical energy removed from a Special Economic Zone to a Domestic Tariff Area or non-processing area of Special Economic Zone w.e.f. 26.6.2009. In fact, levy customs duty @ 16% is part of the Finance Bill and has not become an Act. Under the circumstances, the demand of customs duty raised by the respondent No. 4 on the basis of such a Bill is not sustainable in as much as a Bill is a proposal for levy of the Tax.
38. That Section 30(a) of the SEZ Act provides that any goods removed from SEZ to DTA shall be chargeable with customs duty and other duties under the Customs Tariff Act, 1975 where applicable, as leviable on such goods when imported. Vide Clause 60(1) of the Finance Bill, 2010, Entry at Serial No. 573 of the Table to Notification No. 27/2002-Cus dated 1.3.2002 came to be substituted with retrospective effect i.e. 26.6.2009 whereby the said entry was split into two i.e. Entry No. 573 and 573A. Vide Entry at Serial No. 573, effective rate of customs duty for electrical energy removed from SEZ to DTA was made 16% whereas, vide Entry at Serial No. 573A, all goods other than those mentioned under Entry at Serial No. 573 were exempted from customs duty. The said Notification No. 21/2002 has been issued under Section 25 of the Customs Act, 1962. Thus, when Section 30 of the SEZ Act itself provides for levying duty on any goods removed from SEZ to DTA, as leviable on goods when imported, such a duty @ 16% could not have been made applicable in as much as with regard to all goods other than goods mentioned in Entry at Serial No. 573 effective rate of duty is NIL. Thus, vide the said Notification, Section 30 is sought to be amended to do what could not have been done directly in view of provisions of Section 30 of the SEZ Act has been done indirectly vide the aforesaid Clause. The transaction of sale of electrical energy from unit in SEZ to DTA is, therefore, not within the ambit of the provisions of Customs Act, 1962 in as much as the same cannot be termed as a place outside India as per the provisions of Customs Act, 1962. This apart, notification issued under Section 25 of the Customs Act could not have been amended by Clause 60 of the Finance Bill, 2010 since under Section 25 of the Customs Act, the powers are with the Central Government.
39. The facts which emerge from the records of the case are that the petitioner No. 1 is a Company, engaged in the business of generating, transmitting and selling electrical power and started clearance of electricity from June 2009 to DTA from SEZ. The Company has set up thermal power plant at Mundra within the Special Economic Zone (''SEZ'' for short). It is the case of the petitioners that though Electrical Energy is classified under Tariff Item 27160000 of the Customs Tariff Act, 1975 and vide Government Notification No. 21/2002-Customs dated 1.3.2002 as amended at Entry No. 573 exempted all the goods falling under Tariff Item 27160000 from the whole of customs duty, the Specified Officer, Mundra Port and SEZ, has vide letter dated 26.2.2010 requested to pay duty immediately with retrospective effect from 26.6.2009 as in the Union Budget 2010, electrical energy removed from Special Economic Zone to Domestic Tariff Area and non processing areas of the zone would attract duty of 16% advalorem and this change is being made retrospectively with effect from 26.6.2009. In response, the petitioner Company informed the Specified Officer on 27.2.2010 that they are working out a mechanism and procedure for fulfillment of conditions and, therefore, presented a bond for the purpose of considering removal of electricity from SEZ to Domestic Tariff Area (''DTA'' for short).
40. On 1.3.2010, Central Government issued Notification No. 25/2010 Customs dated 27.2.2010 levying advalorem customs duty @ 16% on the electrical energy removed from SEZ to DTA. Thereafter, vide letter dated 3.3.2010, the Specified Officer returned the bond presented by the petitioner Company and requested to file bills of entry for the electrical energy cleared from 26.2.2009 and to pay applicable duty. Being aggrieved by the aforesaid Government Notification, the petitioners have filed the present petition.
