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TMI Blog2013 (8) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... e units in Domestic Tariff Areas, to the Special Economic Zones, would be permitted only after the payment of the prescribed amount of duty. 3. It has been further stated that export duty was being levied, in respect of several iron and steel items, in accordance with the provisions of the Finance Act, 2008. However, vide Notification No. 66/2008-Customs, dated 10-5-2008, the effective rate of duty, leviable on goods exported out of India, had been reduced, in respect of several items, which had been taxed under the Finance Act, 2008. Even though the said Notification No. 66/2008-Customs, dated 10-5-2008, sought to levy duties of customs, being export duties, only on goods exported out of India, in view of the provisions of the Customs Act, 1962, especially. Section 12 of the said Act, such duties were being levied and collected even in respect of the supplies made to Special Economic Zones situated within India. However, according to the clarifications issued, by way of certain circulars, the suppliers of steel items had been allowed to clear the goods supplied to Special Economic Zones without payment of duty of customs, on condition that such suppliers should execute the necess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, are sought to be levied and collected even on supplies made to Special Economic Zones situated within India. 5. It had been further stated that the contractors, who are having manufacturing or processing units, within the Special Economic Zones, are refusing to reimburse the duties of customs, paid by the suppliers of steel items, having units in the Domestic Tariff Areas. As such, the suppliers of the goods are incurring heavy financial losses. The levying of duties of customs on the goods supplied from the Domestic Tariff Areas, to Special Economic Zones, is contrary to the basic objectives for which the Special Economic Zones have been established. When the Special Economic Zones have been established for export promotion, with a view to earn foreign exchange, by exempting the levy of taxes, duties and cess, it would not be appropriate for the authorities concerned to levy duties of customs on the goods supplied to the Special Economic Zones, from the Domestic Tariff Areas. 6. It has been further stated that the petitioners had transported steel items from the various places located outside the Special Economic Zones, for the purpose of fabrications and constructions and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a' as the whole of India (including the territorial waters and continental shelf) but does not include the areas of the Special Economic Zones. 'Export' has been defined under Section 2(m). Section 2(o) defines the term 'Import'. It states that the term 'Import' means (i) 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 (ii) receiving goods, or services by, Unit or Developer from another Unit or Developer of the same Special Economic Zone or a different Special Economic Zone. Section 2(za) states that a Special Economic Zone means each Special Economic Zone notified under the proviso to sub-section (4) of Section 3 and sub-section (1) of Section 4 (including Free Trade and Warehousing Zone) and includes an existing Special Economic Zone; Section 7 of the Act deals with the exemption from the taxes duties and cess. 10. Likewise, Section 26 of the Act deals with exemptions, draw backs and concessions granted in favour of every Developer and Entrepreneur. Section 51 of the Act stipulates that the provisions of the Special Economic Zones Act, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Economic Zones, from the Domestic Tariff Areas, were to be treated as Deemed Exports. 14. It had also been stated that the areas in the Special Economic Zones had been treated as Customs Stations and all the functions relating to the enforcement of the Customs Act, 1962, were to be controlled by the Commissioner of Customs, with the assistance of the other officers concerned. The goods which were entering the Special Economic Zones, from the Domestic Tariff Areas, were to be covered under Bills of Export. The Bills shall be registered in the Special Economic Zones Customs Formation and they would be assigned serial numbers. Thereafter, the goods shall be examined by the customs officers, posted in the Special Economic Zones, as in the case of normal export consignments. The goods shall be eligible for drawback at the all industry rates and brand rates, as the case may be. The draw back shall be disbursed to the Special Economic Zone units, receiving supplies from the Domestic Tariff Areas, on the basis of the disclaimer certificates issued by the Domestic Tariff Area units in favour of the Special Economic Zone units. Thereafter, a Circular, bearing Circular No. 29/2006-Cus., dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contemplated in Section 26(1), is subject to Section 26(2) of the Act, and it would be governed by the procedures contemplated under Rule 30 of the said Rules. Therefore, the authorities concerned are right in holding that supplies to Special Economic Zones, from Domestic Tariff Areas, would amount to exports and therefore, it would attract export duty, in respect of the supplies made from Domestic Tariff Areas. 