Ramesh Ranganathan, J.@mdashThese batch of writ petitions are filed by Units established in the Special Economic Zone (for short "SEZ"), and units in the Domestic Tariff Area (for short "DTA").
2. The petitioners, in W.P. Nos. 11219 of 2008, 21059 of 2008, 21224 of 2008, 1315 of 2009 and 18618 of 2009, question the proceedings of the Development Commissioner dated 17.04.2008, and the consequential proceedings of the Assistant Commissioner of Customs, Visakhapatnam SEZ dated 08.05.2008, as illegal and void. By his letter dated 17.04.2008, the Deputy Development Commissioner informed the Assistant Commissioner (Customs), Visakhapatnam SEZ that, pending decision on the issue by the Ministry of Commerce/Central Board of Excise and Customs, the export consignments of SEZ units should be cleared after obtaining a bank guarantee from them covering the value of export duty on export of chrome ore; and a similar procedure should be adopted with regards export of chrome ore by other units in the Visakhapatnam SEZ. The Assistant Commissioner of Customs, Visakhapatnam SEZ, vide letter dated 08.05.2008, informed the petitioner that, henceforth, neither was export duty payable by units of the Visakhapatam SEZ procuring chrome ore & concentrates from DTA suppliers, nor were they required to furnish a bank guarantee in respect of such procurement. The petitioner was informed that the existing stock of chrome ore & concentrates available with SEZ units, which were procured from DTA suppliers without payment of duty could be exported by them on furnishing bank guarantee equivalent to export duty; DTA suppliers would, however, be required to pay export duty, as per the export tariff, at Rs. 3,000/- per metric tonne with immediate effect on the chrome ore & concentrates exported to units of the Visakhapatnam SEZ; a bill of export should be filed by the DTA supplier, or by his authorized representative, for assessment; and, thereafter, the export duty liability had to be discharged by the DTA supplier.
3. The petitioners, in W.P. Nos. 15778/08, 16932/08, 16902/08 and 6025 of 2009, question the proceedings dated 30.6.2008 of the Director, SEZ Section, Ministry of Commerce and Industry, Department of Commerce, Government of India, the Circular dated 9.7.2008 issued by the Development Commissioner, Visakhapatnam SEZ, and the proceedings dated 11.7.2008 issued by the Superintendent of Central Excise, Kottur -I Division, Hyderabad, as illegal and void.
4. The Director, Ministry of Commerce and Industry, Government of India, vide proceedings dated 30.6.2008, informed all Development Commissioners that, in accordance with the suggestion of the Department of Revenue, supply of steel products, on which export duty is still applicable as per the relevant Customs Notification, should be permitted only after payment of the prescribed amount of duty. In the Circular dated 9.7.2008 the Development Commissioner informed all the SEZ Developers and Units that steel products procured by them would be permitted only after payment of the prescribed amount of duty as applicable. The specified and authorized officers of the SEZ were advised to permit steel products into the SEZ only after payment of the prescribed amount of duty as applicable. The Superintendent of Central Excise, Kottur Division, Hyderabad, vide letter dated 11.7.2008, informed that export liability should be discharged on iron and steel products cleared to the SEZ from 10.5.2008 onwards.
5. Sri E. Manohar, Learned Senior Counsel appearing on behalf of the SEZ units, would submit that, even if the DTA supplier is liable to pay export duty, it should be recovered from them and not from an SEZ unit; as. Section 26(1)(a) & (b) of the SEZ Act exempts every Developer and entrepreneur from customs duty on goods imported into a Special Economic Zone to carry on authorized operations by the Developer or entrepreneur, and exempts duty of customs on goods exported from a Special Economic Zone to any place outside India, the SEZ unit is not liable to pay either import duty or export duty; and the proceedings of the Assistant Commissioner, requiring SEZ Units to furnish bank guarantee towards export duty on chrome ore, was without jurisdiction. Learned Senior Counsel would rely on the judgment of the Division bench of the Gujarat High Court, in Essar Steel Limited v. Union of India 2010 (249) ELT 3 (Guj.), in this regard.
