2013 (8) TMI 33 - HC - Customs

Export duty - Movement of goods from DTA to SEZ unit - Validity of circular levying duty - assessee filed the petition against the circular levying of duty of customs on the goods moved from various places in India situated outside the SEZ into the SEZ in India Held that - There was no movement of goods from India to a place outside India thus export duty cannot be levied - it would not be open to the revenue to levy duties of customs on such goods by way of Notifications or Circulars - goods which are taken out of India to a place outside India the levy u/s 12 was applicable - Notification No. 66/2008-Customs states that the levy of duties of customs being export duty would be applicable only in respect of goods which are exported outside India - there was no provision in the SEZ Act to levy duties of customs court relied upon Essar Steel Limited v. Union of India (2009 (11) TMI 141 - GUJARAT HIGH COURT ) and Commissioner of C.Ex., Bangalore v. Biocon Ltd. (2011 (2) TMI 460 - KARNATAKA HIGH COURT). SEZ Act a separate Code - it would not be open to the respondents to levy duties of customs on goods moved from Domestic Tariff Areas into Special Economic Zones, as per the definition found in Section 2 - it would not be proper on the part of the department to levy duties of customs on goods supplied from the Domestic Tariff Areas to the units situated in the Special Economic Zones - If levy of duties of customs are to be made applicable to such goods it could only be by way of appropriate amendments introduced in the Customs Act, 1962, as well as in the SEZ Act petition decided in favour of assessee.

Issues Involved:
1. Levying of customs duty on goods supplied from Domestic Tariff Areas (DTAs) to Special Economic Zones (SEZs).
2. Legality of Circular Bearing F.No. 6/2/2008-SEZ (pt), dated 30-6-2008.
3. Interpretation of the term "export" under the Customs Act, 1962, and the Special Economic Zones Act, 2005.
4. Applicability of customs duties on intra-country clearances.
5. Legislative competence and constitutional validity of imposing customs duties on goods supplied to SEZs.

Detailed Analysis:

1. Levying of Customs Duty on Goods Supplied from DTAs to SEZs:
The petitioners challenged the levying of customs duty on goods moved from various places in India (outside SEZs) into SEZs. They argued that customs duties, being export duties, should only apply to goods exported out of India, as per Section 12 of the Customs Act, 1962. The court agreed, stating that duties of customs could only be levied on goods exported to a place outside India.

2. Legality of Circular Bearing F.No. 6/2/2008-SEZ (pt), dated 30-6-2008:
The petitioners contested the circular issued by the Department of Commerce, which mandated the payment of customs duty on steel products supplied from DTAs to SEZs. The court found that the circular was not sustainable in law, as it imposed duties contrary to the provisions of the Customs Act, 1962, and the SEZ Act, 2005.

3. Interpretation of the Term "Export":
The court examined the definitions of "export" under both the Customs Act, 1962, and the SEZ Act, 2005. It concluded that the definition of "export" in Section 2(18) of the Customs Act, 1962, applies only to goods taken out of India to a place outside India. Therefore, the term "export" as defined in the SEZ Act, 2005, cannot be used to levy customs duties on goods supplied from DTAs to SEZs.

4. Applicability of Customs Duties on Intra-Country Clearances:
The court noted that the SEZ Act, 2005, and its rules provide exemptions from taxes, duties, and cess for goods procured by SEZ units from the domestic market. Hence, customs duties cannot be levied on goods supplied from DTAs to SEZs, as these are not considered exports under the Customs Act, 1962.

5. Legislative Competence and Constitutional Validity:
The court analyzed the legislative competence to impose customs duties on goods supplied to SEZs. It held that the Parliament did not intend to levy customs duties on such goods, as evidenced by the SEZ Act, 2005. The court also emphasized that customs duties are meant for goods entering or leaving the country, not for intra-country transactions. Therefore, imposing such duties on goods supplied to SEZs would be beyond the legislative competence of the Parliament and contrary to the Constitution of India.

Conclusion:
The court concluded that the levy of customs duties on goods supplied from DTAs to SEZs is not permissible under the current legal framework. The circular dated 30-6-2008 was deemed illegal and without authority. The writ petitions were ordered accordingly, with no costs.

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