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TMI Blog2011 (11) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule I, item 59 thereof. This issue would arise in the background facts as noticed hereinbelow. The first petitioner is a company registered in Gurgoan in the State of Haryana having marking offices at Chennai and Bengaluru. They are engaged in the manufacture of pumps for various segments such as power, water supply, generation, etc. The second petitioner also is a company engaged in the business of manufacture and export of aluminium. They set up a co-generating power plant at SEZ, Visakhapatnam. The second petitioner placed a purchase order on July 21, 2010 on the first petitioner for design, manufacture, supply and erection of pumping equipment on turnkey basis valued at ₹ 5,42,50,000 at their facility in the SEZ. So as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fected sale to the second petitioner, which is a dealer in a SEZ and therefore, the goods stand exempted from payment of value added tax (VAT) under section 7 read with Schedule I, item 59 of the VAT Act. It is their further contention that when six number of embedded parts dispatched for use in the project of the second petitioner are exempted from VAT, the detention of goods is illegal and is not permissible under section 45(3) of the VAT Act. At the stage of preliminary hearing itself, the DCTO has filed his counter-affidavit. He would submit that on verification from the records it is noticed that the goods were sold by TEIL to the first petitioner; there are discrepancies in the value of the goods in the invoice and way-bill; regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the VAT Act. The first petitioner is not registered and therefore, the benefit under section 7 or 7A of the VAT Act cannot be extended. The exemption granted by the Development Commissioner under section 26 of the SEZ Act in favour of the first petitioner was in relation to the transactions of the first petitioner at their Chennai office and therefore, the same cannot be pressed into service for availing of exemption under the VAT Act. The detention of goods under section 45 of the VAT Act is justified as the sales invoice itself would show that TEIL consigned the goods to the first petitioner which is not a SEZ unit. Point for consideration As defined in section 2(10) of the VAT Act, a dealer means any person who carries on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material or packing accessories in an unit located in any special economic zone or for development, operation and maintenance of special economic zone by the developer of the special economic zone, if such registered dealer has been authorized to establish such unit or to develop, operate and maintain such special economic zone by the authority specified by the Central Government in this behalf. 59. Sale of goods to any unit located in SEZ. 59A. All goods sold to units, operator, developer, co-developer and contractors engaged by them for use in processing area of the respective special economic zone except the goods listed in rule 20(2)(a) of the Andhra Pradesh Value Added Tax Rules, 2005. A brief analysis of the above provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors and the SEZ unit which are eligible for exemption from payment of various duties and taxes, including VAT. Above all, section 51 of the SEZ Act gives overriding effect to the SEZ Act over all other laws in India. Therefore, if section 7A of the VAT Act is construed as exempting the sales effected by a registered dealer alone to another registered dealer in SEZ, it would render the very provision ineffective. We therefore cannot subscribe to such a construction. We however hasten to add that section 7A of the VAT Act read with entry 59A of Schedule I of the VAT Act restricts exemption in respect of goods sold to units, operator, developer, co-developer and contractors engaged by them for use in processing area of the respective SEZ excep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice contains the TIN number which was assigned to the second petitioner and this itself would belie any submission that the goods were dispatched by the TEIL in favour of the first petitioner. We may also refer to the two documents which also do no support the Special Counsel. The first one, the certificate issued by the Development Commissioner on February 22, 2011 to M/s. Flowmore Limited. This would clearly show that the first petitioner is a contractor appointed by the second petitioner for their works at the SEZ. The other document is the letter addressed by the second petitioner on October 22, 2011 to the DCTO, Kovvur, confirming that they have awarded the contract to the first petitioner for erecting pump equipment and that in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X
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