The jurisdiction of Customs laws over SEZ (Special Economic Zone) units in India involves a complex interplay between the Customs Act, 1962, and the SEZ Act, 2005, along with the rules and notifications issued under these legislations. Here’s a structured breakdown:
⚖️ 1. Legal Framework
A. SEZ Act, 2005
- The SEZ Act, 2005 is a self-contained code governing the establishment, development, and management of SEZs in India.
- SEZ units are considered to be located outside the customs territory of India for the purpose of undertaking authorized operations.
- Goods and services imported or procured by SEZ units for authorized operations are exempted from customs duties, subject to conditions.
B. Customs Act, 1962
- Applies to import/export from/to SEZ only in specific cases, particularly:
- When goods move from SEZ to DTA (Domestic Tariff Area).
- When there is any non-compliance or violation by SEZ units related to import/export procedures.
🏛️ 2. Jurisdiction: Who Regulates What?
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Area
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Governing Law
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Jurisdiction/Authority
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Import of goods into SEZ
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SEZ Act, 2005 (Sections 26, 30)
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Development Commissioner & Specified Officer
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Procurement of goods from DTA into SEZ
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SEZ Act & Rules
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Treated as exports under Customs Act (Sec. 2(18)); regulated by SEZ Rules
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Movement of goods from SEZ to DTA
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Customs Act, 1962 (Sections 30, 68, 69)
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Customs Department (Duty payable as if imported into India)
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Non-compliance with import/export regulations
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Customs Act (Penalties, Confiscation, etc.)
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Customs Department
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Overall SEZ operations and monitoring
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SEZ Act and SEZ Rules
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Development Commissioner (DC)
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🔄 3. Customs Duties and Exemptions
Under Section 26 of the SEZ Act, SEZ units are eligible for:
- Exemption from customs duty on goods and services imported into the SEZ.
- Exemption from central excise duties, service tax, and other indirect taxes (though post-GST, some of these have been subsumed).
However:
- When goods move from SEZ to DTA, they are treated as imports into India and attract customs duty as per the Customs Tariff Act.
- SEZ to DTA sales require payment of duties and compliance with Customs regulations.
⚠️ 4. Enforcement & Penalty Jurisdiction
- If SEZ units misuse exemptions or violate any condition under the SEZ or Customs laws, they may be:
- Subject to investigation by Customs authorities.
- Penalized under Customs Act, 1962 (Sections 111, 112, 114, etc.).
- SEZ Act does not override Customs Act in cases involving revenue evasion or fraud.
🧾 5. Case Law and Judicial Interpretations
Several courts have clarified:
- Customs authorities have jurisdiction when there is duty implication, especially in SEZ to DTA movement.
- The SEZ Act is special law and generally overrides the Customs Act within the SEZ for authorized operations.
🔹 Case Example: CC v. GMR Aerospace Engineering Ltd (CESTAT) – Held that Customs Act applies to SEZ unit when goods are cleared into DTA.
✅ Summary
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Topic
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Governed By
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SEZ operations (imports, exports within SEZ)
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SEZ Act, 2005 & Rules
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Movement of goods from SEZ to DTA
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Customs Act, 1962
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Violations/penalties related to duty/tax evasion
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Customs Act, 1962
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Administrative jurisdiction over SEZ unit
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Development Commissioner, SEZ
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