6. Sri R. Raghunandan and Sri C.V.R. Rudraprasad, Learned Counsel for the petitioners, while adopting the submissions of the Learned Senior Counsel, would submit that, as the SEZ Act does not authorize levy and collection of customs duty, no such duty could be levied or collected from SEZ Units; in the absence of a specific provision, enabling such duty to be levied and collected, customs duty could not be levied by implication; and, as customs duty can be levied only for imports and exports to a place outside India, the SEZ Units, all of which are located within the territorial limits of India, are not liable to pay customs duty for goods procured from a DTA unit.
7. Sri Raghavan Ramabhadran, Learned Counsel appearing on behalf of M/s. Lakshmi Kumaran and Sridharan, would submit that the SEZ Act merely provides for certain exemptions to SEZ Units; the said Act does not authorize levy and collection of customs duty, from a DTA supplier, for goods supplied by it to a SEZ unit located within India''s territorial limits; Section 12(1) of the Customs Act, 1962 does not authorize levy of customs duty on supplies made by a DTA Unit to an SEZ unit, both of which are located within India; and the action of the respondents in calling upon DTA units to pay export duty is illegal and without jurisdiction.
8. On the other hand, Sri A. Rajasekhar Reddy, Learned Senior Standing Counsel for Central Excise and Customs, would submit that the Customs Act is not one of the Acts specified in the First Schedule to the SEZ Act; while Section 26(c) & (d) of the SEZ Act exempt goods brought from a Domestic Tariff Area to a Special Economic Zone from payment of excise duty, and makes available to a SEZ unit the drawback,; admissible on goods brought from a Domestic Tariff Area to a Special Economic Zone, it does not exempt either the SEZ unit or the DTA unit from payment of export or import duty under the Customs Act; as Section 2(m)(ii) of the SEZ Act defires "export" to mean supply of goods from a Domestic Tariff Area to a SEZ unit, the DTA unit is liable to pay export duty; full effect should be given to the legal fiction in Section 53 as Section 51 gives overriding effect to the SEZ Act over other laws; giving effect to the legal fiction u/s 53 would require goods supplied to an SEZ unit to be deemed as goods sold outside India which would attract levy of customs duty u/s 12(1) of the Customs Act; Rule 2(c) of the Customs, Central Excise duties and Service Tax Drawback Rules, 1995, (hereinafter called the Drawback Rules), defines "export" to mean taking out from a place in a Domestic Tariff Area to a Special Economic Zone; as such the DTA supplier is liable to pay export duty on goods supplied by them to an SEZ unit; both the SEZ Act and the Customs Act must be read harmoniously in conjunction with each other; and, in the light of Special Economic Zone Rules, 2006 (for short the SEZ Rules), while a SEZ unit may not be liable to pay customs duty, the DTA Unit, which supplies goods to an SEZ unit, is required to pay customs duty as it is deemed to have exported goods.
9. The question which necessitates examination is whether the DTA unit is liable to pay export duty on goods supplied to a unit within the Special Economic Zone either under the SEZ Act, 2005 or the Customs Act, 1962?
