9911796707
TMI Blog2018 (10) TMI 1372X X X X Extracts X X X X X X X X Extracts X X X X ..... en raw materials are procured for such a unit, such exemptions shall be allowed to a Unit and such benefit shall be available to contractors and for the purposes of such exemption a joint document is to be filed. This Rule i.e. Rule 27 falls under the Chapter prescribing procedure for establishment of a Unit. The privity of contract for claiming the benefit of exemption is strictly between Torrent Energy Limited, the Unit and available contractor, the petitioner. If respondent No.4, Simplex has procured such raw material and paid excise and raised a claim for reimbursement, will not clothe such an entity to claim exemption, under the guise of it supplying goods to a Unit, through the petitioner. Merely because Siemens, as a Contractor has been saddled with a liability to reimburse the excise duty to Simplex Limited, respondent No.4, in itself, will not make the petitioner to avail the benefit of exemption, de-hors the mandate of Rule 27 read with Rule 30. In fact, the benefit of the Act is to a Unit who in turn by deeming fiction passes it on to a Contractor who has produced goods and services for manufacture etc., i.e. raw materials. It cannot, through the cloak of a sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any other appropriate Writ, Order or Direction requiring Respondent No. 1 2 to take all steps necessary to remove and resolve the dichotomy between the provisions of the SEZ Act and the Rules, if any and/or issue a clarification that the exemption from Central Excise shall be available to sub-contractors; and directing the Respondent No.3 to stamp ARE-1 forms in favour the manufacturer and sub contractors. ( e) pending the admission and hearing of this petition Respondents 1 2 be restrained from levying and recovering the Central Excise from manufacturer such as Respondent No.5 and 6. ( f) for such further and other reliefs, as this Hon ble Court may deem fit and proper in the facts and circumstances of the case. 1.1 In order to execute such contracts, the petitioner either procures goods directly from the manufacturer or in the alternative through a sub-contractor or a vendor. When the goods are procured directly from the manufacturer, the specified officer in the present case of Dahej Special Economic Zone would endorse ARE-1 so that the petitioner can avail exemption from payment of duty and taxes as a contractor appointed by SEZ unit. However, when su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng tax dues, such as excise etc., for such material. The contractor-Siemens who is such a contractor for the SEZ Unit, would receive such raw material from its sub-contractor for being sent to the SEZ Unit directly. On the amount of dues and taxes paid by M/s.Simplex Infrastructure as a subcontractor, when ARE-1 are sent to the Specified Officer for claiming exemption from the Central Excise benefit on behalf of M/s. Tata Steel from whom such goods are procured, the sub-contractor would be refused exemption as such exemption according to the specified officer is not available to the subcontractor i.e. respondent No.4 but only to the contractor, the petitioner. The petitioner naturally therefore, would have to reimburse M/s.Simplex Infrastructure Ltd., the cost component which would include the value addition of excise. According to the petitioner, since the sub-contractor is acting on his behalf, they would be entitled to exemption from central excise. From the correspondence annexed to the petition by the sub-contractor, namely M/s.Simplex Infrastructure Ltd., dated 19.08.2011 addressed to M/s.Siemens Limited, the petitioner, the respondent No.4 has voiced his concern that the Cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y getting to the SEZ area. 5 Mr.K.H.Kaji, learned senior counsel assisted by Mr. Manish Kaji, learned advocate for petitioner, in the background of these facts has drawn our attention to the various provisions of the Special Economic Zones Act, 2005. Drawing our attention to the preamble of the Act, Mr.Kaji has contended that the objective for creating a Special Economic Zone is to see that the goods are made available free of taxes and duties with a view to provide an international competitive environment. 6 Our attention is drawn to Section 51 of the Act, which reads as under: 51. Act to have overriding effect :- The provisions of this Act shall have 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 this Act. 7 According to Mr.Kaji, learned Senior Advocate, Section 51 of the Act has provided for overriding effect. The provision suggests that the SEZ Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. He invited our attention to Section 7 and Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( f) exemption from the securities transaction tax leviable under section 98 of the Finance (No.2) Act, 2004 (23 of 2004) in case the taxable securities transactions are entered into by a non-resident through the International Financial Services Centre; ( g) exemption from the levy of taxes on the sale or purchase of goods other than newspapers under the Central Sales Tax Act, 1956 (74 of 1956) if such goods are meant to carry on the authorised operations by the Developer or entrepreneur. ( 2) The Central Government may prescribe the manner in which, and the terms and conditions subject to which, the exemptions, concessions, drawbacks or other benefits shall be granted to the Developer or entrepreneur under sub-section(1). 