41. Mr. Kamal B. Trivedi, learned Senior Counsel appearing for the petitioners drew our attention to various statutory provisions and argued that the petitioner Company being a SEZ unit cannot be saddled with such duty liability. He submitted that charging section i.e. Section 12 of the Customs Act, 1962 does not apply to removals from SEZ because definition of "Import" in the Customs Act, 1962 as well as the Special Economic Zones Act, 2005 (''SEZ Act'' for short) does not cover removal of goods from SEZ to DTA and, therefore, the Government, by way of notification, cannot levy customs duty on removals from SEZ into DTA. Even otherwise, the power under Section 25 of the Customs Act, 1962 is to provide for exemption and not to levy duty. He further submitted that duty payable under Section 30 of the SEZ Act is not customs duty and the said section merely refers to the rates of applicable customs duty to like goods when imported into India and for goods removed from SEZ to DTA. However, the Government Notification dated 27.2.2010 levying customs duty on electrical energy removed from SEZ to DTA seeks to amend Section 30 of the SEZ Act, which is not permissible and in fact, the said Section provides for exemption from payment of duty since similar goods are not chargeable to such duty when imported into India. Lastly, Mr. Trivedi argued that electrical energy when imported from outside India is exempted from customs duty and therefore electrical energy when removed from SEZ to DTA should also not be taxable.
42. On the other hand, Mr. Devang Vyas, learned Assistant Solicitor General appearing for the respondents opposed the petition contending that the petitioner Company is obliged to pay the duty on its DTA clearances. This is clearly provided in Section 30 of the SEZ Act. Section 30 of the SEZ Act is a charging Section akin to Section 12 of the Customs Act, 1962. In fact, the duty is being charged under Section 30 of the SEZ Act and not under Section 12 of the Customs Act, 1962 or any notification. The reference to the Customs Tariff Act under Section 30 of the SEZ Act is only with reference to a measure and not the chargeability of duty. The provisions of Section 30 provide that the goods cleared from SEZ to DTA are chargeable to duty as is leviable to the goods imported into India. The chargeability of goods to duty arises when they are removed from SEZ to DTA. Therefore, the notification issued by the Government is just and not discriminatory in nature as it is permissible to grant different exemption to different categories or classes as long as all those within a particular class are treated equally and uniformly.
43. Section 30 of the SEZ Act, 2005 is the charging section whereby duty is imposed in respect of goods removed from SEZ to DTA. Section 30(a) provides that any goods removed from SEZ to DTA shall be chargeable to customs duties, etc. as leviable on such goods when imported. Section 30(b) provides that the rate of duty applicable shall be the rate on the date of removal. The said section, therefore, incorporates by reference rates of customs duties as applicable when goods are imported into India from outside India for goods removed from SEZ to DTA and that the levy of duty is not under the Customs Act. Section 51 of the SEZ Act gives overriding to the provisions of SEZ Act and that being so, the same will prevail over any other law including the Customs Act. Thus, when no customs duty is payable on goods imported in India, no duty would be payable on similar goods transferred from SEZ to DTA in view of Section 30 read with Section 51 of the SEZ Act.
44. The Division Bench of this Court in its judgment dated 27-28.11.2014 rendered in Special Civil Application No. 8869 of 2014, Roxul Rockwool Insulation India Private Limited v. Union of India and others, has dealt with a similar controversy. In the said judgment, the question was where local manufacturers were exempt from payment of excise duty, whether liability to pay duty would continue on SEZ units and it has been observed that the same has to be seen from the language of Section 30 of SEZ Act and that Section 51 of the SEZ Act gives overriding effect to the provisions of the SEZ Act. Considering this, it has been held that SEZ units will have no liability to pay countervailing duty if local manufacturer of like goods is exempt from whole of such duty.
45. Despite the above legal position, by issuing Notification No. 25/2010-Cus dated 27.2.2010 as well as by amending Notification No. 21/2002-Cus dated 1.3.2002 substituting Entry 573 of the Table to the said Notification in terms of Clause 60 of Finance Bill, 2010 (Second Schedule thereto), which was placed in Parliament on 26.2.2010 with retrospective effect from 26.6.2009, the Central Government imposed levy of customs duty, under Section 25(1) of the Customs Act, 1962 on electrical energy cleared/transferred from SEZ to DTA which is not permissible, more particularly when there has been no customs duty on importation of electrical energy from outside India.
46. The impugned Government Notification No. 25/2010-Customs dated 27.2.2010 reads as under:-
"Notification New Delhi, the 27th February, 2010 No. 25/2010-Customs
G.S.R. (E). - In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts, goods falling under Tariff Item 27160000 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), when imported into India, from the whole of the duty of customs leviable thereon which is specified in the said First Schedule;
Provided that nothing contained in this Notification shall apply to electrical energy falling under tariff item 27160000 removed from a Special Economic Zone to the Domestic Tariff Area or non-processing areas of Special Economic Zones.