10. Article 265 of the Constitution of India prohibits levy or collection of tax except by authority of law. Not only the levy but also the collection of tax must be sanctioned by law. (Chhotabhai Jethabhai Patel & Co v. Union of India AIR 1952 Nag 139 ). The rule of construction of a charging section is that, before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used therein. No one can be taxed by implication. A charging section has to be construed strictly. If a person has not been brought within the ambit of the charging section by clear words he cannot be taxed at all. (Commissioner of Wealth Tax, Gujarat III, Ahmedabad v. Ellis Bridge Gymkhana 1997 (9) Supreme 24). Taxes cannot be imposed in vacuum, There should be some machinery for ascertaining the rate of taxation, and the persons or the class of persons liable to pay the same. (
11. A taxing statute must be couched in express and unambiguous language. (
12. In a taxing statute the strict legal position as disclosed by the form and not the substance of the transaction is determinative of its taxability: (Duke of West Minster v. Inland Revenue Commissioners (1936) 19 Tax Cases 490;
13. The Court must look squarely at the words of the Statute and interpret them. It must interpret a taxing is not expressed; it cannot import provisions in the Statute so as to supply any assumed deficiency. The object of this rule is to prevent a taxing statute being construed "according to its intent, though not according to its words". It has even been said that "if the provision is so wanting in clarity that no meaning is reasonably clear, the courts will be unable to regard it as of any effect". (
14. The SEZ Act is an Act to provide for the establishment, development and management of Special Economic Zones for the promotion of exports and for matters connected therewith or incidental thereto. Section 2(c) of the SEZ Act defines ''authorised operations'' to mean operations which may be authorized u/s 4(2) or 15(9) of the said Act. Section 2(g) defines ''developer'' to mean a person who has been granted, by the Central Government, a letter of approval u/s 3(10). Section 2(i) defines ''domestic tariff area'' to mean the whole of India including the territorial waters and continental shelf but not to include the areas of the Special Economic Zones. Section 2(j) defines ''entrepreneur'' to mean a person who has been granted a letter of approval by the Development Commissioner u/s 15(9). Section 2(zc) defines ''unit'' to mean a unit set up by an entrepreneur in a Special Economic Zone. Section 3 of the SEZ Act prescribes the procedure for making a proposal to establish Special Economic Zones and, under Sub-section (10) thereof, the Central Government shall, on receipt of communication under Sub-section (9) (a) or (b), grant a letter of approval, on such terms and conditions and obligations and entitlements as may be approved by the Board, to the Developer. Section 4 relates to establishment of a Special Economic Zone and, under Sub-section (2) thereof, the Board may authorize the developer to undertake in a Special Economic Zone such operations which the Central Government may authorize. Section 15 relates to setting up of a unit and, under Sub-section (9) thereof, the Development Commissioner may, after approval of the proposal, grant a letter of approval to the person concerned to set up a unit and undertake such operations which the Development Commissioner may authorize, and every such operation so authorized shall be mentioned in the letter of approval. While the SEZ Act provides for exemptions, drawbacks and concessions, it does not contain any provision for levy and collection of export duty for goods supplied by a DTA unit to a Unit in a Special Economic Zone for its authorised operations.
15. The Customs Act, 1962 is an Act to consolidate and amend the law relating to customs. Chapter V of the Customs Act relates to levy of, and exemption from, customs duty. u/s 12(1), except as otherwise provided in the 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 or any other law for the time being in force, on goods imported into, or exported from, India. Section 2(18) of the Customs Act defines "export", with its grammatical variations and cognate expressions, to mean taking out of India to a place outside India. Section 2(23) defines "import", with its grammatical variations and cognate expressions, to mean bringing into India from a place outside India. Section 2(27) defines "India" to include the territorial waters of India. Export Duty is a duty of customs leviable under the Customs Act, 1962 on goods exported from India, u/s 12 of the said Act and Section 2 read with the Second Schedule of the Customs Tariff Act, 1975. Payment of such a duty is a condition precedent to sending goods out of the country to other lands. Export Duty is an impost with reference to the movement of property by way of export, particularly with a view to regulating trade and commerce with a foreign country in so far as such matters are within the competence of the Parliament. (In re, Sea Customs Act, 1878, Special Reference No. 1 of 1962 AIR 1963 SC 1760; Essar Steel Limited 2010 (249) ELT 3 (Guj.)).
16. A conjoint reading of Section 12(1) with Sections 2(18), 2(23) and 2(27) of the Customs Act, 1962 makes it clear that customs duty can be levied only on goods imported into or exported beyond the territorial waters of India. Since both the SEZ unit and the DTA unit are located within the territorial waters of India, Section 12(1) of the Customs Act 1962 (which is the charging section for levy of customs duty) is not attracted for supplies made by a DTA unit to a unit located within the Special Economic Zone.
