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2007 (10) TMI 310 - HC - CustomsProsecution - Held that - The contention of the petitioner that only Excise Act is applicable is not a valid contention. The goods which are manufactured in free trade zones are not only exempted from Excise Act but all raw-material, which is imported for the purpose of manufacture is also exempted from custom duty and the Export Processing Zones are treated as custom warehouse where from the goods cannot be removed for domestic market without permission and without payment of duties. Therefore, of the opinion that the Custom Act would be applicable in all such cases. There is no force in the argument of the petitioner that sanction and authorization for prosecution given by the respondent No. 2 and consequent proceedings of taking cognizance by the court of AC MM were without jurisdiction. The writ petition is hereby dismissed.
Issues:
1. Challenge to quash sanction and authorization for prosecution under Customs Act. 2. Jurisdiction of Commissioner Customs to grant sanction for prosecution. 3. Applicability of Customs Act on goods manufactured by Export Oriented Units (EOU) in NEPZ. 4. Interpretation of laws governing Special Economic Zones (SEZ) and Export Processing Zones. 5. Validity of complaint filed after 9 years and mala fide allegations. Analysis: 1. The petitioners sought to quash the sanction and authorization for prosecution under the Customs Act. The petitioners were accused of clandestine removal of goods from Noida Export Processing Zone (NEPZ). The surveillance revealed a large quantity of Compact Discs being removed in a clandestine manner. The investigating agency collected evidence, including statements from individuals involved, leading to the grant of sanction for prosecution by respondent No. 2 under Section 137(1) of the Customs Act for offenses under Section 135(1)(a) of the Act. The Court of Additional Chief Metropolitan Magistrate took cognizance of the offense and issued summons against the petitioners. 2. The petitioners challenged the jurisdiction of the Commissioner Customs to grant sanction for prosecution, arguing that as a 100% Export Oriented Unit (EOU), only the Central Excise Act should apply, not the Customs Act. They contended that the Customs Act did not have jurisdiction over goods produced by an EOU in NEPZ. However, the Court held that goods manufactured in free trade zones, like EOUs in SEZs, are subject to the Customs Act, as these zones are treated as bounded warehouses requiring permission for goods removal for domestic consumption. 3. The legal issue raised by the petitioners concerned the applicability of the Customs Act on goods manufactured by EOUs in NEPZ. The Court clarified that EOUs in SEZs are exempt from customs and excise duties for goods meant for export, not for domestic consumption. Goods diverted for home consumption from these zones are subject to customs regulations, and any unauthorized removal is akin to importing goods without permission, leading to confiscation under the Customs Act. 4. The Court elaborated on the laws governing SEZs and Export Processing Zones, emphasizing that these zones are treated as foreign territories where goods are to be exported. The notifications declaring NEPZ as a free trade zone and bounded warehouse under the Customs Act highlight the strict regulations on goods removal without proper authorization and duty payments. The policy aims to promote exports and maintain competitiveness in international trade. 5. The petitioners also raised concerns about the validity of the complaint filed after nine years, alleging mala fide intentions. However, the Court found no merit in these arguments and dismissed the writ petition, upholding the applicability of the Customs Act on goods manufactured by EOUs in NEPZ and affirming the jurisdiction of the authorities in granting sanction for prosecution and taking cognizance of the offenses under the Act.
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