9911796707
TMI Blog2021 (10) TMI 1090X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(j) of the SEZ Act. Section 15(9) of the SEZ Act makes it specifically clear that the letter of approval shall mention the operations that the concerned person is authorised to undertake. Thus, the scope of the expression authorised operations is well defined and the same has to be stated in the letter of approval - In the present case, the letter of approval dated 08.10.2009 expressly indicates the operations/activities that the petitioner is authorised to undertake. In the aforesaid circumstances, the contention that the operations of generating electricity were rendered unauthorised by the Central Government by the letter dated 06.04.2015 whereby the 2009 Guidelines were reinstated, is unpersuasive. There is nothing to indicate either in the three Guidelines (2009 Guidelines, 2012 Guidelines and the 2016 Guidelines) that the effect and the import of the said guidelines was to render the operations being carried out by the concerned unit as unauthorised operations. This Court is of the view that this is an apparent error as the Second Letter was addressed to all Development Commissioners forwarding the First Letter. As noticed above, the opening words of the second paragra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent: Ms. Suparna Srivastava Ms. Sanjna Dua, Advocates for R-1 2. JUDGMENT VIBHU BAKHRU, J 1. The petitioner has filed the present petition under Article 226 of the Constitution of India impugning an order dated 28.12.2016 passed by the Board of Approval, whereby the petitioner s appeal against an order dated 18.04.2016 passed by the Unit Approval Committee, NOIDA SEZ was rejected. The petitioner also prays that the petitioner may be allowed benefits under Section 26 of the Special Economic Zones Act, 2005 (hereafter the SEZ Act ) in respect of maintenance and duty free imports of raw materials and consumables for operation and maintenance of the power plant (hereafter O M benefits ). In addition, the petitioner also prays that it should be allowed duty free transfer of surplus power generated by it to the Export Oriented Units (hereafter EOU ). Factual Context 2. The petitioner is a company, inter alia, engaged in generation of electricity, which is captively consumed and also supplied to other units in the Special Economic Zone (SEZ Units). The petitioner had submitted its proposal for seeking approval for its power generating unit in MB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnexure P-8 to the petition, and it is not disputed that the same contains a typographical error inasmuch as the letter dated 27.02.2009 (the 2009 Guidelines) is referred to as a letter dated 27.02.2012. 6. The Government of India also issued another letter dated 06.04.2015 addressed to all Development Commissioners, Special Economic Zones informing them that, henceforth, setting up of power plant shall be allowed only in non-processing area of SEZs. It further stated that processing power plants presently situated in the processing area would be demarcated as non-processing areas and no O M benefits would be available to such power plants. 7. Thereafter, on 16.02.2016, the Government of India, Ministry of Commerce issued fresh guidelines (hereafter referred to as the 2016 Guidelines ) extending the O M benefits to power generating units in the processing zone subject to certain conditions. The petitioner states that it has been operating under the said guidelines and, has been extended the O M benefits subject to the condition proscribing duty free transfer of power to EOUs. 8. In the meanwhile, the petitioner submitted its proposal for a fresh Letter of Approval for a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that it was entitled to sell surplus power under Rule 47(3)(c) of the Special Economic Zone Rules, 2006 (hereafter the SEZ Rules ) and the Approval Committee had no power to demand the duties imposed on inputs consumed by an SEZ unit. The petitioner claimed that it was entitled to such duty free procurement on its inputs irrespective of whether the goods manufactured were cleared for export in the Domestic Tariff Area (DTA). 12. The Board of Approval rejected the petitioner s appeal by the impugned order dated 28.12.2016. And, this led the petitioner to file the present petition. Reasons and Conclusion 13. It is apparent from the above that the controversy involved in the present petition relates to the questions, (a) whether the petitioner is entitled to O M benefits (fiscal benefits covered under Section 26 of the SEZ Act in respect of maintenance and duty free import to raw materials and consumables for generation of power) for the period 01.04.2015 to 15.02.2016; and (b) whether the condition that no duty free benefits for transfers to EOU is contrary to the SEZ Act and the Rules made thereunder. 14. Insofar as the validity of the condition that no duty free ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 01.04.2015. According to the petitioner, it was entitled to such benefits in terms of the LoA and the provisions of the SEZ Act and the Rules made thereunder. 16. The respondent has contested the same and contends that in terms of the statutory scheme, the Board of Approval is required to follow the guidelines issued by the Central Government. In its reply to the petition, the respondent has briefly alluded to the scheme of the SEZ Act and the Guidelines issued by the Central Government. It is the respondent s contention that an SEZ unit would be eligible for O M benefits only for authorised operations and only as so long as the said operations are considered as authorised operations by the Central Government. Second, it is stated that in terms of Section 6 of the SEZ Act, the Central Government is entitled to demarcate the processing and non-processing area of the SEZ and since the petitioner s unit was required to be demarcated as a non-processing area for the period 01.04.2015 to 15.02.2016, O M benefits would not be available to the petitioner s unit. Third, it was contended that in terms of Sub-section (2) of Section 26 