The government’s bid to levy export duty on goods supplied to Special Economic Zones from the rest of the country was scuttled with the Supreme Court saying that the extant law doesn’t permit such a levy. Currently, sales by SEZ units to domestic tariff area are subject to a Customs duty as SEZs are designated tax-free zones with an obligation to be net forex earners. Although there is no provision in the law for a levy on the reverse sale, the Customs authorities have started demanding a tax.
Dismissing the government’s special leave petition, the SC held that export duty on sales to SEZs was unjustified in the absence of any specific law in this regard.
A Bench headed by Justice D K Jain while dismissing a batch of petitions filed by the Centre against Essar Steel, Adani Power etc. upheld the Gujarat High Court judgement that the companies were not liable to pay customs duty in the absence of any specific provisions under the SEZ Act, 2005, or any corresponding amendment in the Customs Act 1962.
When contacted by FE, Advocate Tarun Gulati, who appeared for Adani, said that “duty is levied on goods sent from a unit in the SEZ area to the rest of India under Sec 30 of SEZ Act, but no provision for the reverse case is there. And prior to introduction of SEZ Act, there was a specific provision in this regard under Section 76F of the Customs Act, which has been deleted. Now customs duty can’t be levied by relying on Section 12 of the Customs Act, which still remains unamended.”
The Ministry of Commerce had moved the apex court against the Essar group and others stating that iron ore pellets and calibrated iron ore supplied by an Essar unit to the Essar SEZ, Hazira, were goods exported from India for the purpose of such levy.
The petition filed by the ministry had challenged the High Court’s order that allowed Essar Steel to continue its arrangement without paying customs duty on goods supplied from its DTA unit at Vizag to the Hazira SEZ unit.
According to the government, SEZs are to be considered territory outside India under Section 53 of the 2005 Act, and goods supplied to a unit in an SEZ are treated as exports and the corresponding benefits such as excise duty exemptions on goods from a DTA to SEZ units, drawbacks facilities, etc are also provided.
Essar had stated that the SEZ unit was located in India and, therefore, supplies to such a unit cannot be considered goods exported from India.
Please provide details on supreme court judgement on special economic zone for essar