17. Section 7 of the SEZ Act relates to exemption from taxes, duties or cess and, thereunder, any goods exported out of, or imported into, or procured from the domestic tariff area by (i) a unit in a Special Economic Zone; and (ii) a developer; shall, subject to such terms, conditions and limitations as may be prescribed, be exempt from payment of taxes, duties or cess under all the enactments specified in the first schedule to the SEZ Act. The first schedule to the SEZ Act gives a list of associated enactments. The Acts mentioned therein do not include the Central Excise Act, the Central Excise Tariff Act or the Customs Act. Section 26 of the SEZ '' Act 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 services 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 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 a Domestic Tariff Area to a Special Economic Zone or Unit, to carry on the authorised 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 authorised 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 authorised operations in a Special Economic Zone;
(f) exemption from the securities transaction tax leviable u/s 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 authorised operations by the Developer or entrepreneur.
(2) The Central Government may prescribe the manner in which, and the terms and conditions subject to which, the exemptions, concessions, drawback or other benefits shall be granted to the Developer or entrepreneur under Sub-section (1).
18. The mere fact that the Customs Act, 1962 is not one of the Acts specified in the First Schedule to the SEZ Act does not necessitate the conclusion that export duty is payable by a DTA supplier on the goods supplied by it to a unit located within the Special Economic Zone. In the absence of a charging provision in the SEZ Act providing for the levy of customs duty on such goods, export duty cannot be levied on the DTA supplier by implication. The exemptions in Clauses (a) to (g) of Section 26(1) are provided for, as the goods in question would otherwise have been subjected to levy of taxes and duties under the enactments mentioned therein. For instance, but for the exemption u/s 26(1)(b) of the SEZ Act, goods exported by a unit in an SEZ to any place outside India would have been subjected to levy of customs duty u/s 12(1) of the Customs Act. Likewise, but for the exemption u/s 26(1)(c) of the SEZ Act, central excise duty would have been payable on goods procured by an SEZ Unit, from a DTA supplier, to carry on its authorised operations.
19. It was wholly unnecessary to exempt goods, supplied by a DTA unit to an SEZ unit, from the levy of export duty as the Customs Act does not provide for levy of customs duty on the supply of such goods. The levy of export duty is neither expressly nor impliedly contemplated under the SEZ Act, and cannot be read in by purported intendment which, in any case, is clearly to the contrary, (Essar Steel Limited 2010 (249) ELT 3 (Guj.)).
20. It is no doubt true that Section 2(m)(ii) of the SEZ Act defines ''export'' to mean supplying goods from the domestic area to a unit or developer. The SEZ Act, however, does not contain any provision for the levy of customs duty on goods supplied by a DTA unit to a unit located within a Special Economic Zone. The word ''export'', as defined in Section 2(m)(ii) of the SEZ Act, cannot be interpolated into Section 12(1) of the Customs Act. The Customs Act is a taxing statute and if the said Act does not, by the plain language used therein, carry out the object the Court will not be justified in supplying deficiencies in the Act. (
21. The language of Section 12(1) of the Customs Act is plain and does not suffer from any ambiguity. It does not provide for the levy of customs duty on goods supplied by a DTA unit to a Unit located within a Special Economic Zone as both of them are located within the territorial waters of India. If the language is plain and unambiguous Courts will not be justified in putting a different meaning on the words merely because a sister legislation has in its wisdom thought it fit to enlarge the scope of those words. (Rullia Ram Hakim Rai v. S. Fateh Singh S. Sham Shder Singh AIR 1962 Punjab 256). For defining the terms in one Act, the definitions given of that particular term in some other enactment cannot be used. It is not a sound rule of interpretation to seek the meaning of words used in an Act, in the definition clause of another statute. The definition of an expression in one Act must not be imported into another. It would be a new terror in the constitution of Acts of Parliament if we were required to limit a word to an unnatural sense because in some Act, which is not incorporated or referred to, such an interpretation is given to it for the purposes of that Act alone. (
22. Unlike Section 2(zd) of the SEZ Act, whereunder all other words and expressions used and not defined in the SEZ Act but defined in the Central Excise Act 1944, the Industries (Development and Regulation) Act, 1951, the Income Tax Act, 1961, the Customs Act, 1962 and the Foreign Trade (Development and Regulation) Act, 1992 shall have the meaning respectively assigned to them in those Acts, the Customs Act 1962 does not contain a similar provision requiring the words and expressions used, and not defined in the Customs Act, to have the meaning assigned to them under the SEZ Act. Moreover, the word ''export'' has also been defined in Section 2(18) of the Customs Act. The said definition of ''export'' is at variance with the definition of export u/s 2(m)(ii) of the SEZ Act. For attracting levy of customs duty u/s 12(1) of the Customs Act, 1962 it is the definition of the word ''export'' u/s 2(18) of the Customs Act which would apply, and not the word ''export'' as defined u/s 2(m)(ii) of the SEZ Act, 2005.
