2022 (4) TMI 219 - HC - Customs

Obtaining No Objection Certificate (NOC) from the State Government - denotification of SEZ units - Rule 74 of the Central Special Economic Zone Rules, 2006 - HELD THAT - For the purpose of grant of NOC, the State Government wants the writ applicant to abide by the order dated 31st January, 2022 passed by the Joint State Tax Commissioner, Division-VI, Vadodara, Page-95, Annexure- P, wherein the Government wants the writ applicant to make good an amount of ₹ 1049.47 Crore towards VAT/GST up to 31st March, 2021. The computation of the tax liability as carried out by the Joint State Tax Commissioner, vide its order dated 31st January, 2022 has something to do with the order/communication dated 26th August, 2021 between the Addl. State Tax Officer (Administration) and Joint Industries Commissioner (Infra), Gandhinagar. The request of Mr. Joshi as on date is two fold; first the business exigencies demand that his client exits the SEZ at the earliest and, therefore, at least a provisional NOC may be granted by the Government reserving liberty for the Government to determine the liability in accordance with law. It is pointed out that the writ applicant is incurring an approximate loss of ₹ 770 Crore annually and, in such circumstances, it needs to exit the SEZ at the earliest. The argument of Mr. Joshi, on merits, is that Rule 74 has no application in the present case. Time is granted as prayed for by Mr. Trivedi to enable him to seek appropriate instructions in the matter, more particularly, whether the State is inclined to grant provisional NOC so that the writ applicant gets some relief from the huge loss which it is suffering as on date. If the State Government deems fit to grant a provisional NOC, it will always be subject to their rights and contentions so far as the claim of the requisite amount towards the VAT/GST is concerned. If the Government is able to find out a viable solution by grant of provisional NOC, it may provide some relief to the writ applicant. Post the matter on 13th April, 2022 on top of the board.

Summary

Issues:
1. Application for exit from SEZ and compliance requirements.
2. Dispute regarding NOC application responsibility.
3. Tax liability for exit from SEZ under Rule 74 of SEZ Rules.
4. Request for provisional NOC due to business exigencies.

Analysis:
1. The judgment revolves around a Company seeking to exit a Special Economic Zone (SEZ) in Gujarat. The Company, a joint venture of ONGC, Gail India Ltd., and GSPC, set up a Mega Petrochemical Complex in the SEZ at Dahej. The Unit Approval Committee granted in-principal approval for the exit subject to compliance, including obtaining a No Objection Certificate (NOC) from the State Government.

2. A dispute arose regarding the responsibility for applying for the NOC, with the Company arguing that as per a circular, the developer should apply. The Developer did write to the Industries Commissioner requesting the NOC for a specific area. However, the State Government linked the NOC grant to the Company's settlement of a tax liability of ?1049.47 Crore towards VAT/GST up to March 2021, as per an order by the Joint State Tax Commissioner.

3. The Advocate General argued that Rule 74 of the Central Special Economic Zone Rules, 2006, allows the Government to claim the tax amount before granting the NOC for the Company's exit from the SEZ. The Company requested a provisional NOC due to significant annual losses and urged that Rule 74 should not apply in their case.

4. The Court granted time for the Advocate General to seek instructions on granting a provisional NOC to provide relief to the Company from losses. The provisional NOC, if granted, would be subject to the Government's right to determine the tax liability later. The Court indicated it would examine the legality of the tax liability under Rule 74 if the matter proceeds to a merit-based contest. The case was adjourned for further proceedings on April 13, 2022.