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TMI Blog2009 (11) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... Units and goods are cleared to SEZ units under LUT/Bond and/ or rebate. 3. Special Civil Application Nos. 11032 9806 of 2008 are filed by SEZ Developers and remaining 8 petitions are filed by SEZ Units. The Domestic Tariff Area Suppliers followed the procedure of LUT/Bond while clearing the goods to SEZ Units. 4. In Special Civil Application Nos. 9656, 9713, 10444, 10445, 10446, 13298, 11032 and 11909 of 2008, Mr. K.S. Nanavati and Mr. Mihir H. Joshi, learned Senior Advocates appeared with Mr. Keyur Gandhi for Nanavati Associates for the petitioners. 5. In Special Civil Application Nos. 9792 9806 of 2008, learned advocates Mr. Vikram Nankani with Mr. Uday Joshi with Mr. Hardik Gupta of M/s. Trivedi and Gupta Advocates and Mr. Hardik Modh appeared for the petitioners. 6. In Special Civil Application No.11057 of 2008, Mr. B.D. Karia, learned advocate appeared for the petitioners. In Special Civil Application No.12176 of 2008, learned advocate Mr. Hasit Dave appeared for the petitioners. 7. For the sake of brevity and convenience, facts are taken from Special Civil Application No.9656 of 2008. 8. The petitioners in Special Civil Application Nos.9656 97 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty at the rate of Rs. 300 per ton. After the Entry No. 11 in the Second Schedule to the Customs Tariff Act, 1975 was amended with effect from 1-3-2007, the ARE-1's Bills of Export for supply of Iron Ore Pellets by the petitioner to the SEZ unit continued to be assessed and the subject goods were permitted for acceptance by the SEZ unit without any demand for export duty. The petitioners addressed a letter dated 12-3-2007 to the Director in the SEZ Section of Ministry of Commerce requesting for clarification/confirmation for the effect that no export duty will be leviable on sale of iron ore/iron ore pellets to SEZ Units in view of Rule 27 of the SEZ Rules, 2006. The Superintendent of Central Excise, Range-I, Surat-I Commissionerate had also sought clarification from the petitioners vide his letter dated 24-10-2007 regarding levy of export duty on iron ore pellets. The petitioners' Hazira Unit had, vide its letter dated 25-10-2007 clarified the matter by pointing out that no export duty was leviable on supplies of pellets to the SEZ Unit, particularly in view of Rule 21 of the SEZ Rules, 2006, it was also clarified that the provisions of section 12 of the Customs Act, 1962 were i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets by it to the SEZ unit under various Bills of Export should not be treated as goods exported and as to why export duty at the rate of Rs.300 per ton should not be demanded under section 28(1) of the Customs Act, 1962. In a parallel development, export duty was imposed on specified iron and steel items with effect from 10-5-2008 and the effective rates of export duty on various items were prescribed through Notification No. 66/2008-Cus., dated 10-5-2008. Representations were made regarding the applicability of the said Notification with regard to levy of export duty on certain steel products supplied from DTA to SEZ. Pursuant to the representations, a Circular was issued on 14-5-2008 by the respondent No.3 stating that the matter was under active consideration of the respondent No. 2 and till such time a clarification was received all such DTA supplies would be chargeable to export duty. By Office Order dated 17-5-2008, the said Circular dated 14-5-2008 was amended and it was ordered that the subject goods would be provisionally assessed on furnishing a suitable PD bond with surety/security and the goods would be allowed to be admitted in the SEZ until further orders. The respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led order dated 25-7-2008 admitted the petitions and granted ad interim relief in terms of paragraph 28C(ii) whereby the operation and implementation of letters dated 30-6-2008 of the respondent No. 2, letter dated 8-7-2008 of the respondent No.3 and letter dated 9-7-2008 were suspended and arrangement regarding supply of goods to the SEZ unit as contained in the letter dated 1-2-2008 was ordered to be continued. This ad interim relief was continued with certain modifications. Even in Special Civil Application Nos. 10444 of 2008, 10445 of 2008 and 10446 of 2008, the Court has passed separate order on 14-8-2008 and granted ad interim relief despite the fact that it was urged on behalf of the revenue that there are certain distinguishing features in all these three petitions. The Excise Department has challenged the said order before the Apex Court. Even the earlier order dated 25-7-2008 passed by this Court was challenged before the Apex Court and the Apex Court vide its order dated 9-4-2009 dismissed the Special Leave Petition by observing that the said SLP is against an interim order and hence, there