7.1 Section 7 provides that any goods or services exported out of or imported into or procured from the Domestic Tariff Area by a unit in a Special Economic Zone or a developer, shall be exempted from payment of taxes, duties or cess. Section 26 , to which our attention was invited to, provides that every developer and an entrepreneur is entitled to exemptions, drawbacks and concessions such as exemption from duty of customs, exemption f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of duty, taxes or cess, drawbacks and concessions on all types of goods and services, required for setting up and maintenance of the factory building, allowed to a unit shall also be available to the contractors appointed by such unit and all the documents in such cases shall bear the name of the unit along with the contractor and these shall be filed jointly in the name of the unit and the contractor: Provided further that the unit shall be responsible and liable for proper utilization of such goods and services in all cases:] [ Provided also that items prohibited for import can be procured by a Special Economic Zone unit or Developer from a place outside India to the Special Economic Zone with the prior approval of Board of Approval.] ( 2) In case of any doubt as to whether any goods or services are required by a Unit or Developer for authorized operations or not, it shall be decided by the Development Commissioner. ( 3) The import of duty free material for setting up educational institutions, hospitals, hotels, residential and/or business complex, leisure and entertainment facilities or any other facilities in the non-processing area of the Special Ec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been damaged or become defective after such import or procurement, may be sent outside the Special Economic Zone without payment of duty for repairs or replacement, to the supplier or his authorized dealer or be destroyed: Provided that where overseas supplier or the Domestic Tariff Area supplier of goods does not insist for re-export or for supply back to the Domestic Tariff Area of goods, the same shall not be insisted upon and such goods shall be destroyed with the permission of the Special Officer.: [ Provided further that the goods which are sent outside the Special Economic Zone for repairs are returned to the Special Economic Zone, under intimation to the Special officer. In case goods are sent out for replacement, then on replaced goods, no Duty Entitlement Passbook Scheme, duty drawback or other export incentives shall be claimed for this purpose:] Provided further that destruction shall not be permitted in case of precious and semi-precious stones and precious metals: Provided also that in case of return of goods procured from the Domestic Tariff Area, the same shall be allowed on refund of the export entitlement which have been received or availed or claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the Unit or Developer only after completion of the assessment of the Bill of Export. ( 4) A copy of the ARE-1 and/or copy of Bill of Export as the case may be with an endorsement by the authorized officer that goods have been admitted in full into the Special Economic Zone shall be forwarded to the Central Excise Officer having jurisdiction over the Domestic Tariff Area supplier within forty five days failing which the Central Excise Officer shall raise demand of duty against the Domestic Tariff Area supplier; ( 5) Where a Bill of Export has been filed under a claim of drawback or Duty Entitlement Pass Book, the Unit or Developer shall claim the same from the Specified Officer and jurisdictional Development Commissioner respectively and in case the Unit or Developer does not intend to claim entitlement of drawbacks or Duty Entitlement Passbook Scheme, a disclaimer to this effect shall be given to the Domestic Tariff Area Supplier for claiming such benefits: Provided that the Duty Entitlement Passbook Scheme may be claimed by Domestic Tariff Area Supplier from the Development Commissioner or their jurisdictional Regional Licencing Authority of the Directorat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoice or transport documents, issued by the supplier: Provided that such invoices or transport documents shall be endorsed to the effect that no exemptions, drawbacks and concessions have been availed on the said supplies. ( 12) Procedure for procurement from warehouse shall be as under: ( a) where goods are to be procured from warehouse, a Unit or Developer shall file a Bill of Entry with the Specified Officer; ( b) the Unit or Developer shall submit Bill of Entry assessed by the Authorized Officer to the Customs Officer in charge of the warehouse from where the Special Economic Zone Unit or Developer intends to procure the goods; ( c) the Customs Officer in charge of the warehouse shall allow clearance of the goods from the warehouse for supply to the Unit or Developer without payment of duty on the cover of ex-bond Shipping Bill and on the basis of Bill of Entry assessed by the Authorized Officer; ( d) where the re-warehousing certificate by way of endorsement by the Authorized Officer on the copy of ex-bond Shipping Bill is not received by the Customs Officer in charge of warehouse within forty five days from the date of clearance of go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd precious and semi-precious stones from Domestic Tariff Area.