2024 (1) TMI 305 - HC - Customs

Exemption from payment of GST compensation cess to SEZ unit - Section 26 of the SEZ Act - HELD THAT - The tax so raised i.e., income tax, sales tax, excise tax etc., can be utilized for any public purpose i.e., for payment of salaries, infrastructure creation, developmental programmes etc. However a cess is though broadly a tax, it is a special kind of tax levied for some special purpose which will be levied as an increment to the existing tax. The cess is utilized for a specific purpose i.e., for education, health etc., depending the nature of the cess levied. Then duty is concerned, duty is a tax levied on goods and services produced within or imported into a country. Keeping the aforesaid distinction in view, when Section 26 of SEZ Act is perused, it is discernible that the word duty alone is used in the said section but not the word cess . More prominently U/s 26(1)(a), on which much reliance is placed by the petitioners, what is exempted is only duty of customs but not any cess much-less the GST Compensation Cess. In Section 7 the words tax, duty and cess are specifically and distinctly used and stated that any goods or services exported or imported or procured from the DTA by a SEZ unit or developer shall subject to such terms and conditions and limitations be exempt from payment of taxes, duties or cess under all enactments specified in the First Schedule. The sine qua non for application of Section 7 is that in order to get exemption, the enactment which imposes tax, duty or cess shall be mentioned in the First Schedule. Therefore, from the said section two things are clear. Firstly, the Goods and Services Tax (Compensation to States) Act, 2017 is not mentioned in the First Schedule of the Act and secondly, the words tax, duty and cess are differently mentioned. However, in Section 26(1)(a) the phrase duty of customs alone is mentioned. A conjunctive study of Section 26(1)(a), 2(zd) of SEZ Act, 2005 and Section 2(15) of Customs Act, 1962 would pellucidly tell that the phrase duty of customs used in Section 26(1)(a) of SEZ Act only refers to duty leviable under Customs Act, 1962 but the said phrase does not include cess under GST Compensation Act. Petition dismissed.

Summary

Issues Involved:
1. Exemption from GST Compensation Cess for SEZ Units.
2. Maintainability of Writ Petitions due to availability of alternative remedies.
3. Interpretation of relevant provisions of SEZ Act, 2005 and GST Compensation Act, 2017.

Summary:

1. Exemption from GST Compensation Cess for SEZ Units:
The petitioners, SEZ units, claimed exemption from GST compensation cess on coal imports under Section 26 of the SEZ Act, 2005. They argued that Section 26(1)(a) of the SEZ Act exempts them from any duty of customs under the Customs Act, 1962 or Customs Tariff Act, 1975. The respondents contended that the exemption does not extend to compensation cess under the GST Compensation Act, 2017, as it is not included in the First Schedule of the SEZ Act. The court upheld the respondents' view, stating that the term "duty" in Section 26(1)(a) does not encompass "cess," and the GST Compensation Act is not listed in the First Schedule of the SEZ Act.

2. Maintainability of Writ Petitions due to availability of alternative remedies:
The respondents argued that the impugned letters were appealable orders under Section 128 of the Customs Act, 1962, and hence, the writ petitions were not maintainable due to the availability of an alternative remedy. The court noted that while alternative remedies were available, writ petitions could still be entertained if the impugned orders were issued without jurisdiction, as claimed by the petitioners.

3. Interpretation of relevant provisions of SEZ Act, 2005 and GST Compensation Act, 2017:
The court examined the provisions of the SEZ Act, 2005, particularly Sections 7, 26, and 50, which provide exemptions on taxes, duties, and cess for SEZ units. The court also analyzed the GST Compensation Act, 2017, and relevant constitutional amendments. The court concluded that the term "duty" in Section 26(1)(a) of the SEZ Act refers to customs duties under the Customs Act, 1962, and Customs Tariff Act, 1975, but does not include compensation cess under the GST Compensation Act, 2017. The court emphasized that the SEZ Act is a self-contained code, and exemptions must be derived from its provisions.

Conclusion:
The court dismissed the writ petitions, ruling that SEZ units are not exempt from paying GST compensation cess on coal imports under the current legal framework. The court also highlighted the distinction between "duty" and "cess" and the specific requirements for exemptions under the SEZ Act.