[F. No. 334/1/2010-TRU]
Sd/-
(Prashant Kumar)
Under Secretary to Government of India"
47. The SEZ Act was enacted with a view to provide an internationally competent environment for exports and for promoting export led growth. The term "Domestic Tariff Area" is defined in Section 2(i) as to mean the whole of India (including the territorial waters and continental shelf) but does not include the areas of the Special Economic Zones. The term "Special Economic Zone" is defined in Section 2(za) as to mean an economic zone notified under the proviso to sub-section (4) of Section 3 and subsection (1) of Section 4 (including Free Trade and Warehousing Zone) and includes an existing Special Economic Zone. Section 51 of the SEZ Act provides that the provisions of the 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. Sub-section (1) of Section 53 provides that a SEZ shall on and from the appointed day be deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorized operations. Chapter IV of the SEZ Act pertains to special fiscal provisions for SEZs. Section 26 contained in the said Chapter grants exemptions, drawbacks and concessions to every developer and entrepreneur such as exemption from payment of any customs duty, excise duty etc. Section 30 pertains to domestic clearances by a SEZ unit and reads as under:-
"30. Domestic clearance by Units. -- Subject to the conditions specified in the rules made by the Central Government in this behalf:-
(a) any goods removed from a Special Economic Zone to the Domestic Tariff Area shall be chargeable to duties of customs including anti-dumping, countervailing and safeguard duties under the Customs Tariff Act, 1975 (51 of 1975), where applicable, as leviable on such goods when imported; and
(b) the rate of duty and tariff valuation, if any, applicable to goods removed from a Special Economic Zone shall be at the rate and tariff valuation in force as on the date of such removal, and where such date is not ascertainable, on the date of payment of duty."
48. Thus, from the above, it can be seen that in order to give an impetus to exports, the SEZ Act was enacted. The SEZ Act envisages a deeming fiction where a SEZ area would be considered outside the Customs area of the country. It is also noticed that Section 30 of the SEZ Act permits DTA clearances to a SEZ unit under certain conditions. One of the conditions being the goods removed from SEZ to DTA would be chargeable to duties of customs including anti-dumping, countervailing and safeguard duties under the Customs Tariff Act, 1975 where applicable as leviable on such goods when imported.
49. It is not in dispute that by virtue of Government Notification dated 1.3.2002, electrical energy was exempted from payment of whole of Customs duty. This notification is sought to be replaced by Government Notification No. 25/2010-Customs dated 27.2.2010.
50. Chapter V of the Customs Act, 1962 relates to levy and exemption from customs duties. Section 12 pertains to dutiable goods, which is reproduced below:-
"Section 12. Dutiable goods. - (1) Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975) or any other law for the time being in force, on goods imported into, or exported from India.
(2) The provision of sub-section (1) shall apply in respect of all goods belonging to Government as they apply in respect of goods not belonging to Government."
51. Section 25 of the Customs Act, 1962 pertains to the power of the Central Government to grant exemption from payment of customs duty. Section 25(1) of the said Act reads as under:-
"25. Power to grant exemption from duty:-
(1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after clearance) as may be specified in the notification goods of any specified description from the whole or any part of duty of customs leviable thereon."
52. We deem it necessary to point out over here that in the affidavit-in-reply filed by Commissioner of Customs, on behalf of respondent Nos. 1 and 2, notification No. 60/2010-Customs dated 10.5.2010 is filed which is reproduced as under:-
"Notification No. 60/2010-Customs
New Delhi, the 10th May, 2010
G.S.R. (E) - In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government hereby rescinds the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 25/2010-Customs, dated the 27th February, 2010, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 138(E) dated the 27th February, 2010, except as respects things done or omitted to be done before such rescission."
53. However, from the above statutory provisions, it can be seen that by virtue of Section 30 of the SEZ Act, a SEZ unit on its clearance of goods to any DTA invites duty of customs where applicable as leviable on such goods when imported. Such DTA clearance by a SEZ unit would, thus, be treated as imports for computation of customs duty. Section 30 of the SEZ Act only imposes conditions for a SEZ unit to clear the goods to a DTA. Such condition is payment of authorized duties, as applicable and leviable on such goods when imported. By reference, therefore, the charging Section 12 of the Customs Act, 1962 would be leviable as if the goods cleared by SEZ unit to the DTA are in the nature of imports. If, therefore, by virtue of an exemption notification, the whole of customs duty payable is exempted, then no customs duty would be payable on import of such goods. Even otherwise, Section 51 of the SEZ Act gives overriding effect to the provisions of the Act.