is no reason to interfere. However, this Court was requested by the Apex Court to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the intentions of the Legislature and by considering what was the substance of the matter. In CWT v. Ellis Bridge Gymkhana [1998] 1 SCC 384, it is held that the rule of construction of a charging section is that before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section. No one can be taxed by implication. A charging section has to be construed strictly. If a person has not been brought within the ambit of the charging section by clear words, he cannot be taxed at all. In CIT v. Venkateswara Hatcheries (P.) Ltd. [1999] 3 SCC 632, it is held that neither the word 'produce' nor the word 'article' has been defined in the Act, Therefore, it may be permissible to refer to a dictionary. But where the dictionary gives divergent or more than one meaning of a word it would not be safe to construe the said word according to the suggested dictionary meaning. In such a situation, the word has to be construed in the context of the provisions of the Act having regard to the legislative history of the provisions of the Act and the scheme of the Act. It is a settled principle of interpretation that the meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xport of goods or movement of goods from Domestic Tariff Area to SEZ and the SEZ Rules clarify that all supplies to a SEZ unit will be 'without payment of duty, taxes or cess'. 16. It is further contended that the definition of the term 'Export' in the SEZ Act, being an artificial definition for certain purposes as contemplated under the said Act, it should be restricted to the said Act for the contemplated purposes and cannot be extended or applied for any other purpose. The definition contained in one Act cannot be adopted for the purposes of another Act more particularly when the other Act contains a definition of the term for the purposes of that Act. The duties of customs which have a definite connotation in the economy, legislation and the Constitution, cannot be levied by an artificial extension of the term 'Export' since the same would offend the Constitution. It is, therefore, contended that export duty is not levied under the provisions of the SEZ Act and, therefore, cannot be justified by any provision there under. The purported decisions of the respondent Nos. 1 and 2 regarding liability of export duty in case of supplies by a Domestic Tariff unit to a SEZ unit are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Estate Receiver [1996] 6 SCC 185, it is held that in interpreting a provision creating a legal fiction the Court is to ascertain for what purpose the fiction is created, and after ascertaining this, the Court is to assume all those facts and consequences which are incidental or inevitable corollaries to the giving effect to the fiction. But in so construing the fiction it is not to be extended beyond the purpose for which it is created, or beyond the language of the section by which it is created. It cannot also be extended by importing another fiction. However, beneficial may be the scope and ambit of the legal fiction created by the Legislature while enacting section 4A such fiction can arise only when the express language of the section laying down the conditions precedent for raising of such a fiction is complied with by the mortgagee-in-possession concerned seeking the benefit of such a deeming fiction. Such a fiction cannot be extended by the Court on analogy or by addition or deleting words not contemplated by the Legislature. In State of W. B. v. Sadan K. Bormal SCC 59, itis held that Legislature may sometimes create a chain of fictions by the same Act or by succe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose for which the exercise is undertaken. The concept of depreciation (amortisation) differs from enactment to enactment. Therefore, when excise law seeks to tax the value, the concept therein cannot be bodily lifted and incorporated in section 3 of the U.P. Trade Tax Act, 1948, which essentially deals with ascertainment of the price structure depending upon the negotiations between the parties. In Rajindra Dyeing Printing Mills v. Union of India 1993(67) ELT 217 (Guj.), this Court held that the term 'exported' appearing in Rule 2(a) of the Rules will have to be held that when the export goods go out of control of the person exporting them and they cease to be available for consumption within the country, they can be said to have been exported. Therefore, though the term 'India' is defined by the Act as including 'territorial waters of India' in the context of the drawback Rules, the term 'India' will have to be interpreted to mean landmass of India only. In Union of India v. Rajindra Dyeing Printing Mills Ltd. [2004] 10 SCC 187 it is held that when there is movement of the goods outside the territorial waters of India, it is then that an export m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act to land customs with certain modifications. There was no separate law relating to air customs, and the administration of air customs was governed by certain rules made under the Indian Aircrafts Act, 1911. Therefore, while revising the provisions of the Sea Customs Act, at the time of enactment of the Customs Act, 1962, it was proposed to consolidate the provisions relating to sea customs, land customs and air customs into one comprehensive measure. With that statement of objects and reasons in mind, the Parliament enacted the Customs Act, 1962 being an act to consolidate and amend the law relating to customs. 