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TMI Blog2009 (11) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... , Mr. K.S. Nanavati and Mr. Mihir H. Joshi, learned Senior Advocates appeared with Mr. Keyur Gandhi for Nanavati Associates for the petitioners. 5. In Special Civil Application Nos. 9792 & 9806 of 2008, learned advocates Mr. Vikram Nankani with Mr. Uday Joshi with Mr. Hardik Gupta of M/s. Trivedi and Gupta Advocates and Mr. Hardik Modh appeared for the petitioners. 6. In Special Civil Application No.11057 of 2008, Mr. B.D. Karia, learned advocate appeared for the petitioners. In Special Civil Application No.12176 of 2008, learned advocate Mr. Hasit Dave appeared for the petitioners. 7. For the sake of brevity and convenience, facts are taken from Special Civil Application No.9656 of 2008. 8. The petitioners in Special Civil Application Nos.9656 & 9713 of 2008, being DTA units have prayed for writ of Mandamus restraining the respondents from levying and demanding export duty for supplies of Iron Ore Pellets made by the Vizag Pellet Unit of the petitioner to the SEZ unit of the Company located at Essar Special Economic Zone, Hazira, Surat and for supplies of Iron Ore Pellets and Calibrated Lump Ore by the petitioner of Special Civil Application No.9713 of 2008 to the SEZ unit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the SEZ Section of Ministry of Commerce requesting for clarification/confirmation for the effect that no export duty will be leviable on sale of iron ore/iron ore pellets to SEZ Units in view of Rule 27 of the SEZ Rules, 2006. The Superintendent of Central Excise, Range-I, Surat-I Commissionerate had also sought clarification from the petitioners vide his letter dated 24-10-2007 regarding levy of export duty on iron ore pellets. The petitioners' Hazira Unit had, vide its letter dated 25-10-2007 clarified the matter by pointing out that no export duty was leviable on supplies of pellets to the SEZ Unit, particularly in view of Rule 21 of the SEZ Rules, 2006, it was also clarified that the provisions of section 12 of the Customs Act, 1962 were inapplicable for the purpose of levying export duty for the aforesaid movement of goods, as such movement could not be considered as that of 'goods exported from India' for the purpose of section 12. The petitioners submitted that at the relevant time, the authorities were satisfied with the explanation given, as is evident from the fact that the Bills of Export filed for supply of pellets to the SEZ Unit continued to be assessed without le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 10-5-2008. Representations were made regarding the applicability of the said Notification with regard to levy of export duty on certain steel products supplied from DTA to SEZ. Pursuant to the representations, a Circular was issued on 14-5-2008 by the respondent No.3 stating that the matter was under active consideration of the respondent No. 2 and till such time a clarification was received all such DTA supplies would be chargeable to export duty. By Office Order dated 17-5-2008, the said Circular dated 14-5-2008 was amended and it was ordered that the subject goods would be provisionally assessed on furnishing a suitable PD bond with surety/security and the goods would be allowed to be admitted in the SEZ until further orders. The respondent No.2 had also directed the Development Commissioners of SEZ throughout the country, vide its Circular letter dated 23-5-2008 to allow supply of steel products on submission of bond and bank guarantee. Notifications were issued by the respondent No. 1 on 13-6-2008. By Notification No.77/08 certain amendments were made in Notification No. 66/2008-Cus., referred to above, substituting the rate of export duty in respect of certain goods. Vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with certain modifications. Even in Special Civil Application Nos. 10444 of 2008, 10445 of 2008 and 10446 of 2008, the Court has passed separate order on 14-8-2008 and granted ad interim relief despite the fact that it was urged on behalf of the revenue that there are certain distinguishing features in all these three petitions. The Excise Department has challenged the said order before the Apex Court. Even the earlier order dated 25-7-2008 passed by this Court was challenged before the Apex Court and the Apex Court vide its order dated 9-4-2009 dismissed the Special Leave Petition by observing that the said SLP is against an interim order and hence, there is no reason to interfere. However, this Court was requested by the Apex Court to take up the matter for final hearing as the matter is of an important nature. The Apex Court further observed that the views expressed by the High Court in the impugned order are to be treated as tentative views. It is in the above background of the matter, the entire group was taken up for final hearing. 