of the SEZ Act, the Central Government h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on processing area of other SEZs, SEZ units located in the processing area of the same SEZ/SEZ units located in the processing area in other SEZs, facilities located in the processing area of the same SEZ/facilities located in the processing area of other SEZs and also Domestic Tariff Area (DTA). ii) A unit set up within the SEZ A unit can be set up within the SEZ to generate power as a product or have a captive power plant and will be located in the processing area. Such a power plant will be entitled to all the fiscal benefits covered under section 26 of the SEZ Act including the benefits for initial setting up, maintenance and the duty free import of raw materials and consumables for the generation of the power in such plants. With respect to SEZs in sectors such as IT/ITES, Gem and Jewelry. Biotech, etc. where a minimum built up area is stipulated under the SEZ Rules and in respect of which generation of power has been approved by the Board of Approval as authorized operation to the Developer/Co-developer within the processing area, in such cases generation of power will be carried out as a unit without any separate demarcation of the area for that purpose. Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced below: No. P 6/3/2006- SEZ Government of India Ministry of Commerce Industry Department of Commerce (SEZ Division) Udyog Bhawan, New Delhi Dated- 6th April, 2015 Subject: Guidelines for Power Generation in Special Economic Zone- regarding 1. The undersigned is directed to say that guidelines for power generation transmission and distribution in Special Economic Zone issued vide this Ministry's letter of even number dated 21st March, 2012 stand withdrawn with immediate effect i.e. 1st April, 2015. 2. The guidelines for Power Generation, Transmission and Distribution in Special Economic Zone issued vide this Department's letter of even number dated 27th February, 2012 [sic 27th February 2009] are hereby restored and will, henceforth, be the basis for relevant policy and operational decisions. Sd/- Under Secretary to the Govt. of India Tel- 011- 23062496 e-mail:[email protected] 1. Chief Secretaries of all States/UT's 2. All Development Commissioners of SEZs 3. Ministry of Power, Govt. of India, Shram Shakti Bhawan, Rafi Marg, New Delhi 4. Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tel. 011-23062496 e-mail: [email protected] Copy to: Department of Revenue (CBDT/CBEC) Govt. of India 25. On 16.02.2016, the Government of India issued fresh guidelines (the 2016 Guidelines ). The relevant extract of the said Guidelines are set out below: i. A power plant, including non-conventional energy power plant to be set up by the developer/ codeveloper in an SEZ as part of infrastructure facility will be in the Non Processing Area of SEZ only and will be entitled to fiscal benefits only for initial setting up and no fiscal benefit would be admissible for its operation and maintenance. There will be no obligation to achieve positive Net Foreign Exchange (NFE) for such power plants. Such a power plant can supply power to DTA after meeting the power requirement of the SEZ subject to payment of customs duty as determined by DoR keeping in view the duty foregone on initial setting up of the power plant. ii. Henceforth no single stand-alone power plant will be permitted to be set up in to SEZ in which there would be no other units. iii. Henceforth setting up of captive power plant including non conventional energy power plant, can be permitted in Proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed operations as under: Authorised Operations Setting up of Power Plant in Processing area for generating Power (Electrical energy) 1740 MW. The LoA also specified the Projected Annual Exports for the entire five year term of the LoA. 27. It is also material to note that there is no dispute that the petitioner s generating unit is located in the processing zone of MBILSEZ. 28. The expression authorised operations is defined under Section 2(c) of the SEZ Act to mean operations which may be authorised under sub-section (2) of section 4 and sub-section (9) of section 15. Section 4(2) of the SEZ Act empowers the Board of Approval to authorize the Developer to undertake the operations in an SEZ as may be authorized by the Government. Sub-section (9) of Section 15 of the SEZ Act expressly provides that the Development Commissioner may issue a letter of approval to the person concerned to set up a unit and undertake such operations, which the Development Commissioner may authorise and such operations would be mentioned in the letter of approval. 29. The word Developer is defined under Section 2(g) of the SEZ Act as under: (g) Developer means a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such operations that may be authorised by the Central Government in the SEZ. It is clear from the Scheme of the SEZ Act that the authorised operations under Section 4(2) of the SEZ Act are such operations that a developer who establishes the SEZ in terms of the letter of approval issued under Section 3(10) of the SEZ Act is entitled to carry out in the SEZ. 35. Section 15 of the SEZ Act contains provision regarding setting up a unit in an SEZ. In terms of Sub-section (1) of Section 15 of the SEZ Act, any person, who intends to set up a Unit for carrying on the authorised operations in an SEZ is required to submit a proposal to the Development Commissioner. The Development Commissioner is required to submit the same to an Approval Committee for its approval. If such approval is granted in terms of Sub-section (9) of Section 15 of the SEZ Act, the Development Commissioner is required to issue a letter of approval to the person concerned to set up a unit and undertake such operations, which the Development Commissioner may authorise. Sub-section (8) of Section 15 of the SEZ Act entitles the Central Government to, inter alia, prescribe the requirements subject to which the Appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Central Government can introduce terms and conditions by notifying Rules or issuing guidelines in terms of which an approval may be granted. 