20. Mr. Champaneri has further submitted that under section 2(15), the term 'duty' is defined to mean a duty of customs leviable under the said Act. The term 'export' is defined under section 2(18) to mean with its grammatical variations and cognate expression, taking out of India to a place outside india. The term 'export goods' is defined under section 2(19) to mean any goods which are to be taken out of India to a place outside India and the term 'exporter' is defined under section 2(20) to mean in relation to any goods at any time between their entry for export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for provisional assessment of duty. 21. Mr. Champaneri has further submitted that Chapter X-A incorporating special provisions relating to Special Economic Zone were enacted by Act 20 of 2002 effective from 11-5-2002 and have been omitted vide section 99 of the Finance Act, 2007 with effect from 11-5-2007. Section 76B as was operative during the above mentioned periods, provided that the provisions of the said Chapter and other Chapters shall apply to goods admitted to a Special Economic Zone but in the event of conflict between the provisions of this Chapter and other Chapters, the provisions of this Chapter shall prevail, Section 76E provided for exemption from duties of customs and section 76F provided for levy of customs. The Special Economic Zone had been one of the latest measures adopted by the Government of India to promote exports from India. It was in March, 2000 that the then Union Commerce and Industry Minister took a visit to China to get first hand information about the functioning of Special Economic Zones. This led to the announcement of SEZs in India through the annual Export-import Policy of March, 2000. It took the Government almost 6 years to put/place an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o mean taking goods or providing services, out of India, from a Special Economic Zone, by land, sea or air or by any other mode, whether physical or otherwise, or supplying goods, or providing services, from the Domestic Tariff Area to a unit or a developer or supplying goods, or providing services, from one unit to another unit or developer, in the same or different Special Economic Zone. The term 'import' is defined under section 2(o) to mean bringing goods or receiving services, in a Special Economic Zone, by a Unit or Developer from a place outside India by land, sea or air or by any other mode, whether physical or otherwise, or receiving goods, or services by a Unit or Developer from another Unit or Developer of the same Special Economic Zone or a different Special Economic Zone. The term 'manufacture' is defined under section 2(r). The term 'Special Economic Zone' is defined under section 2(za) to mean each Special Economic Zone notified under the proviso to sub-section (4) of section 4 and sub-section (1) of section 4 (including Free Trade and Warehousing Zone) and includes an existing Special Economic Zone. The term 'unit' is defined under section 2(zc) to mean a unit set u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Area. In view of the provisions contained in section 7 read with the First Schedule and conscious non-inclusion of the Central Excise Act, 1944 and the Customs Act, 1962 in the First Schedule make the intention of the Parliament clear not to exempt taxes, duties and cess leviable under the Central Excise Act, 1944 and the Customs Act 1962. 25. Mr. Champaneri has further submitted that section 26 of the Act of 2005 also assumes importance. Section 26(1) provides that every developer and the entrepreneur shall be entitled to the exemptions, drawbacks and concessions contained therein. Exemption from any duty on customs under the Customs Act, 1962 or the Customs Tariff Act, 1975 or any other liability for the time being in force, is available on goods imported into or services provided in a Special Economic Zone or an Unit to carry on the authorized operations by the developer or entrepreneur. Similarly, exemption from any duty of customs under the Customs Act, 1962 or the Customs Tariff Act, 1975 or any other law for the time being in force on goods exported from or services provided from a Special Economic Zone or from a unit, to any place outside India is available. Similarly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, airport, inland container depot, land station and land customs stations, as the case may be, under section 7 of the Customs Act, 1962. 