23. In this context it is useful to note that Chapter X-A of the Customs Act, 1962, (inserted by Finance Act 2002 (Act 20 of 2002), contained special provisions relating to Special Economic Zones. Section 76-E thereunder related to exemption from duties of customs and, without prejudice to the provisions of Section 76-F, 76-G and 76-H, goods admitted to a Special Economic Zone were exempt from duties of customs. Sections 76-F, 76-G and 76-H, as they then stood, read thus:
76F Levy of duties of customs.
Subject to the conditions as may be specified in the rules made in this behalf,
(a) any goods admitted to a special economic zone from the domestic tariff area shall be chargeable to export duties at such rates as are leviable on such goods when exported;
(b) any goods removed from a special economic zone for home consumption shall be chargeable to duties of customs including antidumping, countervailing and safeguard duties under the Customs Tariff Act, 1975 (51 of 1975), where applicable, as leviable on such goods when imported; and
(c) the rate of duty and tariff valuation, if any, applicable to goods admitted to, or removed from, a special economic zone shall be the rate and tariff valuation in force as on the date of such admission or removal, as the case may be, and where such date is not ascertainable, on the date of payment of the duty.
76G Authorised operations.
All goods admitted to a special economic zone shall undergo such operations including processing or manufacturing as may be specified in the rules made in this behalf.
76H Goods utilised within a special economic zone.
(1) The Central Government may make rules in this behalf to enumerate the cases in which goods to be utilised inside a special economic zone may be admitted free of duties of customs and lay down the requirements which shall be fulfilled.
(2) Goods utilised contrary to the provisions of rules made under Sub-section (1) shall be chargeable to duties of customs in the same manner as provided under Clause (b) of Section 76-F as if they have been removed for home consumption.
24. Chapter X-A, in its entirety, was repealed by Finance Act, 2007 (Act 22 of 2007) with effect from 11.5.2007.
25. Prior to its repeal by Act 22/07, Section 76 F (a) provided for levy of export duty on goods brought into a Special Economic Zone from a DTA, and Section 76 F(b) provided for levy of customs duty including anti-dumping, countervailing and safeguard duties on goods removed from a Special Economic Zone for home consumption as if the said goods are being imported. After its repeal by Act 22/07 neither the Customs Act 1962 nor the SEZ Act, 2005 provide for the levy of customs duty on goods admitted into a Special Economic Zone from a DTA Unit. The effect of repeal is to obliterate the provisions repealed as completely as if it had never been passed, and it must be considered as a law which never existed, except for the purposes of those actions which were commenced and concluded while it was an existing law. (
26. u/s 53(1) of the SEZ Act a Special Economic Zone shall, on and from the appointed day, be deemed to be a territory outside the customs territory of India for the purpose of undertaking authorized operations. Section 53(1) of the SEZ Act creates a legal fiction but the legal fiction is limited in its scope. In interpreting a provision creating a legal fiction the Court is to ascertain for what purpose the fiction is created, and after ascertaining this, the court is to assume all those facts and consequences which are incidental or inevitable corollaries to the giving effect to the fiction. But in so construing the fiction it is not to be extended beyond the purpose for which it is created, or beyond the language of the Section by which it is created. It cannot also be extended by importing another fiction. (
27. The term "customs territory", as referred to in Section 53(1) of the SEZ Act, cannot be equated to the territory of India. This term has been defined in the General Agreement of Tariffs & Trade, to which India is a signatory, to mean an area subject to common tariff and regulations of commerce; and there could be more than one customs territory in a country. The contention that Section 53(1) requires an SEZ to be deemed to be a territory outside India, if accepted, would lead to a situation where a Special Economic Zone would not be subject to any Indian laws. The entire SEZ Act, 2005 would be rendered redundant since it is stated to extend to the whole of India. In any case, various provisions of the SEZ Act would be rendered redundant and unworkable if the Special Economic Zone was to be considered an area outside India. This is apart from the fact that such a declaration would be constitutionally impermissible. (Essar Steel Limited 2010 (249) ELT 3 (Guj.)).