13. The main thirst of the arguments of learned Senior Counsels appearing for the petitioners in all these petitions is that the supply of goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht within the ambit of the charging section by clear words, he cannot be taxed at all. In CIT v. Venkateswara Hatcheries (P.) Ltd. [1999] 3 SCC 632, it is held that neither the word 'produce' nor the word 'article' has been defined in the Act, Therefore, it may be permissible to refer to a dictionary. But where the dictionary gives divergent or more than one meaning of a word it would not be safe to construe the said word according to the suggested dictionary meaning. In such a situation, the word has to be construed in the context of the provisions of the Act having regard to the legislative history of the provisions of the Act and the scheme of the Act. It is a settled principle of interpretation that the meaning of the words occurring in the provisions of the Act must take their colour from the context in which they are so used. 15. The provisions of section 53 of the SEZ Act, 2005 do not provide that the SEZ is located outside 'India'. The said provision refers to the expression 'customs territory of India', which expression, though not defined in the SEZ Act or the Customs Act, finds reference in the GATT Agreement. The said section does not state that a SEZ is outside Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The definition contained in one Act cannot be adopted for the purposes of another Act more particularly when the other Act contains a definition of the term for the purposes of that Act. The duties of customs which have a definite connotation in the economy, legislation and the Constitution, cannot be levied by an artificial extension of the term 'Export' since the same would offend the Constitution. It is, therefore, contended that export duty is not levied under the provisions of the SEZ Act and, therefore, cannot be justified by any provision there under. The purported decisions of the respondent Nos. 1 and 2 regarding liability of export duty in case of supplies by a Domestic Tariff unit to a SEZ unit are contrary to law and deserve to be quashed. The said decisions suffer from the vice of non-application of mind since the same do not contain any reasons and are based only upon the fact of issuance of subsequent Notifications stipulating the effective rate of duty in respect of specified steel products, which fact is wholly extraneous and irrelevant to the issue. 17. For the proposition that a deeming fiction or an ambit of deemed provisions should be restricted to the section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is created. It cannot also be extended by importing another fiction. However, beneficial may be the scope and ambit of the legal fiction created by the Legislature while enacting section 4A such fiction can arise only when the express language of the section laying down the conditions precedent for raising of such a fiction is complied with by the mortgagee-in-possession concerned seeking the benefit of such a deeming fiction. Such a fiction cannot be extended by the Court on analogy or by addition or deleting words not contemplated by the Legislature. In State of W. B. v. Sadan K. Bormal SCC 59, itis held that Legislature may sometimes create a chain of fictions by the same Act or by succeeding Acts. If the Legislature is competent to enact a provision creating a legal fiction, there is no reason why it cannot create a chain of fictions if necessity arises. It is true that in interpreting a provision creating a legal fiction it is not open to the court to import another fiction. In Meghraj Biscuits Industries Ltd v. CCE [2007] 3 SCC 780 [7 STT 270]. It is held that the grant of registration certificate under the Trade Marks Act will not automatically provide benefit to the SSI u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted' appearing in Rule 2(a) of the Rules will have to be held that when the export goods go out of control of the person exporting them and they cease to be available for consumption within the country, they can be said to have been exported. Therefore, though the term 'India' is defined by the Act as including 'territorial waters of India' in the context of the drawback Rules, the term 'India' will have to be interpreted to mean landmass of India only. In Union of India v. Rajindra Dyeing & Printing Mills Ltd. [2004] 10 SCC 187 it is held that when there is movement of the goods outside the territorial waters of India, it is then that an export may be said to have taken place. In the instant case, the cargo was destroyed when the vessel sank within the territorial waters of India. There was, therefore, no export of the said cargo. Accordingly, no duty drawback was available in respect of the said cargo. In Qazi Noorul H.H.H. Petrol Pump v. Dy. Director, E.S.I. Corpn. AIR 2009 SCW 5490, it is held that the words 'manufacturing process' in different statutes have different meanings. For instance, in the Central Excise Act, 1944, the word 'manufacture' means bringing into existenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 62 being an act to consolidate and amend the law relating to customs. 