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TMI Blog2010 (7) TMI 768X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner (Customs), Visakhapatnam SEZ that, pending decision on the issue by the Ministry of Commerce/Central Board of Excise and Customs, the export consignments of SEZ units should be cleared after obtaining a bank guarantee from them covering the value of export duty on export of chrome ore; and a similar procedure should be adopted with regards export of chrome ore by other units in the Visakhapatnam SEZ. The Assistant Commissioner of Customs, Visakhapatnam SEZ, vide letter dated 8-5-2008, informed the petitioner that, henceforth, neither was export duty payable by units of the Visakhapatam SEZ procuring chrome ore & concentrates from DTA suppliers, nor were they required to furnish a bank guarantee in respect of such procurement. The petitioner was informed that the existing stock of chrome ore & concentrates available with SEZ units, which were procured from DTA suppliers without payment of duty, could be exported by them on furnishing bank guarantee equivalent to export duty; DTA suppliers would, however, be required to pay export duty, as per the export tariff, at Rs. 3,000/- per metric tonne with immediate effect on the chrome ore & concentrates exported to units of the Vis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty on chrome ore, was without jurisdiction. Learned Senior Counsel would rely on the judgment of the Division Bench of the Gujarat High Court, in Essar Steel Limited v. Union of India - 2010 (249) E.L.T. 3 (Guj.), in this regard. 6. Sri R. Raghunandan and Sri C.V.R. Rudraprasad, Learned Counsel for the petitioners, while adopting the submissions of the Learned Senior Counsel, would submit that, as the SEZ Act does not authorize levy and collection of customs duty, no such duty could be levied or collected from SEZ Units; in the absence of a specific provision, enabling such duty to be levied and collected, customs duty could not be levied by implication; and, as customs duty can be levied only for imports and exports to a place outside India, the SEZ Units, all of which are located within the territorial limits of India, are not liable to pay customs duty for goods procured from a DTA unit. 7. Sri Raghavan Ramabhadran, Learned Counsel appearing on behalf of M/s. Lakshmi Kumaran and Sridharan, would submit that the SEZ Act merely provides for certain exemptions to SEZ Units; the said Act does not authorize levy and collection of customs duty, from a DTA supplier, for goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p;Article 265 of the Constitution of India prohibits levy or collection of tax except by authority of law. Not only the levy but also the collection of tax must be sanctioned by law. [Chhotabhai Jethabhai Patel & Co. v. Union of India - AIR 1952 Nagpur 139]. 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 therein. 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. [Commissioner of Wealth Tax, Gujarat III Ahmedabad v. Ellis Bridge Gymkhana - 1997 (9) Supreme 24]. Taxes cannot be imposed in vacuum. There should be some machinery for ascertaining the rate of taxation, and the persons or the class of persons liable to pay the same. [Gopal Narain v. State of U.P, (1964) 4 SCR 869; State of Mysore v. D. Cawasji and Co., (1970) 3 SCC 710; M.P.V. Sundararamier and Co. v. State of Andhra Pradesh, AIR 1958 SC 468]. 11. A taxing statute must be couched in express and unambiguous language. [Banarsi Debi v. ITO - (196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at is clearly expressed. It cannot imply anything which is not expressed; it cannot import provisions in the Statute so as to supply any assumed deficiency. The object of this rule is to prevent a taxing statute being construed "according to its intent, though not according to its words". It has even been said that "if the provision is so wanting in clarity that no meaning is reasonably clear, the courts will be unable to regard it as of any effect". [Gursahai Saigal - (1963) 48 ITR (S.C.) 1, Cape Branday Syndicate v. Inland Revenue Commissioners, (1921) KB 64; In re : Bethlehem Hospital - (1875) 19 Eq 457; A.V. Fernandez - 1957 SCR 837; Re : Bladnoch Distillery Co. Ltd. - (1948) 1 All ER 616; CST v. Modi Sugar Mills Ltd., (1961) 2 SCR 189; CIT v. V.M.R.P. Firm, Muar - AIR 1965 SC 1216; Controller of Estate Duty v. Kantilal Trikamlal - AIR 1976 SC 1935; Aphali Pharmaceuticals Ltd. v. State of Maharashtra - (1989) 4 SCC 378 = 1989 (44) E.L.T. 613 (S.C.); Baidyanath Ayurved Bhawan Pvt. Ltd. v. The Excise Commissioner, U.P. - AIR 1971 SC 378 = 1999 (110) E.L.T. 363 (S.C.)]