54. Section 30(a) of the SEZ Act provides that if any goods are removed from SEZ to DTA, such goods will be chargeable to duties of customs including anti-dumping, countervailing and safeguard duties under the Customs Tariff Act, 1975 as leviable on such goods when imported. Meaning thereby, that if any goods are removed from the SEZ to DTA, then the present customs duty will be leviable treating the goods to be imported from outside India. If the same meaning is applied to the Government Notification No. 25/2010-Customs dated 27.2.2010, Annexure A to this writ petition, it provides that the Central Government if it is satisfied can grant exemption in public interest to the goods falling under the tariff Item No. 27160000 of the First Schedule to Customs Tariff Act, 1975 from whole of the duties which are specified in the First Schedule. Meaning thereby, with regard to tariff item No. 27160000 if the goods are imported in India, then those goods will be exempted from payment of customs duty. If we apply the same analogy to Section 25(1) of the Customs Act, 1962 which provides for exemption from payment of customs duty and in view of Section 30(a) of the SEZ Act, since the goods are being brought from SEZ to DTA, then it has to be treated as imported goods which has come from outside India and, therefore, item No. 27160000 which is the goods known as electrical energy removed from the SEZ to DTA would be exempted as it will be treated to be imported from outside India and 16% advalorem cannot be charged by the respondents because Section 25(1) of the Customs Act, 1962 is not charging Section, but it is the Section which grants exemption from payment of customs duty. It is not disputed by the respondents that proviso to Government Notification No. 25/2010-Customs dated 27.2.2010 exempted electrical energy which is imported into India from the whole of payment of customs duty. Therefore, proviso to Government Notification No. 25/2010-Customs dated 27.2.2010 is violative of provisions of Section 25(1) of the Customs Act, 1962 and arbitrarily impose customs duty treating electrical energy falling under Tariff Item No. 20170000 removed from SEZ to DTA chargeable to Customs duty. Therefore, entire proviso to Government Notification No. 25/2010-Customs dated 27.2.2010 is violative of Section 25(1) of the Customs Act, 1962 read with Section 30(a) of the SEZ Act, arbitrary and liable to be quashed. In view of the above, the said Notification No. 25/2010-Customs dated 27.2.2010 as well as Notification No. 21/2002 Customs as amended by Clause 60 of the Finance Bill, 2010 (Second Schedule thereto) are ultra vires Entry 83 of List I of Seventh Schedule of the Constitution of India, Section 12 of Customs Act, 1962 and Section 30 of SEZ Act, 2005 as well as Articles 14 and 265 of the Constitution of India and consequently deserves to be quashed and set aside.
55. There is yet another aspect of the matter which has been argued before us. It has been urged by Mr. Kamal B. Trivedi, learned counsel for the petitioners that customs duty could not be levied retrospectively. The power and competence of the Parliament to amend any statutory provision with retrospective effect cannot be doubted. Any retrospective amendment to be valid must however be reasonable and not arbitrary and must not be violative of any of the fundamental rights guaranteed under the Constitution. The mere fact that any statutory provision has been amended with retrospective effect does not by itself make the amendment unreasonable. Unreasonableness or arbitrariness of any such amendment with retrospective effect has necessarily to be judged on the merits of the amendment in the light of the facts and circumstances under which such amendment is made. In considering the question as to whether the legislative power to amend a provision with retrospective operation has been reasonably exercised or not it, becomes relevant to enquire as to how the retrospective effect of the amendment operates.