20. Mr. Champaneri has further submitted that under section 2(15), the term 'duty' is defined to mean a duty of customs leviable under the said Act. The term 'export' is defined under section 2(18) to mean with its grammatical variations and cognate expression, taking out of India to a place outside india. The term 'export goods' is defined under section 2(19) to mean any goods which are to be taken out of India to a place outside India and the term 'exporter' is defined under section 2(20) to mean in relation to any goods at any time between their entry for export and the time when they are exported, includes any owner or any person holding himself out to be the exporter. The term 'goods' is defined under section 2(22). The term 'import' is defined under section 2(23) to mean with its grammatical variations and cognate expressions, bringing into India from a place outside India and the term 'imported goods' is defined under section 2(25) to mean any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption. The term 'importer' is defined under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Chapter and other Chapters, the provisions of this Chapter shall prevail, Section 76E provided for exemption from duties of customs and section 76F provided for levy of customs. The Special Economic Zone had been one of the latest measures adopted by the Government of India to promote exports from India. It was in March, 2000 that the then Union Commerce and Industry Minister took a visit to China to get first hand information about the functioning of Special Economic Zones. This led to the announcement of SEZs in India through the annual Export-import Policy of March, 2000. It took the Government almost 6 years to put/place an all encompassing legislation to take care of the concept. An Act for Special Economic Zone was passed and the Special Economic Zones Act, 2005 received the Presidential assent in June, 2005 and became effective from 10-2-2006. The Rules under the Act were notified on 10-2-2006 and were further amended by Amendment Rules, 2006 dated 10-8-2006. He has, therefore, submitted that the Government of India viewed the SEZs as engines of growth and increased growth and economic activity through increased foreign investment. For achieving the said purpose, the Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by land, sea or air or by any other mode, whether physical or otherwise, or receiving goods, or services by a Unit or Developer from another Unit or Developer of the same Special Economic Zone or a different Special Economic Zone. The term 'manufacture' is defined under section 2(r). The term 'Special Economic Zone' is defined under section 2(za) to mean each Special Economic Zone notified under the proviso to sub-section (4) of section 4 and sub-section (1) of section 4 (including Free Trade and Warehousing Zone) and includes an existing Special Economic Zone. The term 'unit' is defined under section 2(zc) to mean a unit set up by an entrepreneur in a Special Economic Zone and includes an existing unit, an offshore Banking unit and a unit in an International Financial Services Center, whether established before or established after the commencement of the Act. Section 2( zd) provides that all other words and expressions used and not defined in this Act but defined in the Central Excise Act, 1944, the Industries (Development and Regulation) Act, 1951, the Income-tax Act, 1961, the Customs Act, 1962 and the Foreign Trade (Development & Regulation) Act, 1992 shall have the meanings, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns contained therein. Exemption from any duty on customs under the Customs Act, 1962 or the Customs Tariff Act, 1975 or any other liability for the time being in force, is available on goods imported into or services provided in a Special Economic Zone or an Unit to carry on the authorized operations by the developer or entrepreneur. Similarly, exemption from any duty of customs under the Customs Act, 1962 or the Customs Tariff Act, 1975 or any other law for the time being in force on goods exported from or services provided from a Special Economic Zone or from a unit, to any place outside India is available. Similarly, under clause (2), exemption from any duty, excise, under the Central Excise Act, 1944 or the Central Excise Tariff Act, 1985 or any other law for the time being in force on goods, brought from Domestic Tariff Area to a Special Economic Zone or unit, to carry on the authorized operations by the developer or entrepreneur is entitled. Section 26(1)(d) provides that drawback or such other benefits as may be admissible from time to time on goods brought or services provided from the Domestic Tariff Area into a Special Economic Zone or Unit by the service