28. Section 51(1) contains a non-obstante clause and, in case of inconsistency between the provisions of the SEZ Act and any other law in force, the provisions of the SEZ Act shall prevail. It should first be ascertained what the enacting part of the Section provides on a fair construction of the words used according to their natural and ordinary meaning, and the non obstante clause is to be understood as operating to set aside as no longer valid anything contained in the relevant existing laws which is inconsistent with the new enactment. (
29. The contention that the SEZ Rules and the Drawback Rules enable levy of export duty on goods brought in from a DTA to a Special. Economic Zone must only be noted to be rejected. Even if the Rules are presumed to permit imposition of customs duty it would be ultra vires the SEZ Act, as a tax/duty can only be imposed under the Constitution by some enactment. (L. Maheshwari Prasad v. State of U.P. AIR 1957 Allahabad 282). The liability to pay customs duty is statutory. If the statute does not effectuate the levy, no liability can arise for payment of such duty. (
30. Even otherwise neither the SEZ Rules nor the Drawback Rules provide for levy of customs duty on goods supplied from a domestic tariff area to a unit located within a Special Economic Zone for its authorised operations. Section 47 of the Customs Act relates to clearance of goods for home consumption and, under Sub-section (1) thereof, where the proper officer is satisfied that any goods entered for home consumption are not prohibited goods, and the importer has paid the import duty, if any, assessed thereon and any charges payable under the Act in respect of the same, the proper officer may make an order permitting clearance of the goods for home consumption.
31. Chapter II of the SEZ Rules prescribes the procedure for establishment of a Special Economic Zone. Rule 12 relates to import and procurement of goods by the developer. Under Sub-rule (1) thereof, the developer may import or procure goods from the Domestic Tariff Area without payment of duty, taxes and cess for the authorized operations subject to the provisions contained in Sub-rules (2) to (8). Rule 12(2) requires the Developer to make an application to the Development Commissioner along with the list of goods including machinery, equipment and construction materials required for the authorized operations. Sub-rule (6) requires the developer to maintain a proper account of the import or procurement, consumption and utilization of goods and submit quarterly and half yearly returns to the Development Commissioner for being placed before the approval Committee for consideration. Sub-rule (8) prohibits the developer from removing goods from the Special Economic Zone to the Domestic Tariff Area except with the permission of the Specified Officer, and on payment of duty applicable on such goods.
