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2022 (11) TMI 638 - HC - CustomsRequest for denotification of alloted land in the midst of the SEZ - despite the land was allotted to the petitioner and even after lapse of 12 years, the petitioner had not utilized the land and had kept it vacant - specific case of the petitioner is that the petitioner is entitled for de-notification of the land allotted to the petitioner from the purview of the Special Economic Zones Act, 2005, as it has been done in the case of few others - HELD THAT - The petitioner appears to have built up building / shed in 2 Acres allotted to the petitioner vide allotment letter dated 27.03.2008. It was intended to manufacture plastic injection moulded components, wire wound components and electronic assembly for Samsung Heavy Industries India Private Limited and Dell International Services India Private Limited. Thus, the petitioner was conceived as an ancillary unit for supply of plastic injection moulded components, wire wound components and electronic assembly and other parts to units in the said SEZ - At the time when the petitioner obtained the allotment letter from the first respondent, there was a global meltdown. Therefore, there was a delay in commencing and completing the construction by the petitioner. By the time the construction was completed, the two units for whom the petitioner was conceived to supply the plastic injection moulded components, wire wound components and electronic assembly exited from Special Economic Zones (SEZ). Thus, the petitioner was left in the lurch. The continuance of the petitioner as a Special Economic Zones (SEZ) Unit supplying to a unit in the Domestic Tariff Area (DTA) would render the petitioner an unviable unit. If the unit is de-notified, the petitioner will be liable to refund the duty concession availed on the goods that were imported into Special Economic Zones (SEZ) Area i.e., the goods used for constructing the factory and for installing, commencing and erecting of capital goods. The petitioner will have to repay the concession availed in terms of Section 29 read with Section 26(d) of the Special Economic Zones Act, 2005. Whether any prejudice would be caused either to the first respondent or the second respondent or for that matter to the units in the neighbourhood if the petitioner's unit is de-notified merely because the petitioner's unit is located in the midst of the Special Economic Zones (SEZ) area? - HELD THAT - The power to de-notify an area from the Special Economic Zones (SEZ) is vested with the Central Government under Rule 6 of the Special Economic Zones Rules, 2006. However, the Central Government can de-notify a unit or an area, only on the recommendation of the Board on an application by a developer, if it is satisfied - the Central Government has to act on the recommendation of the Board on the application of the developer. In view of facts of the case, the first respondent as a developer has declined to file the application as the land that was allotted to the petitioner in the midst of the Special Economic Zones (SEZ). Though the intention of the petitioner was to operate as a Special Economic Zones (SEZ) unit, the fact remains that it was intended to supply the plastic injection moulded components, wire wound components and electronic assembly and other parts of Samsung Heavy Industries India Private Limited and Dell International Services India Private Limited. However, these units have exited from the Special Economic Zones (SEZ) units making the petitioner's unit unviable as a SEZ unit - After the implementation of Goods and Services Tax Act, 2017, adequate safeguards are in force with effect from 01.07.2017. All supplies to be made by the petitioner as a non Special Economic Zones (SEZ) unit, i.e. as a Domestic Tariff Area (DTA) unit, will attract the Goods and Services Tax under the provisions of Central Goods and Services Tax Act, 2017 (CGST), respective State Goods and Services Tax Act, 2017 and Integrated Goods and Services Tax Act, 2017 (IGST) and the rules made thereunder. Likewise, all goods cleared will attract the respective GSTs. The first respondent is therefore directed to reconsider the request of the petitioner for de-notifying the land allotted to the petitioner from the operation of Special Economic Zones Act, 2005 afresh and thereafter recommend to the Central Government to issue appropriate Notification under Rule 8 of the Special Economic Zones Rules, 2006 provided the petitioner agrees to such terms as may be imposed by the first respondent to safeguard the interest and integrity of SEZ. The petition is disposed off.
Issues Involved:
1. Validity of the cancellation of land allotment to the petitioner in the SIPCOT Hi-Tech SEZ. 2. Petitioner's request for de-notification of the SEZ unit. 3. Compliance with the terms and conditions of the allotment order and lease deed. 4. Feasibility of de-notifying the petitioner's unit from the SEZ. 5. Legal implications of the petitioner's failure to commence production within the stipulated time. Detailed Analysis: 1. Validity of the Cancellation of Land Allotment: The petitioner challenged the impugned order dated 29.09.2020, which canceled the allotment of land in the SIPCOT Hi-Tech SEZ. The cancellation was based on the petitioner's failure to commence construction and commercial production within the stipulated time as per the allotment order and lease deed. The court noted that the petitioner had breached several conditions, including the requirement to commence production within 30 months from the date of the allotment order. 2. Petitioner's Request for De-Notification: The petitioner requested de-notification of its SEZ unit due to the unviability of operating under SEZ rules. The petitioner highlighted difficulties, including the exit of key customers and the need to supply to the domestic market. The court examined whether de-notification would cause prejudice to the respondents or other units in the SEZ. The court found that no significant prejudice would be caused and directed the first respondent to reconsider the de-notification request. 3. Compliance with Terms and Conditions: The court reviewed the petitioner's compliance with the terms and conditions of the allotment order and lease deed. It was found that the petitioner had not commenced construction or production within the stipulated time, leading to the issuance of show cause notices and the eventual cancellation of the allotment. The court noted that the petitioner had faced genuine difficulties, including a global economic downturn and the exit of key customers. 4. Feasibility of De-Notifying the Petitioner's Unit: The court examined the feasibility of de-notifying the petitioner's unit from the SEZ. The first respondent argued that de-notification was not feasible as the unit was located in the midst of the SEZ, and it would disrupt the contiguity of the SEZ area. The court, however, found that de-notification was possible without causing significant disruption and directed the first respondent to re-examine the issue. 5. Legal Implications of Failure to Commence Production: The court considered the legal implications of the petitioner's failure to commence production within the stipulated time. The court noted that the petitioner had heavily invested in the unit and that de-notification would allow the petitioner to operate viably as a Domestic Tariff Area (DTA) unit. The court directed the first respondent to reconsider the de-notification request and recommend appropriate action to the Central Government. Conclusion: The court quashed the impugned order dated 29.09.2020 canceling the allotment of land and directed the first respondent to reconsider the petitioner's request for de-notification. The case was remitted back to the first respondent for re-examination, and the steps taken under the Tamil Nadu Public Premises (Eviction of Unauthorised Occupants) Act, 1975, were also quashed. The court directed the first respondent to complete the reconsideration process within six months.
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