. The question as to what is covered must be found out from the language according to its natural meaning fairly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elating to customs. Chapter V of the Customs Act relates to levy of, and exemption from, customs duty. Under Section 12(1), except as otherwise provided in the Act or any other law for the time being in force, duties of customs shall be levied, at such rates as may be specified under the Customs Tariff Act, 1975 or any other law for the time being in force, on goods imported into, or exported from, India. Section 2(18) of the Customs Act defines "export", with its grammatical variations and cognate expressions, to mean taking out of India to a place outside India. Section 2(23) defines "import", with its grammatical variations and cognate expressions, to mean bringing into India from a place outside India. Section 2(27) defines "India" to include the territorial waters of India. Export Duty is a duty of customs leviable under the Customs Act, 1962 on goods exported from India, under Section 12 of the said Act and Section 2 read with the Second Schedule of the Customs Tariff Act, 1975. Payment of such a duty is a condition precedent to sending goods out of the country to other lands. Export Duty is an impost with reference to the movement of property by way of export, particularly w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) exemption from any duty of excise, under the Central Excise Act, 1944 (1 of 1944) or the Central Excise Tariff Act, 1985 (5 of 1986) or any other law for the time being in force, on goods brought from a Domestic Tariff Area to a Special Economic Zone or Unit, to carry on the authorised operations by the Developer or entrepreneur; (d) drawback or such other benefits as may be admissible from time to time on goods brought or services provided from the Domestic Tariff Area into a Special Economic Zone or Unit or services provided in a Special Economic Zone or Unit by the service providers located outside India to carry on the authorised operations by the Developer or entrepreneur; (e) exemption from service tax under Chapter V of the Finance Act, 1994 (32 of 1994) on taxable services provided to a Developer or Unit to carry on the authorised operations in a Special Economic Zone; (f) exemption from the securities transaction tax leviable under Sec. 98 of the Finance (No. 2) Act, 2004 (23 of 2004) in case the taxable securities transactions are entered into by a non-resident thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c Zone. The word 'export', as defined in Section 2(m)(ii) of the SEZ Act, cannot be interpolated into Section 12(1) of the Customs Act. The Customs Act is a taxing statute and if the said Act does not, by the plain language used therein, carry out the object the Court will not be justified in supplying deficiencies in the Act. [Janapada Sabha Chhindwara v. Central Provinces Syndicate Ltd., (1970) 1 SCC 509]. 21. The language of Section 12(1) of the Customs Act is plain and does not suffer from any ambiguity. It does not provide for the levy of customs duty on goods supplied by a DTA unit to a Unit located within a Special Economic Zone as both of them are located within the territorial waters of India. If the language is plain and unambiguous Courts will not be justified in putting a different meaning on the words merely because a sister legislation has in its wisdom thought it fit to enlarge the scope of those words. [Rullia Ram Hakim Rai v. S. Fateh Singh S. Sham Shder Singh - AIR 1962 Punjab 256]. For defining the terms in one Act, the definitions given of that particular term in some other enactment cannot be used. It is not a sound rule of interpretation to seek the mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1962, inserted by Finance Act 2002 (Act 20 of 2002), contained special provisions relating to Special Economic Zones. Section 76-E thereunder related to exemption from duties of customs and, without prejudice to the provisions of Section 76-F, 76-G and 76-H, goods admitted to a Special Economic Zone were exempt from duties of customs. Sections 76-F, 76-G and 76-H, as they then stood, read thus : 76F Levy of duties of customs. Subject to the conditions as may be specified in the rules made in this behalf, (a) any goods admitted to a special economic zone from the domestic tariff area shall be chargeable to export duties at such rates as are leviable on such goods when exported; (b) any goods removed from a special economic zone for home consumption shall be chargeable to duties of customs including anti-dumping, countervailing and safeguard duties under the Customs Tariff Act, 1975 (51 of 1975), where applicable, as leviable on such goods when imported; and (c) the rate of duty and tariff valuation, if any, applicable to goods admitted to, or removed from, a special economic zone shall be the rate and tariff valuation in force as on the date of such admission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es a legal fiction but the legal fiction is limited in its scope. 