32. Chapter IV of the SEZ Rules prescribes the terms and conditions subject to which the entrepreneur and the developer shall be entitled to exemptions, drawbacks and concessions. Rule 27 relates to import and procurement and, under Sub-rule (1) thereof, a unit or developer may import or procure from the domestic tariff area, after availing export entitlements, all types of goods including capital goods etc., for authorized operations except prohibited items. Sub-rule (5) enables a unit to import or procure from a domestic tariff area all types of goods without payment of duty, taxes of cess for creating a central facility for use by units in a Special Economic Zone. Rule 28 prescribes the procedure for import. Under Sub-rule (4) thereof the unit or developer may also procure goods required for the authorized operations without payment of duty from bonded warehouses set up under the Foreign Trade Policy, and under the Customs Act, in the Domestic Tariff Area. Rule 30 prescribes the procedure for procurement from the domestic tariff area and, under Sub-rule (1) thereof, the domestic tariff area supplier supplying goods to a unit or developer shall clear the goods, as in the case of exports, either under bond or as duty paid goods under claim of rebate on the cover of ARE-1. Under Sub-rule (3), goods procured by a unit or developer under claim of export entitlement shall be allowed admission into the Special Economic Zone on the basis of ARE-1 and Bill of Export filed by the supplier. Rule 30(5) provides that, where a bill of export has been filed under a claim of draw-back or Duty Entitlement Pass Book, the Unit or developer shall claim the same from the specified officer and jurisdictional Development Commissioner respectively. Under Sub-rule (8), drawback or duty entitlement pass book credit against supply of goods by a domestic tariff area supplier shall be admissible provided payments for the supply are made from the Foreign Currency Account of the Unit. Under Sub-rule (9), a copy of the bill of export and ARE-1, with the endorsement of the authorized officer that the goods have been admitted in full in a Special Economic Zone, shall be treated as proof of export. Rule 34 relates to utilization of goods and, thereunder, goods admitted into a Special Economic Zone shall be used by the Unit or the Developer only for carrying out authorized operations. If the goods admitted are utilized for purposes other than for the authorized operations, duty shall be chargeable on such goods as if it had been cleared for home consumption. Under Rule 35, the Unit shall account for the entire quantity of goods imported or procured duty free, by way of export, sales or supplies in a Domestic Tariff Area.
33. Rule 47 relates to sales in a Domestic Tariff Area. Such sales are liable for payment of customs duty u/s 30 of the Act. Section 30 relates to domestic clearance by Units and, thereunder, 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 antidumping, countervailing and safeguard duties under the Customs Tariff Act, 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.
34. Rule 48 of the SEZ Rules prescribes the procedure for sale in a Domestic Tariff Area and requires the Domestic Tariff Area buyer to file a bill of entry for home consumption. Rule 49(1) enables a Unit to remove capital goods to the Domestic Tariff Area, after use in the Special Economic Zone, on payment of duty.
35. On 3 conjoint reading of Section 30 of the SEZ Act with Rules 34, 46 and 47 of the SEZ Rules, it is evident that only sales effected by a SEZ unit to a unit in the DTA are liable for payment of customs duty; and customs duty would be chargeable only on such of the goods which are admitted into a Special Economic Zone and are utilized for purposes other than the authorized operations as if such goods had been cleared for home consumption. As long as the goods supplied by a DTA unit is for the SEZ unit to carry on its authorized operations, neither the SEZ Act nor the Rules made thereunder provide for levy of customs duty on such supplies.
36. Chapter X of the Customs Act relates to drawback. Section 75 relates to drawback on imported material used in the manufacture of goods which are exported. The Drawback Rules enable drawback to be allowed on export of goods at such amount, or at such rates, as may be determined by the Central Government. The Drawback, under Rule 3 of the Drawback Rules, is subject to the provisions of the Customs Act and the Rules made thereunder. These Rules also specify certain goods which are not entitled for drawback. The Drawback Rules do not relate to levy and collection of customs duty, and it is only for the limited purpose of claiming drawback would taking out of goods from a place in a Domestic Tariff Area to a Special Economic Zone fall within the definition of "export" under Rule 2(c) of the Drawback Rules.
37. In the absence of any provision for the levy or collection of customs duty on goods supplied from a Domestic Tariff Area to a Special Economic Zone for its authorized operations, either on the D.T.A. supplier or the SEZ unit, the impugned proceedings whereby the SEZ units were called upon to furnish bank guarantees, and the D.T.A. units were called upon to pay customs duty, are quashed.
38. The Writ Petitions are allowed. However, in the circumstances, without costs.
39. That Rule Nisi has been made absolute as above witness the Hon''ble Shri Nlsar Ahmad Kakru, the Chief Justice on this Friday day the Thirtieth day of Two Thousand and ten.
