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TMI Blog2015 (11) TMI 882X X X X Extracts X X X X X X X X Extracts X X X X ..... ich may be authorised under Section 4(2) and Section 15(9) of the Act. Section 4(2) and Section 15(9) speak of such operations, which are authorised by the Central Government, and in respect of which the Developer of a unit has the authorisation of the Board of Approval. Further, an overview of the provisions of the SEZ Act indicates that it is a special law enacted with the specific object of providing an internationally competitive environment for exports and there are specific provisions therein that are tailored to provide tax exemptions and other benefits to the units situated in the SEZ's. The overriding effect given to provisions of the Act is only with a view to further the objects of the Act and cannot confer on the units in the SEZ a status other than what is contemplated for the purposes of their functioning under the Act. It is apparent, therefore, that while enacting the SEZ Act, the Parliament did not intend to treat a supply from the DTA to a unit in the SEZ as an export for the purposes of the CST Act or Article 286 of the Constitution. Had the Parliament any such intention, then it would not have been necessary to provide for an exemption from State taxes, levi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, hereinafter referred to as the 'KVAT Act', on the purchases of sandalwood. While the petitioner maintains that she is not liable to pay local tax on the sandalwood purchased by her at the auction, since the goods so purchased are taken by her directly to the unit in the Madras Export Processing Zone, it is the case of the respondents that the transaction of sale would attract tax under the KVAT Act since the sale was concluded in the State of Kerala. 2. The brief facts that are necessary for a disposal of this case may now be noticed; The petitioner, who is a registered dealer under the Tamil Nadu Value Added Tax Act as well as the Central Sales Tax Act (hereinafter referred to as the 'CST Act'), is an exporter of articles like pre Indian Sandalwood chips and chips powder. These items are procured from the Domestic Tariff Area (hereinafter referred to as the 'DTA') and then exported to various countries against export orders placed by foreign buyers. Against Exts.P2 to P4 purchase orders obtained by the petitioner, she wanted to purchase sandalwood from the respondents and she, accordingly, participated in the e-auction held by the respondents pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case and the submissions made across the bar, I find that the following two issues arise for consideration in the instant case; (i) Whether the movement of the goods from Kerala to the unit of the petitioner in the Madras Export Processing Zone, pursuant to the sale effected by the respondents, could be considered an export of the goods outside the territory of India? (ii) If so, whether the sale effected by the respondents occasioned the export for the purposes of Section 5(1) of the CST Act? Issue No.1: It is the specific contention of the learned Senior Counsel for the petitioner that, as per the scheme and specific provisions of the Special Economic Zones Act, 2005 (hereinafter referred to as the 'SEZ Act'), Special Economic Zones (SEZ) created under the said Act are seen as foreign countries for the purposes of trade and hence, when the goods sold to the petitioner were transported from the DTA to the unit of the petitioner in the SEZ, there was an export of the goods for the purposes of Article 286 of the Constitution of India read with Section 5(1) of the CST Act. It is contended that the Special Economic Zones Act, 2005 should also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when a sale or purchase of goods took place, outside the state or in the course of import of the goods into, or export of the goods out of, the territory of India. The law enacted by Parliament in this regard is the Central Sales Tax Act, 1956. Section 5 of the CST Act, which is relevant for the purposes of the instant case, reads as follows: 5. When is a sale or purchase of goods said to take place in the course of import or export:- (1) A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India; (2) A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India. [(3) Notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods precedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... area of a customs station in which imported goods or exported goods are ordinarily kept before clearance by customs authorities. Explanation:- For the purposes of this clause, customs station and customs authorities' shall have the same meanings as in the Customs Act, 1962 (52 of 1962)]. 9. The above definition also indicates that the meaning to be attributed to the word export , as also the phrase crossing the customs frontiers of India , under the CST Act is the same as attributable to the word/phrase under the Customs Act, 1962. A sale effected to a unit in an SEZ cannot, therefore, on a plain reading of the CST Act, be deemed to be an export for the purposes of the said Act. 10. I must, however, advert to the provisions of the SEZ Act, 2005 for it is the contention of the learned Senior Counsel for the petitioner that the SEZ Act is also a law enacted by Parliament, and the said Act also provides a definition for the term export , which can be taken into consideration when examining the issue of whether or not a sale occasioned an export of the goods out of the territory of India. 11. The SEZ Act was enacted with the object of providing an internationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecial Economic Zones; or (b) shall apply to a Special Economic Zone or a class of Special Economic Zones only with such exceptions, modification and adaptation, as may be specified in the notification. Provided that nothing contained in this section shall apply to any modifications of any Central Act or any rules or regulations made thereunder or any notification or order issued or direction given or scheme made thereunder so far as such modification, rule, regulation, notification, order or direction or scheme relates to the matters relating to trade unions, industrial and labour disputes, welfare of labour including conditions of work, provided funds, employers' liability, workmen's compensation, invalidity and old age pensions and maternity benefits applicable in any Special Economic Zones. (2) A copy of every notification proposed to be issued under sub-section (1) shall be laid in draft before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive session ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regulations referred to in that sub-section. 53. Special Economic Zones to be ports, airports, inland container depots, land stations, etc., in certain cases:- (1) A Special Economic Zone shall,on and from the appointed day, be deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorised operations. (2) A Special Economic Zone shall, with effect from such date as the Central Government may notify, be deemed to be a port, airport, inland container depot, land station and land customs stations, as the case may be under section 7 of the Customs Act, 1962 (52 of 1962): Provided that for the purposes of this section, the Central Government may notify different dates for different Special Economic Zones. 14. It will be seen from a reading of Section 53 of the SEZ Act that an SEZ is deemed to be a territory outside the customs territory of India only for the purposes of undertaking authorised operations. The term authorised operations is defined in Section 2(c) of the Act as meaning operations which may be authorised under Section 4(2) and Section 15(9) of the Act. Section 4(2) and Section 15(9) speak of such operation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through an amendment that was brought in with effect from 10.09.2004, Section 8(6) of the Act was amended to provide an exemption from CST in cases where there is an inter-state sale effected to registered dealers who are permitted to set up units in SEZ's. The said provision reads as follows: 8. Rates of tax on sales in the course of inter state trade or commerce:- [(1) ................. (2) ................. (3) ................. (4) ................. (5) ................. (6) Notwithstanding anything contained in this Section, no tax under this Act shall be payable by any dealer in respect of sale of any goods made by such dealer, in the course of inter-State trade or commerce to a registered dealer for the purpose of setting up, operation, maintenance, manufacture, trading production, processing, assembling, repairing, reconditioning, re-engineering, packaging or for use as packing material or packing accessories in a 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 authorised to establish such u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EPZ pursuant to the sale that the said movement could be seen as an implied term of the contract of sale between the State of Kerala and the petitioner. While the material produced in this writ petition is insufficient to hold that there was any understanding between the petitioner and the respondents, either express or implied, that the goods would move from Kerala to the petitioner's unit in the Madras SEZ as a direct consequence of, or incidental to, the sale transaction between them, I am of the view that I need not deliberate upon this issue since I have already found that a movement of the goods from Kerala to the unit of the petitioner in the SEZ would not qualify as an export for the purposes of Section 5(1) of the CST Act or for the purposes of Article 286 of the Constitution. It is also relevant to note that the express terms of Ext.P6 - Special Terms and Conditions of the e-auction of sandalwood at Marayoor Sandal Depot of Kerala Forest department , and in particular clauses 11 and 14(v) thereof, clearly contemplated that prevalent rates of KVAT would be applicable to all successful bidders irrespective of destination of transportation of materials and purpose. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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