- A gem and jewellery Unit may procure cut and polished diamonds and precious and semi-precious stones from the Domestic Tariff Area, as per the following procedure, namely:- ( i) the parcel shall be brought into the Zone in a sealed condition by the authorized representative of the Domestic Tariff Area supplier or Customs House Agent, who shall represent the invoice clearly marked original, duplicate and triplicate to the Authorized Officer at the gate; ( ii) the Authorized Officer shall register the invoice at the gate of the Special Economic Zone and endorsing the registration number on the original and duplicate copies of the Invoice and the parcel shall be allowed to be taken into the premises of the Unit and such goods shall be separately accounted for by the Unit; ( iii) the duplicate copy of the invoice with the endorsement of the Authorized Officer shall be forwarded to the supplier in the Domestic Tariff Area for claiming Replenishment Licence from the Development Commissioner of the Special Economic Zone. 8.2 Rule 10 deals with the permission for procurement of items. According to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d drawbacks which are available to a Developer or a Co-developer, in this case Torrent Energy Limited, shall also be available to a contractor including the sub-contractor appointed by the Developer or a Co-developer. It is not disputed that the Developer of the Unit in this case i.e. M/s. Torrent Energy Ltd., has appointed the petitioner as a contractor to carry out its construction activity and who in turn has appointed respondent No.4 as a sub-contractor. In other words, it is Mr.Kaji s submission that when the contractor has procured the exciseable goods from the manufacturer through the sub-contractor for it being supplied to the Special Economic Zone Unit, such a sub-contractor and in turn the petitioner as a contractor is entitled to exemption of central excise. As the goods are meant to be carried on for the purposes of operations in a Unit in the Special Economic Zone, their cases squarely fall under Section 7 and Section 26 of the Act and are therefore entitled to exemption. According to Mr.Kaji, merely because the ARE-1 which the respondent No.4 M/s.Simplex Infrastructures Ltd., presents for exemption, as a sub-contractor to the interpretation of respondent No.3 to provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such zones. The term Unit as defined under Section 2(zc) of the Act would mean a Unit set up by an entrepreneur in such Special Economic Zone. 11.1 In the earlier part of our judgment, we have reproduced the relevant sections of the Special Economic Zones Act, 2005 and the Special Economic Zones Rules, 2006, in context of the facts of the present case. However, to consider and decide the controversy in issue, the scheme of the Act and the Rules need to be viewed in an entire perspective. 11.2 Relevant definitions under Section 2 of the Special Economic Zones Act, 2005 are reproduced hereunder: 2 (b) approval Committee means an Approval Committee constituted under sub-section (1) of section 13; 2 (c) authorized operations means operations which may be authorised under sub-section (2) of section 4 and sub-section (9) of section 15; 2 (f) Co-Developer means a person who, or a State Government which, has been granted by the Central Government a letter of approval under sub-section (12) of section 3; 2(g) Developer means a person who, or a State Government which, has been granted by the Central Government a letter of approval under sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SEZ. (c) An Entrepreneur can in such an SEZ, be allocated space for such a Unit . 12.1 In other words, a Unit set up by an entrepreneur is an entity and part of a larger picture, i.e. Developer. A Unit is, in that sense a part of an SEZ / Developer : Co-Developer. It is in the context of this position that the provisions of the SEZ Rules, 2006 need to be seen. 13 In juxtaposition to Chapter II of the Act which provides for establishment of Special Economic Zone, the procedure for establishment of Special Economic Zones is so found also, under Chapter II of the Rules. The proposals to set up SEZ are considered by the Board. A Developer of an SEZ would set up an SEZ on being granted a Letter of Approval. On such approval obtained under Rule 9, the Developer, can procure, on permission of the Approval Committee, goods and services to carry on operations. The developer in his pursuit to carry out authorised operations may permit goods and services to be procured, provided such goods and services are required for the authorised operations as may be approved by the Board. Exemptions, drawbacks and concessions on the goods and services allowed to a Developer or a Co-Develope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to exemption. Reading Section 26 with Rule 27 of the Rules suggests that, when raw materials are procured for such a unit, such exemptions shall be allowed to a Unit and such benefit shall be available to contractors and for the purposes of such exemption a joint document is to be filed. This Rule i.e. Rule 27 falls under the Chapter prescribing procedure for establishment of a Unit. The Scheme of the Act suggests, difference of identity between a Developer , Co-Developer and a Unit . A Developer is the SEZ and Unit is a part. The language of Rule 10, which deals with the establishment of a Developer cannot be read into Rule 27, which specifically deals with the setting up of a Unit. The word subcontractor which is consciously missing in Rule 27, cannot be read into it, lest we travel beyond the Rule of establishment of Unit and get into the domain of establishment of SEZ / Developer / Co-Developer. 16.1 The privity of contract for claiming the benefit of exemption is strictly between Torrent Energy Limited, the Unit and available contractor, the petitioner. If respondent No.4, Simplex has procured such raw material and paid excise and raised a claim for r ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