providers locate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... import and procurement. Rule 27(1) provides that the unit or developer may import or procure from the Domestic Tariff Area without payment of duty, taxes or cess or procure from Domestic Tariff Area after availing export entitlements or procure from other units in the same or other Special Economic Zone or from Export Oriented Unit or Software Technology Park Unit or Bio-technology Park unit, all types of goods, including capital goods (new or second-hand), raw materials, semi-finished goods (including semi finished jewellery), component, consumables spares goods and materials for making capital goods required for authorized operations except prohibited items under the Import Trade Control (Harmonized System) Classifications of Export and Import Items. He has, therefore, submitted that the entitlement of importing or procuring from the Domestic Tariff Area without payment of duty though may be available to a unit or a developer in the Special Economic Zone, there is no provision which exempts the levy of export duty under the Customs Act, 1962 read with the Special Economic Zones Act, 2005, any export duty that is leviable and to be collected from the unit which is outside the Spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act stipulated that the provisions of the Act shall have the 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 the said Act. Furthermore, having regard to section 53 of the Act of 2005, providing that a Special Economic Zone shall be deemed to be a territory outside the customs territory of India, in view of the deeming provisions, for the authorized operations the Special Economic Zones are territories outside India and, therefore, for the purposes of application of the Customs Act, 1962, removal of steel products from DTA to SEZ would become export and although the Customs Act defines the 'export' to mean taking any goods to a place outside India, because of the deeming provisions of section 53, supply to Special Economic Zone from Domestic Tariff Area becomes export for the purpose of the Customs Act, 1962 as well. Furthermore, the definition of 'export' as defined in section 2(m) of the Act of 2005 would prevail over the definition of the term under the Customs Act, 1962 when there is a transaction between a Domestic Tariff Area unit and Special Eco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... export duty. 32. Mr. Champaneri has further submitted that the exemption available under section 26(2) cannot be claimed to be an exemption from levy and payment of export duty by a DTA unit. The basic objective of levying export duty is to discourage export of steel items and augment domestic availability. The export of any item from the SEZ to a place outside India is statutorily exempt from export duty under section 26(1)(b) of the Act of 2005. However, this exemption will be available only to SEZ unit and not to DTA unit. Furthermore, if export duty is not applied to supplies of steel made from the DTA to SEZ, then the entire chain of transactions for such supplies would escape without any levy of export duty and the basic objective of the levy would be defeated. 33. In view of the above submissions, Mr. Champaneri has submitted that the petitioners are not entitled to any relief and hence, all these petitions deserve to be dismissed and the petitioners be directed to pay the relevant duty as confirmed by the appropriate authorities. 34. Having heard the learned counsels appearing for the parties and having gone through their rival submissions as well as pleadings in light ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... movement of the goods outside the territorial waters of India. Reference is made to the decision of the Apex Court in the case of Rajindra Dyeing & Printing Mills Ltd. (supra). 35.3 In the absence of any amendment of the definitions of the terms 'Export' and 'India' in the Customs Act, 1962, or any amendment in the charging section, i.e., section 12 or insertion of a charging provision contemplating movement of goods from the Domestic Tariff Area to the Special Economic Zone as a taxable event entailing a levy of Export Duty as in the case of export, the levy of Export Duty cannot be justified under the provisions of the Customs Act, 1962. 35.4 The very fact that such a charging provision, i.e., section 76F had to be introduced by inserting Chapter X-A in the Customs Act, 1962 containing sections 76A to 76N being Special Provision Relating to Special Economic Zone, clearly indicates that in the absence of the newly added provision, the said movement of goods was not a taxable event attracting levy of Export Duty under the provisions of the said Act. The entire Chapter has been omitted by the Finance Act, 2007 with effect from 11-5-2007 and, therefore, the aforesaid movement of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the Domestic Tariff Area to the Special Economic Zone is not at all provided for or contemplated thereunder, which will be evident from the following facts. 