38. The letter of approval as contemplated under Section 15(9) of the SEZ Act is required to be issued by the Development Commissioner pursuant to the proposal submitted under Section 15(1) of the SEZ Act. The person who is granted the letter of approval falls within the definition of an entrepreneur within the meaning of Section 2(j) of the SEZ Act. Section 15(9) of the SEZ Act makes it specifically clear that the letter of approval shall mention the operations that the concerned person is authorised to undertake. Thus, the scope of the expression authorised operations is well defined and the same has to be stated in the letter of approval. 39. In the present case, the letter of approval dated 08.10.2009 expressly indicates the operations/activities that the petitioner is authorised to undertake. In the aforesaid circumstances, the contention that the operations of generating electricity were rendered unauthorised by the Central Government by the letter dated 06.04.2015 whereby the 2009 Guidelines were reinstated, is unpersuas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter of approval would specify the items of manufacture or particulars of service activity. Rule 19(3) of the SEZ Rules expressly provides that only an entrepreneur holding the letter of approval shall be entitled to set up a unit in the processing area of the SEZ. The proviso also expressly provides that proposals for setting up a unit in the SEZ would be entertained only after the processing area has been demarcated under Rule 11 of the SEZ Rules. 44. The import of the contentions advanced on behalf of the respondent is that notwithstanding that specific provisions have been made under the SEZ Act and the Rules for demarcation of processing and non-processing zones prior to the issuance of the letter of approval; the Central Government can re-demarcate the areas under the SEZ Zone as a measure to deny the benefits available to a unit in terms of the SEZ Act. Plainly, this militates against the scheme of the SEZ Act and the SEZ Rules and thus, the said contention is unsustainable. 45. It is material to note that two letters dated 06.04.2015 have been placed on record. The First Letter communicates the decision of the Government of India to withdraw the 2012 Guidelines with ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Letter and the Second Letter. 47. This Court is of the view that this is an apparent error as the Second Letter was addressed to all Development Commissioners forwarding the First Letter. As noticed above, the opening words of the second paragraph of the Second Letter indicates that it is in pursuance to the decision to withdraw the 2012 Guidelines and restore the 2009 Guidelines as contained in the communication enclosed the First Letter dated 06.04.2015. The First Letter does not contain any decision that the processing areas of the SEZ would be re-demarcated to place those units which are operating in the processing area of the SEZ to be placed in a non-processing area. The purport of the Second Letter dated 06.04.2015 appears to be essentially to amplify the decision as communicated by the First Letter. Read in the aforesaid context, the import of the direction that the power plants which are situated in processing areas of the SEZ would be demarcated as non-processing areas could only be applicable to those power plants in the processing areas in respect of which a letter of approval had not been issued or if issued, was not renewed. As noticed above, the exercise of dema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st be read as applicable only to those power plants which are set up by developers/co-developers as a part of the facility or utility for the SEZ and, not as a separate unit set up within the SEZ to generate power as a product or as a captive power plant in terms of Clause (ii) of the 2009 Guidelines as set out above. 50. In view of the above, even assuming that the Central Government had the power to re-demarcate areas post-issuance of the letter of approvals, the Second Letter on the basis of which the petitioner has been denied the O M benefits with effect from 01.04.2015 to 16.02.2016, cannot be construed in the manner so as to be applicable to the petitioner s unit which was granted the LoA under the 2009 Guidelines. 51. Insofar as the respondent s contention that the Board of Approval is required to follow the policy decisions of the Central Government is concerned, there is no dispute that it is required to do so. Section 9 of the SEZ Act contains provisions regarding the duties, powers, functions of the Board of Approval. Section 9 of the SEZ Act is set out below: 9. Duties, powers and functions of Board.-( 1) Subject to the provisions of this Act, the Board s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the performance of its functions under this Act, be bound by such directions on the questions of policy as the Central Government may give in writing to it from time to time. (6) The decision of the Central Government whether a question is one of policy or not shall be final. 52. It is apparent from the plain language of Section 9(5) of the SEZ Act that the Board of Approval would in exercise of its powers or performance of its functions be bound by the directions of the Central Government on the questions of policy under the SEZ Act. Clearly, if the policy of the Central Government is not to permit power plants to be set up in processing areas, the Board of Approval is required to ensure that no letter of approval is granted to a unit or a developer to do so. However, that does not mean that the Board of Approval is required to proceed to cancel an existing letter of approval even though there is no default on the part of the entrepreneur in complying with the terms and conditions or its obligations subject to which, the letter of approval was granted to him. As noticed above, the letter of approval granted to an entrepreneur can be cancelled if the conditions as stipulated ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