28. Mr. Champaneri has further submitted that in exercise of powers conferred under section 55 of the Act of 2005, the Central Government had made the Special Economic Zones Rules, 2006 as originally enacted on 10-2-2006 and amended on 10-8-2006. The Rules cannot go beyond the legislative enactment nor the Rules can provide for anything which is inconsistent with what is manifest in the statutory provisions. Rule 27 makes provisions for import and procurement. Rule 27(1) provides that the unit or developer may import or procure from the Domestic Tariff Area without payment of duty, taxes or cess or procure from Domestic Tariff Area after availing export entitlements or procure from other units in the same or other Special Economic Zone or from Export Oriented Unit or Software Technology Park Unit or Bio-technology Park unit, all types of goods, including capital goods (new or second-hand), raw materials, semi-finished goods (including semi finished jewellery), component, consumables spares goods and materials for making capital goods required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as, therefore, submitted that the writ petitions filed by the Units in the Domestic Tariff Area challenging the applicability of export duty on the Domestic Tariff Area supplies made by a Unit in the Domestic Tariff Area to units in the Special Economic Zone cannot be entertained by this Court. 30. Mr. Champaneri has further submitted that having regard to section 2(m)(ii) of the Act of 2005 defining 'export' to, inter alia, mean supplying goods or providing services, from the Domestic Tariff Area to a unit or developer, export duty is applicable particularly when section 51 of the Act stipulated that the provisions of the Act shall have the effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than the said Act. Furthermore, having regard to section 53 of the Act of 2005, providing that a Special Economic Zone shall be deemed to be a territory outside the customs territory of India, in view of the deeming provisions, for the authorized operations the Special Economic Zones are territories outside India and, therefore, for the purposes of application of the Cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 18 and 19 of the Central Excise Rules, 2002. He has, therefore, submitted that supplies from DTA to SEZ are eligible for various export benefits such as drawback, DEPB or towards fulfilment of advance license obligations, etc. If these supplies from a place in India to another place in India are not treated as export, such benefits would not be admissible. He has, therefore, submitted that the combined reading of all these provisions leads to a conclusion that supplies made by a DTA unit to units/developers in SEZ are to be treated as exports and they do not enjoy any exemption from export duty. 32. Mr. Champaneri has further submitted that the exemption available under section 26(2) cannot be claimed to be an exemption from levy and payment of export duty by a DTA unit. The basic objective of levying export duty is to discourage export of steel items and augment domestic availability. The export of any item from the SEZ to a place outside India is statutorily exempt from export duty under section 26(1)(b) of the Act of 2005. However, this exemption will be available only to SEZ unit and not to DTA unit. Furthermore, if export duty is not applied to supplies of steel made fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort goods as goods which are to be taken out of India to a place outside India; Section 2(27) defines India as including the territorial waters of India. Therefore, the taxable event contemplated under the Customs Act, 1962 for the purpose of levy of Export Duty is taking the goods out of the territorial waters of India to a place outside India, in which case the goods would be dutiable goods as contemplated under section 12 of the said Act and attract levy of export duty, to be paid at the time of exportation of such goods. Export under the Customs Act, 1962, therefore, can be said to have taken place only upon movement of the goods outside the territorial waters of India. Reference is made to the decision of the Apex Court in the case of Rajindra Dyeing Printing Mills Ltd. (supra). 35.3 In the absence of any amendment of the definitions of the terms 'Export' and 'India' in the Customs Act, 1962, or any amendment in the charging section, i.e., section 12 or insertion of a charging provision contemplating movement of goods from the Domestic Tariff Area to the Special Economic Zone as a taxable event entailing a levy of Export Duty as in the case of export, the levy of Export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of E. V. Fernandez (supra). 