36.4 The Statement of Objects and Reasons of the SEZ Act, 2005 indicates that the policy for setting up of Special Economic Zones had been adopted by the Government of India with a view to provide an internationally competitive environment for export. The objectives of the Special Economic Zones include making available (to the Unit) goods and services free of taxes and duties for export production, supported by integrated infrastructure. 36.5 In line with the aforesaid objective of providing goods and services free of taxes and duties to the Unit in the Special Economic Zone or to a Developer for the purpose of establishing an integrated infrastructure for export production, provisions have been made in the SEZ Act, 2005 granting exemption from taxes and duties, which would otherwise have been leviable in the absence of any provision for exemption from such duties. 36.6 Section 7 of the Act exempts goods or services exported out of or imported into or procured from the Domestic Tariff Area by a Unit or Developer from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the export of goods from the Domestic Tariff Area to the Special Economic Zone are available either to the Domestic Tariff Area supplier or the Special Economic Zone Unit/Developer at their option. Therefore, duty drawback or DEPB and/ or other export benefits would be available to either party at their option. The sweeping exemption granted under this provision renders the contention of the Department regarding liability of the goods to levy of Export Duty, academic since this provision exempts the goods brought in by the Special Economic Zone Unit from all levies and duties. Since the duty is leviable on the goods, it would be irrational to contend that the export from the Domestic Tariff Area to the Special Economic Zone should be taxed while the inward movement of the goods from the Domestic Tariff Area to the Special Economic Zone, would be exempt. 36.10 The aforesaid provisions clearly establish the legislative intention recorded in the Statement of Objects and Reasons of making available goods and services to the Developer/Unit situated in the Specific Economic Zone, free of taxes and duties. A levy of export duty is neither expressly nor impliedly contemplated under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Ellis Bridge Gymkhana (supra), Venkateswara Hatcheries (P.) Ltd.'s case (supra) and Qazi Noorul H.H.H. Petrol Pump's case (supra). In fact, the interpretation canvassed by the department is not merely the adoption of a definition of another statute, but the incorporation of a taxable event itself, which is impermissible under the law. 37.2 The movement of goods from the Domestic Tariff Area to the Special Economic Zone has been treated as export by a legal fiction created under the SEZ Act, 2005. A legal fiction is to be restricted to the statute which creates it. Reference is made to the decisions of the Apex Court in the case of Sadan K. Bormal (supra), Meghraj Biscuits Industries Ltd.'s case (supra), Moriroku UT India (P.) Ltd.'s case (supra). Moreover, such legal fiction should be confined to the purpose for which it has been created. Reference is made to the decisions of the Apex Court in the case of K Gopalakrishna Shenoy (supra); Mancheri Puthusseri Ahmed's case (supra). As stated above, such movement has been treated as export under the SEZ Act, 2005 for the purpose of making available benefits as in the case of actual exports like duty drawback, DEPB benefits, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is stated to extend the whole of India. In any case, various provisions of the SEZ Act would be rendered redundant and unworkable if the Special Economic Zone was to be considered an area outside India. This is apart from the fact that such a declaration would be constitutionally impermissible. 38. In view of the above discussion and findings arrived at as well as conclusion drawn, the levy of export duty on goods supplied from the Domestic Tariff Area to the Special Economic Zone is not justified. The petitioners are, therefore, not to be called upon to pay export duty on movement of goods from Domestic Tariff Area to Special Economic Zone units or developers. 39. All these petitions, therefore, stood allowed to the above extent. Rule made absolute without any order as to costs. 40. In view of disposal of Special Civil Application No. 9656 of 2008, Civil Application No. 12705 of 2008 does not survive and it is accordingly disposed of. 41. On pronouncement of the judgment, Mr. Chhaya learned Senior Standing Counsel for the Central Government requests for suspension of operation of this judgment for a period of four weeks. 42. Heard. In the facts and circumstances of the case, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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