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2010 (7) TMI 290 - HC - CustomsSupply made from DTA to a SEZ - Section 7 of the SEZ Act provided that any goods procured from the DTA to a SEZ unit would be exempt from the payment of taxes, duties or cess, under all enactments specified in the First Schedule - Section 53 of the SEZ Act provides that the SEZ shall be deemed to be a territory outside the customs territory of India, for the purpose of undertaking its authorised operations the question would be whether a SEZ does not continue to be a part and parcel of India. If a SEZ was to be treated as being outside India, there was hardly any necessity under Section 26 to exempt from customs duty any goods which are imported into a SEZ and likewise exempt export duties when exported from a SEZ Held that - The levy of customs duty on exports is sanctioned by Entry 83 of List I of the VII Schedule to the Constitution - provisions of the SEZ Act would render the provisions unconstitutional as a levy of customs duty on export of goods from India cannot be with reference to the provisions of the SEZ Act. The authorities under the SEZ Act are without jurisdiction in seeking to enforce the li ability which could arise only under the Customs Act. Hence, the instructions issued by the respondents under the impugned notification are wholly illegal and cannot be sustained - petitions are allowed accordingly.
Issues Involved:
1. Whether export duty can be levied under the provisions of the Special Economic Zones Act, 2005. 2. Whether export duty could be imposed under the Customs Act, 1962 while incorporating the definition of the expression "export" under the SEZ Act, 2005, into the Customs Act, 1962. Issue-wise Detailed Analysis: 1. Whether export duty can be levied under the provisions of the Special Economic Zones Act, 2005: The petitioners, comprising developers, co-developers, entrepreneurs, or existing units under the SEZ Act, 2005, contested the imposition of export duty on goods supplied from the Domestic Tariff Area (DTA) to the SEZs. They argued that Section 26 of the SEZ Act provides for duty exemptions, including customs duty exemptions for goods imported into or exported from SEZs. The SEZ Act aims to promote exports and economic activity by offering such exemptions. The petitioners contended that treating goods supplied to SEZs as exports and imposing export duty is contrary to the SEZ Act's provisions and objectives. They argued that SEZ units are part of India and should not be treated as foreign territories for tax purposes. The court noted that the SEZ Act's Section 26 explicitly provides exemptions from customs duty, and the imposition of export duty on goods supplied from DTA to SEZs contradicts this provision. The court concluded that the SEZ Act does not contemplate the levy of export duty on such transactions. 2. Whether export duty could be imposed under the Customs Act, 1962 while incorporating the definition of the expression "export" under the SEZ Act, 2005, into the Customs Act, 1962: The respondents argued that the SEZ Scheme, introduced in the Foreign Trade Policy of 2001 and later codified in the SEZ Act, 2005, treats supplies from DTA to SEZs as exports, thus justifying the imposition of export duty under the Customs Act, 1962. They contended that the SEZ Act defines "export" to include supplies from DTA to SEZs, and this definition should be incorporated into the Customs Act for the purpose of levying export duty. The court examined the definitions of "export" and "import" under both the SEZ Act and the Customs Act. It noted that the Customs Act defines "export" as taking goods out of India to a place outside India, while the SEZ Act includes supplies from DTA to SEZs within its definition of "export." The court emphasized that the SEZ Act's definition of "export" is intended to confer benefits like duty exemptions and drawbacks, not to impose export duty. The court concluded that incorporating the SEZ Act's definition of "export" into the Customs Act to levy export duty is not justified. The court referred to the principle that fiscal statutes should be construed strictly, and any tax liability must be clearly provided for in the law. In the absence of a specific provision in the Customs Act to treat supplies from DTA to SEZs as exports for the purpose of levying export duty, such a levy cannot be justified. Conclusion: The court ruled that the imposition of export duty on goods supplied from DTA to SEZs is not justified under either the SEZ Act, 2005, or the Customs Act, 1962. The SEZ Act explicitly provides for duty exemptions, and treating supplies to SEZs as exports for the purpose of levying export duty contradicts this provision. The court quashed the impugned notifications and instructions, declaring them illegal and without jurisdiction. The petitions were allowed, and all proceedings initiated to impose export duty on the petitioners were quashed.
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