36.3 The contention that levy of Export Duty is impliedly contemplated under the SEZ Act, principally on account of the fact that unlike other levies, the levy of Export Duty has not been specifically exempted under the provisions of the said Act, is wholly misconceived. In the first place, as stated above, there cannot be a levy of tax by implication. Secondly, the necessity for exemption would arise if the subject is liable to tax in the first place. In any case an overall view of the provisions of the SEZ Act and the Rules would establish that levy of Export Duty on the movement of goods from the Domestic Tariff Area to the Special Economic Zone is not at all provided for or contemplated thereunder, which will be evident from the following facts. 36.4 The Statement of Objects and Reasons of the SEZ Act, 2005 indicates that the policy for setting up of Special Economic Zones had been adopted by the Government of India with a view to provide an internationally competitive environment for export. The objectives of the Special Economic Zones include making available (to the Unit) goods and services free of taxes and duties for export produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2006 provides that supplies from the Domestic Tariff Area to the Special Economic Zone would be eligible for export benefits as admissible under the Foreign Trade Policy. This would include Duty Entitlement Pass Book Scheme and other benefits/concessions under the Policy. The procedure for claiming drawback and DEPB benefits is provided in Rule 24 and Rule 30. 36.9 Rule 27 permits an Unit or Developer to import or procure from the Domestic Tariff Area all types of goods, without payment of duty or procure from the Domestic Tariff Area such goods after availing export entitlements. This means that the export entitlements available on account of the export of goods from the Domestic Tariff Area to the Special Economic Zone are available either to the Domestic Tariff Area supplier or the Special Economic Zone Unit/Developer at their option. Therefore, duty drawback or DEPB and/ or other export benefits would be available to either party at their option. The sweeping exemption granted under this provision renders the contention of the Department regarding liability of the goods to levy of Export Duty, academic since this provision exempts the goods brought in by the Special Econo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs Act, 1962, for the purposes of that Act, there is no question of adopting or applying the meaning of the said term under another enactment for any purpose of levying duty under the Customs Act, 1962. In other words, a definition given under an Act cannot be displaced by a definition of the same term given in another enactment, more so, when the provisions of the first Act are being invoked. Even in the absence of a definition of the term in the subject statute, a definition contained in another statute cannot be adopted since a word may mean different things depending on the setting and context. Reference is invited to the decisions of the Apex Court in the case of Ellis Bridge Gymkhana (supra), Venkateswara Hatcheries (P.) Ltd.'s case (supra) and Qazi Noorul H.H.H. Petrol Pump's case (supra). In fact, the interpretation canvassed by the department is not merely the adoption of a definition of another statute, but the incorporation of a taxable event itself, which is impermissible under the law. 37.2 The movement of goods from the Domestic Tariff Area to the Special Economic Zone has been treated as export by a legal fiction created under the SEZ Act, 2005. A legal fict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 53 provides that the Zone would be deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorized operations. The term customs territory cannot be equated to the territory of India and in fact, such term has been defined in the General Agreement of Tariffs Trade to which India is a signatory to mean an area subject to common tariff and regulations of commerce and that there could be more than one customs territory in a country. Moreover such an interpretation would lead to a situation where a Special Economic Zone would not be subject to any laws whatsoever. The entire SEZ Act, 2005 would be rendered redundant since it is stated to extend the whole of India. In any case, various provisions of the SEZ Act would be rendered redundant and unworkable if the Special Economic Zone was to be considered an area outside India. This is apart from the fact that such a declaration would be constitutionally impermissible. 38. In view of the above discussion and findings arrived at as well as conclusion drawn, the levy of export duty on goods supplied from the Domestic Tariff Area to the Special Economic Zone is not justified. The petition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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