56. Where there is challenge to the constitutional validity of a law enacted by the legislature, the Court must keep in mind that there is always a presumption of constitutionality of an enactment, and a clear transgression of constitutional principles must be shown. The fundamental nature and importance of the legislative process needs to be recognized by the Court and due regard and deference must be accorded to the legislative process. Where the legislation is sought to be challenged as being unconstitutional and violative of Article 14 of the Constitution, the Court must remind itself to the principles relating to the applicability of Article 14 in relation to invalidation of legislation. The two dimensions of Article 14 in its application to legislation and rendering legislation invalid are now well recognized and these are (i) discrimination, based on an impermissible or invalid classification and (ii) excessive delegation of powers; conferment of uncanalised and unguided powers on the executive, whether in the form of delegated legislation or by way of conferment of authority to pass administrative orders if such conferment is without any guidance, control or checks, it is violative of Article 14 of the Constitution. The Court also needs to be mindful that a legislation does not become unconstitutional merely because there is another view or because another method may be considered to be as good or even more effective, like any issue of social, or even economic policy. It is well settled that the courts do not substitute their views on what the policy is. The Constitution Bench of the Apex Court in
57. We may now examine as to the Notification dated 27.2.2010 which levied customs duty 16% advalorem w.e.f. 26.6.2009 would operate retrospectively or prospectively. The Constitutional Bench of the Apex Court in
57.1. We would also like to point out, for the sake of completeness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In
57.2. In such cases, retrospectively is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. In the instant case, the proviso added to Section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by out weighing factors.
57.3. Let us sharpen the discussion a little more. We may note that under certain circumstances, a particular amendment can be treated as clarificatory or declaratory in nature. Such statutory provisions are labeled as "declaratory statutes". The circumstances under which a provision can be termed as "declaratory statutes" is explained by Justice G.P. Singh [Principles of Statutory Interpretation, 13th Edition 2012 published by Lexis Nexis Butterworths Wadhwa, Nagpur] in the following manner: "Declaratory statutes. The presumption against retrospective operation is not applicable to declaratory statutes. As stated in CRAIES and approved by the Supreme Court: "For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word ''declared'' as well as the word ''enacted''. But the use of the words ''it is declared'' is not conclusive that the Act is declaratory for these words may, at times, be used to introduced new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is ''to explain'' an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language ''shall be deemed always to have meant'' is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the pre-amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law which the Constitution came into force, the amending Act also will be part of the existing law." The above summing up is factually based on the judgments of this Court as well as English decisions.
57.4. A Constitution Bench of this Court in
"The amending clause does not seek to explain any pre-existing legislation which was ambiguous or defective. The power of the High Court to entertain a petition for exercising revisional jurisdiction was before the amendment derived from S. 115, Code of Civil Procedure, and the legislature has by the amending Act attempted to explain the meaning of that provision. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act."
57.5. We would also like to reproduce hereunder the following observations made by this Court in the case of
"11. Now it is a well settled rule of interpretation hallowed by time and sanctified by judicial decisions that, unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. The general rule as stated by Halsbury in Vol. 36 of the Laws of England (3rd Edn.) and reiterated in several decisions of this Court as well as English courts is that all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospectively and retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only."
57.6. In the case of
57.7. At the same time, it is also mandated that there cannot be imposition of any tax without the authority of law. Such a law has to be unambiguous and should prescribe the liability to pay taxes in clear terms. If the concerned provision of the taxing statute is ambiguous and vague and is susceptible to two interpretations, the interpretation which favours the subjects, as against there the revenue, has to be preferred. This is a well established principle of statutory interpretation, to help finding out as to whether particular category of assessee are to pay a particular tax or not. No doubt, with the application of this principle, Courts make endeavour to find out the intention of the legislature. At the same time, this very principle is based on "fairness" doctrine as it lays down that if it is not very clear from the provisions of the Act as to whether the particular tax is to be levied to a particular class of persons or not, the subject should not be fastened with any liability to pay tax. This principle also acts as a balancing factor between the two jurisprudential theories of justice - Libertarian theory on the one hand and Kantian theory along with Egalitarian theory propounded by John Rawls on the other hand.
57.8. Tax laws are clearly in derogation of personal rights and property interests and are, therefore, subject to strict construction, and any ambiguity must be resolved against imposition of the tax. In Billings v. U.S. [232 U.S. 261, at p. 265, 34 S.Ct. 421 (1914)], the Supreme Court clearly acknowledged this basic and long-standing rule of statutory construction:
"Tax Statutes... should be strictly construed, and, if any ambiguity be found to exist, it must be resolved in favor of the citizen. Eidman v. Martinez, 184 U.S. 578, 583; United States v. Wigglesworth, 2 Story, 369, 374; Mutual Benefit Life Ins. Co. v. Herold, 198 F. 199, 201, affd 201 F. 918; Parkview Bldg. Assn. v. Herold, 203 F. 876, 880; Mutual Trust Co. v. Miller, 177 N.Y. 51, 57."