15. The main contention of the learned counsels appearing on behalf of the petitioners is that the goods transported by the petitioners, from the Domestic Tariff Areas, for various purposes, into the Special Economic Zones, cannot be said to be export of goods, for the levying of export duty. The word 'export' has been given a wider meaning, under Section 2(m) of the Special Economic Zones Act, 2005, only for the purpose of granting certain privileges in favour of the exporters of goods from the Special Economic Zones, with a view to encourage export of goods to places outside India. 18. The exporters, who export goods from Special Economic Zones, are granted certain concessions and privileges to enable the exporters to make the goods competitive in the world market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quivalent to Section 76F of the Customs Act, 1962, had specifically omitted the levy of duty of customs on goods received in the Special Economic Zones, from a manufacturer in India located outside the Special Economic Zones. Further, Section 7, read with Section 26 of the Economic Zones Act, 2005, makes it clear that the parliament of India did not contemplate the levying of any tax, duty or cess on the goods admitted or received within the Special Economic Zones. From a reading of Section 1 of the Special Economic Zones Act, 2005, it is clear that it applies to the whole of India, which would mean that the Special Economic Zones are not areas, which are situated outside India. As such, the levying of customs duties on goods admitted into Special Economic Zones, from a manufacturer situated outside such Zones, cannot be held to be valid in the eye of law. 22. It has been further stated that the purpose of granting of concessions and privileges, in respect of goods exported from the Special Economic Zones, would be nullified by imposing customs duty on the goods, which had been transported from the Domestic Tariff Areas into the Special Economic Zones. 23. It has been further sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rances, any such revenue obtained from a tax on inter-state sales cannot form a part of the Consolidated Fund of India, under Article 269(1)(g), read with Article 269(2), and it would have to be assigned to the States concerned. However, where such levy is imposed as customs/export duty, as in the present case, the same would form part of the Consolidated Fund of India, under Article 266 of the Constitution of India, with no requirement of assignment to the states. Therefore, a levy of customs/export duties, in cases where only a tax on inter-state sale is leviable, would therefore, be a colourable exercise of power. 26. It had been further stated that in cases where the clearances are occasioned from a Domestic Tariff Area Unit in one State, to a Special Economic Zone Unit in another State, otherwise than on account of a sale, then a levy on such clearances would be in the nature of tax on inter-consignment of goods, under Articles 245, 246, 269 (3), read with Entry 92B, List-I, Schedule-VII. While parliament may have the power to levy a tax on such clearances such revenue from tax on inter-state consignments cannot form a part of the Consolidated Fund of India, under Article 269 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also noted that there is no provision in the Special Economic Zones Act, 2005, to levy duties of customs. Though such a provision was available, under Section 76F of the Customs Act, 1962, it had been omitted in the Special Economic Zones Act, 2005. Section 30 of the present Special Economic Zones Act, 2005, which is equivalent to the erstwhile Section 76F of the Customs Act, 1962, specifically omits the levy of duties of customs, being export duties, on goods received in the Special Economic zones, from any manufacturer situated in India, outside the Special Economic Zone. It is also noted that Section 7, read with Section 26 of the Special Economic Zones Act, 2005, makes it clear that there was no intention on the part of the legislature to levy any tax, duty or cess on goods admitted or received within the Special Economic Zones. As such, it is clear that the levy of customs duties cannot be in respect of goods removed to the Special Economic Zones, by a manufacturer in India, situated outside the Special Economic Zones. The export duty cannot be made applicable to the goods supplied by the units in the Domestic Tariff Areas to the Special Economic Zones, by way of a Circular B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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