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. [Mancheri Puthusseri Ahmed v. Kuthiravattam Estate Receiver - (1996) 6 SCC 185; CIT v. Shakuntala - AIR 1966 SC 719; CIT v. Moon Mills Ltd. - AIR 1966 SC 870; State of West Bengal v. Sadan K. Bormal - 2004 (5) Supreme 29]. The scope of a fiscal provision cannot be enlarged by creating a fiction. [Wilayatullah v. C.S. Sub-Committee - AIR 1950 Nagpur 223]. A legal fiction must be limited to the purposes for which it has been created and cannot be extended beyond its legitimate field. [The Modi Sugar Mills Ltd. - (1961) 2 SCR 189]. It is only for the limited purpose of undertaking authorized operations, i.e., operations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Act. As noted hereinabove, the charging section, for levy of customs duty, is Section 12(1) of the Customs Act, 1962. The SEZ Act does not provide for levy of customs duty on goods brought into the Special Elconomic Zone for authorised operations from a DTA. In the absence of 'any inconsistency between the Customs Act, 1962 and the SEZ Act, 2005, with regards levy of customs duty, the non-obstante clause in Section 51(1) of the SEZ Act has no application. 29. The contention that the SEZ Rules and the Drawback Rules enable levy of export duty on goods brought in from a DTA to a Special Economic Zone must only be noted to be rejected. Even if the Rules are presumed to permit imposition of customs duty it would be ultra vires the SEZ Act, as a tax/duty can only be imposed under the Constitution by some enactment. [L. Maheshwari Prasad v. State of U.P. - AIR 1957 ALLAHABAD 282]. The liability to pay customs duty is statutory. If the statute does not effectuate the levy, no liability can arise for payment of such duty. [State of Mysore v. D. Cawasji and Co., (1970) 3 SCC 710]. A particular transaction is either exigible to tax under the taxing statute or it is not. If it is not, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure from a domestic tariff area all types of goods without payment of duty, taxes of cess for creating a central facility for use by units in a Special Economic Zone. Rule 28 prescribes the procedure for import. Under sub-rule (4) thereof the unit or developer may also procure goods required for the authorized operations without payment of duty from bonded warehouses set up under the Foreign Trade Policy, and under the Customs Act, in the Domestic Tariff Area. Rule 30 prescribes the procedure for procurement from the domestic tariff area and, under sub-rule (1) thereof, the domestic tariff area supplier supplying goods to a unit or developer shall clear the goods, as in the case of exports, either under bond or as duty paid goods under claim of rebate on the cover of ARE-1. Under sub-rule (3), goods procured by a unit or developer under claim of export entitlement shall be allowed admission into the Special Economic Zone on the basis of ARE-1 and Bill of Export filed by the supplier. Rule 30(5) provides that, where a bill of export has been filed under a claim of draw-back or Duty Entitlement Pass Book, the Unit or developer shall claim the same from the specified officer and juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for payment of customs duty; and customs duty would be chargeable only on such of the goods which are admitted into a Special Economic Zone and are utilized for purposes other than the authorized operations as if such goods had been cleared for home consumption. As long as the goods supplied by a DTA unit is for the SEZ unit to carry on its authorized operations, neither the SEZ Act nor the Rules made thereunder provide for levy of customs duty on such supplies. 36. Chapter X of the Customs Act relates to drawback. Section 75 relates to drawback on imported material used in the manufacture of goods which are exported. The Drawback Rules enable drawback to be allowed on export of goods at such amount, or at such rates, as may be determined by the Central Government. The Drawback, under Rule 3 of the Drawback Rules, is subject to the provisions of the Customs Act and the Rules made thereunder. These Rules also specify certain goods which are not entitled for drawback. The Drawback Rules do not relate to levy and collection of customs duty, and it is only for the limited purpose of claiming drawback would taking out of goods from a place in a Domestic Tariff Area to a Special ..... X X X X Extracts X X X X X X X X Extracts X X X X
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