57.9. Again, in United States v. Merriam [263 U.S. 179, 44 S.Ct. 69 (1923)], the Supreme Court clearly stated at pp. 187-88-
"On behalf of the Government it is urged that taxation is a practical matter and concerns itself with the substance of the thing upon which the tax is imposed rather than with legal forms or expressions. But in statutes levying taxes the literal meaning of the words employed is most important, for such statutes are not to be extended by implication beyond the clear import of the language used. If the words are doubtful, the doubt must be resolved against the Government and in favor of the taxpayer. Gould v. Gould, 245 U.S. 151, 153"
57.10. As Lord Cairns said many years ago in Partington v. Attorney-General [(1869) LR 4 HL 100]: "As I understand the principle of all fiscal legislation it is this: If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be.
57.11. "Notes on Clauses" appended to Finance Bill, 2002 while proposing insertion of proviso categorically states that "this amendment will take effect from 1st June, 2002". These become epigraphic words, when seen in contradistinction to other amendments specifically stating those to be clarificatory or retrospectively depicting clear intention of the legislature. It can be seen from the same notes that few other amendments in the Act were made by the same Finance Act specifically making those amendments retrospectively. For example, clause 40 seeks to amend S. 92F. Clause iii (a) of S. 92F is amended "so as to clarify that the activities mentioned in the said clause include the carrying out of any work in pursuance of a contract." This amendment takes effect retrospectively from 01.04.2002. Various other amendments also take place retrospectively. The Notes on Clauses show that the legislature is fully aware of 3 concepts:- (i) prospective amendment with effect from a fixed date; (ii) retrospective amendment with effect from a fixed anterior date; and (iii) clarificatory amendments which are retrospective in nature.
57.12. Thus, it was a conscious decision of the legislature, even when the legislature knew the implication thereof and took note of the reasons which led to the insertion of the proviso that the amendment is to operate prospectively. Learned counsel appearing for the assessees sagaciously contrasted the aforesaid stipulation while effecting amendment in Section 113 of the Act, with various other provisions not only in the same Finance Act but Finance Acts pertaining to other years where the legislature specifically provided such amendment to be either retrospective or clarificatory. In so far as amendment to Section 113 is concerned, there is no such language used and on the contrary, specific stipulation is added making the provision effective from 1st June, 2002.
57.13. Furthermore, an amendment made to a taxing statute can be said to be intended to remove ''hardships'' only of the assessee, not of the Department. On the contrary, imposing a retrospective levy on the assessee would have caused undue hardship and for that reason Parliament specifically chose to make the proviso effective from 1.6.2002.
58. The Apex Court in
59. The Apex Court in Union of India and others v. Martin Lottery Agencies Ltd. (2002) 9 SCC 209, held in paragraphs 36 to 39, 45, 50 to 52 as under:-
"36.... The speech of the Hon''ble the Finance Minister would have been relevant for the purpose of opining as to whether the court independently would have arrived at a conclusion that organizing lottery would amount to rendition of service but not otherwise.
37. As it is not possible for us to arrive at the said conclusion, we have no other option but to hold that by inserting the explanation appended to clause (19) of Section 65 of the Act, a new concept of imposition of tax has been brought in. The Parliament may be entitled to do so. It would be entitled to raise a legal fiction, but when a new type of tax is introduced or a new concept of tax is introduced so as to widen the net, it, in our opinion, should not be construed to have a retrospective operation on the premise that it is clarificatory or declaratory in nature.
38. There cannot be any doubt whatsoever that speech of the Hon''ble Finance Minister in the House of the Parliament may be taken to be a valid tool for interpretation of a statute. It was so held in
"8. ... Now it is true that the speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the Mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation is enacted. This is in accord with the recent trend in juristic thought not only in western countries but also in India that interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible. [See also
39. It is, however, also well settled that the statute must be interpreted keeping in view the words used in it. We must notice that in
"24. Section 271 of the Act is a penal provision and there are well-established principles for the interpretation of such a penal provision. Such a provision has to be construed strictly and narrowly and not widely or with the object and intention of the legislature."
45. We are also not unmindful of the fact that the said decision has been overruled in
50. It is, therefore, evident that by reason of an explanation, a substantive law may also be introduced. If a substantive law is introduced, it will have no retrospective effect. The notice issued to the assessee by the appellant has, thus, rightly been held to be liable to be set aside.
51. Subject to the constitutionality of the Act, in view of the explanation appended to this [sic Section 65(19)(ii) of the Finance Act, 1994] we are of the opinion that the service tax, if any, would be payable only with effect from May, 2008 and not with retrospective effect. In a case of this nature, the Court must be satisfied that the Parliament did not intend to introduce a substantive change in the law.
52. As stated herein before, for the aforementioned purpose, the expressions like for the removal of doubts are not conclusive. The said expressions appear to have been used under assumption that organizing games of chance would be rendition of service. We are herein not concerned as to whether it was constitutionally permissible for the Parliament to do so as we are not called upon to determine the said question but for our purpose, it would be suffice to hold that the explanation is not clarificatory or declaratory in nature."
60. From the Constitution Bench decision of the Apex Court in Vatika''s case, it is clear that any amendment which seeks to levy tax or custom duty for the first time can only be prospective as it amounts to substantive law. Such law cannot be retrospective and the notification dated 27.2.2010 levying custom duty with retrospective effect from 26.6.2009 is illegal, arbitrary and liable to be quashed.
61. The levy of custom duty is illegal as it amounts to levying custom duty on electrical energy which can only be levied by a substantive provision of law. The custom duty could be levied only prospectively and not retrospectively. The Central Government realized that custom duty at the rate of 16% was onerous and by Notification No. 91 of 2010 Cus. Dated 16.9.2010 reduced the custom duty to 10 paisa per unit. The custom duty was further reduced to 3 paisa per unit by another Notification No. 26 of 2012 Cus : Dated 18.4.2012. The learned counsel for the petitioner also urged that in case this writ petition succeeds, the petitioners are entitled for refund of the Bank Guarantee from the respondent authority as it had been furnished in compliance of the interim order dated 6.5.2010 passed by this Court. Thus, the dispute in the present writ petition is confined to the period from June 2009 to 15.9.2010.
62. The case of the petitioner is that the levy of custom duty for the power supplied to DTA from SEZ amounts to double taxation as the petitioner was liable to pay duty on the raw material, namely, coal he had paid the duty on raw materials. Since the petitioner had already paid duty on raw materials, namely, coal and consumable under Rule 47(3) of the SEZ Rules, he cannot be subjected to double taxation. We find force in the contention of the petitioner that the petitioner should not be made liable to suffer double taxation, and the petitioner is made to pay the custom duty for the energy supplied then payment on duty of raw materials or any other duty on inputs should not be levied on the petitioner, and the duty paid by the petitioner on raw materials is liable to be refunded, as otherwise, the levy of duty on the power supplied to DTA from SEZ amounts to double taxation and it would be in violation of Article 265 of the Constitution of India.
63. We are of the considered opinion that custom duty at the rate of 16% advalorem levied by Notification dated 27.2.2010 could not be imposed retrospectively w.e.f. 26.6.2009 and, therefore, retrospective amendment is illegal and arbitrary and deserves to be set aside. The petitioner is entitled for exemption from payment of custom duty for the period 26.6.2009 to 15.9.2010 on the electricity cleared to DTA from SEZ. We are further of the considered opinion that the entire proviso to Government Notification No. 25/2010-Customs dated 27.2.2010 is violative of Section 25(1) of the Customs Act, 1962 read with Section 30(a) of the SEZ Act, arbitrary and liable to be quashed. In view of the above, the said Notification No. 25/2010-Customs dated 27.2.2010 as well as Notification No. 21/2002-Customs as amended by Clause 60 of the Finance Bill, 2010 (Second Schedule thereto) are ultra vires Entry 83 of List I of Seventh Schedule of the Constitution of India, Section 12 of Customs Act, 1962 and Section 30 of SEZ Act, 2005 as well as Articles 14 and 265 of the Constitution of India and consequently deserves to be quashed and set aside.
64. For the reasons given above, this writ petition succeeds and is allowed. The entire proviso to the Government Notification No. 25/2010-Customs dated 27.2.2010 at Annexure A to this writ petition is held to be ultra vires Articles 14 and 265 of the Constitution of India and is accordingly quashed. The petitioners are entitled for exemption from payment of custom duty for the period 26.6.2009 to 15.9.2010 on the electricity cleared to DTA from SEZ. The respondent authority is directed to return back the Bank Guarantee furnished by the petitioners in compliance of the interim order dated 6.5.2010 passed by this Court forthwith. Rule is made absolute. The parties shall bear their own costs.
