TMI Blog2014 (2) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... is to ensure that the goods which are permitted to be cleared to the DTA are returned back to the SEZ, so that they are ultimately used only for the required purpose of undertaking "authorized operation" within the SEZ. The "authorized operation" within the SEZ, insofar as the assessee is concerned, is the activity of refining Crude oil so as to obtain various Refined end-products such as gasoline, diesel etc. If the goods which were removed from the Zone to the DTA were ultimately received back into the SEZ and were finally used only for SEZ's authorized operation, the object behind the permission stood achieved and fulfilled. Steel materials were used for the purpose of construction of storage tanks in the RTF. Such storage tanks were still under construction on 04.06.2007, when the additional land was notified to be part of the SEZ. As such, neither the storage tanks nor the steel materials used for their construction had been used or utilized for any purpose other than the originally contemplated purpose of setting up a refinery in the SEZ. We also take note of the fact that before effecting any removal of goods in terms of the permission granted to it, the Developer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -principle approval was also granted in the same letter for expansion of the SEZ into multi-product SEZ, as and when minimum additional area of 1000 Hectares was acquired by the assessee. As per the provisions of SEZ Act, under Section 4(i) read with Rule 8 of SEZ Rules, 2006, a formal notification was issued on 19.04.2006, notifying the area of 1087 Acres (440 Hectares) as SEZ. The assessee applied to the Development Commissioner for setting up of a SEZ unit in the approved SEZ and submitted details of process of acquisition of additional land. The Development Commissioner issued a letter of approval to RIL on 04.05.2006 to set up an SEZ unit. The developer also acquired the possession of additional land of 1813 Acres for expansion of SEZ for which in principle sanction had already been granted by Govt. of India. The developer also made a request on 03.08.2006 for formalizing the in-principle approval for additional land pointing out that large work force has already been mobilized for construction activities on additional land. During the interim period, RIL received duty free steel plates, structural steel and tor steel for undertaking construction activity. Applications were ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods removed to non-SEZ area under Section 30 of the SEZ Act, 2005 read with Rule 25/34 of SEZ Rules, 2006 as detailed in Annexure A to D to show cause notice is confirmed and this amount is recoverable from M/s Reliance Industries Ltd and M/s Reliance Industries Ltd are directed to pay the said amount of Rs.49,37,90,415/- forthwith. The amount of 44,37,90,316/- paid by M/s Reliance Industries Ltd during / prior to the investigation of the case by DRI as detailed in the show cause notice is appropriated against the said duty liability of Rs.49,37,90,415/-. The remaining amount, i.e. Rs.5,00,00,099/- is recoverable from them. M/s Reliance Industries Ltd is directed to pay the said amount forthwith. 2. Interest at the applicable rate for the period as mentioned in Para 62, 62.1 and 62.3 of the show cause notice is also recoverable from M/s Reliance Industries Ltd on the duty confirmed as at Sr.No.1 above, and M/s Reliance Industries Ltd is ordered to pay the same forthwith along with remaining amount as at Sr.No.1 above. 3. Goods valued at Rs.1,82,24,32,482.35 seized on 11.07.2007 under Section 110 of the Customs Act, 1962 are confiscated under Section 111(j) and 111(o) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EZ. Consequently, to deny the benefit of SEZ to the appellant in respect of the said additional land in respect of the goods taken to the said additional land in the interregnum between the grant of in-principle approval and the formal notification would clearly be contrary to the ratio of the aforesaid decisions. 3.3 The principle laid down in the aforesaid decisions has in fact been applied to the case of a SEZ unit by this Hon'ble Tribunal in the case of Zydus Mayne Oncology Pvt. Ltd. reported in 2010 (262) ELT 0280 (Tri-Ahmd), in which the Tribunal has by following the aforesaid decisions laid down that there can be no duty liability in respect of goods which are received pending the grant of letter of approval by the Development Commissioner to a SEZ unit and so long as the goods are used for the purpose of the SEZ there can be no duty on such goods notwithstanding that they were received in the unit while its application for approval as SEZ unit was pending with the Development Commissioner. 3.4 Reliance is also placed on the decision of the Hon'ble Karnataka High Court in the case of Union of India Vs. Yokogawa Bluestar Ltd. reported in 2001 (129) ELT 598 in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued on 4-6-07 it would relate back to 19-4-2006. Consequently the duty liability on the steel taken to the additional land does not arise. Section 2(a) of the SEZ Act, 2005 contemplates only one appointed day which is in reference to the Notification of the original SEZ and any subsequent Notification for inclusion of additional area as part of the original SEZ would relate back to the said appointed day. 3.7 It is submitted that section 2(a) of the SEZ Act 2005 provides that the "appointed day" with reference to a Special Economic Zone means the date on which the special Economic zone is notified by the central Government under sub-section (1) of section 4, which in the present case is 19-4-2006. It is evident from the said Section 2(a) that the appointed day is defined with reference to the Special Economic zone alone and not with reference to any additional area subsequently included in a notified Special Economic Zone. Further the appointed day is defined as the date on which the Special Economic Zone is notified under Section 4(1) and it bears no reference to the date on which any additional area is included in the SEZ under the second proviso to section 4(1). Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mposed under the permission granted under Rule 50 ought to have been considered as a technical breach, not warranting denial of the substantive benefit of the permission granted under Rule 50 of the SEZ Rules, 2006. 3.9 Rule 50 (e) of the SEZ Rules 2006 permits a unit in SEZ to temporarily remove without payment of duty any goods to DTA with the approval of the Authorized officer. By letters dated 31-8-2006 and 18-10-2006 the Appellant had sought permission for removal to and storage of goods in area of 25 acres and 416.47 acres respectively comprised in the said additional land and such permission was duly granted and extended from time to time by the Authorized officer. In fact in the application dated 18-10-2006 the Appellant had clearly pointed out that it would undertake construction activities in the additional land which was expected to be shortly notified as part of the existing SEZ. It is significant to note that Clause (e) of Rule 50(1), unlike clauses (a) to (d) does not impose any restriction on the purpose for which the goods may be taken temporarily to DTA. The permission in response to the said application was duly granted by the Specified Officer under Rule 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacturer's factory the mere fact that the procedure of Rule 57 F was not followed would not be sufficient to deny the substantive benefit of Rule 57F. The Commissioner should have applied the ratio and principle laid down in the said decisions to the present case and he should have held that in the context of Rules 50 d 51 also, the purpose of stipulating the procedure of obtaining the permission of the authorized officer is to ensure that the goods which temporarily go to the DTA are eventually used in the SEZ and since there is no dispute in the present case about such eventual use in the SEZ the substantive benefit of the said Rules cannot be denied merely because the procedure of permission was not allegedly followed for taking the goods to the RTF. REVENUE NEUTRALITY 3.13 Without prejudice to the aforesaid submissions, it is submitted that since admittedly the goods remained in the DTA only temporarily and have eventually become part of the SEZ, duty if any payable at the time of the removal to DTA would be eligible to be paid back to RPL as Drawback. The entire situation is therefore revenue neutral and therefore the duty demand does not survive. The plea of reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (89) ELT 28 Pushpaman Forgins v. CCE - 2002 (149) ELT 490 [maintained in 2003 (153) ELT A 89] Rochees Watches v CCE - 2003 (152) ELT 420 The Commissioner erred in not following the above decisions by making a bald observation that the said decisions are distinguishable on facts and not applicable to the present case. He has not indicated as to how according to him the said decisions are distinguishable and he has assigned no reasons or grounds to indicate as to why according to him the ratio and principle laid down in the said decisions do not apply in the present case. 3.16 The Commissioner erred in proceeding on the basis that the charge/leviability of the duty is created by Section 30 of the SEZ Act and Rules 25 and 34 of the SEZ Rules 2006 provide for voluntary compliance and hence in the case of non-compliance recovery is implicit in the said provisions. The Commissioner erred in not appreciating that a mere provision for voluntary compliance is not sufficient for effecting recovery. There has to be an express provision for effecting recovery by adjudication in case of non compliance. As laid down in Eternit Everest Limited v UOI - 1997 (89) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Customs Act, 1962 applicable to inquiries and proceedings under the SEZ Act, 2005. Such referential provision exists in several other Central Enactments; for instance, Section 12 of the Central Excise Act, 1944, enables application of certain provisions of the Customs Act, 1962 for proceedings under the Central Excise Act, 1944. Likewise, sub-section (8) of Section 3 of the Customs Tariff Act, 1975 contains referential provisions enabling application of certain provisions of Customs Act, 1962 to proceedings under Customs Tariff Act, 1975. Similar referential provisions are to be found in Chapter V of the Finance Act, 1994, wherein the context of service tax levy, certain provisions of the Central Excise Act have been made applicable through a specific referential provision in Section 83. Referential provisions such as the ones referred to above give the requisite legal authority and sanction for application of certain proceedings under a different enactment. The SEZ Act, 2005 also contains a referential provision, it is however, only in the context of the Income Tax Act, 1961 (see Section 27). If it was the intention of the legislature to extend provisions of the Customs Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Customs Act, 1962. The Customs Act, 1962 confers no authority whatever on the DRI officers or on the Commissioner of Customs to investigate and adjudicate on alleged contraventions under the SEZ Act 2005. 3.20 The Commissioner erred in relying on Rule 25 of the SEZ Rules 2006 to hold that by virtue of the said Rule 25 the DRI had jurisdiction to initiate action under the Customs Act 1962 against a SEZ unit. He erred in not appreciating that the said Rule 25 merely stipulates that the liability of the SEZ unit to return the benefits/ exemptions availed in respect of goods which are not utilized for authorized operations or which are not duly accounted for shall be without prejudice to any other action under the Customs Act 1962. This provision by itself cannot confer on the DRI jurisdiction to initiate action in respect of alleged contravention of the SEZ Act and Rules. For any action to be initiated under the Customs Act, 1962, there should in the first place be a contravention under the Customs Act 1962. The effect of Rule 25 of the SEZ Rules is that if there is a contravention of the Customs Act 1962 then the liability to be proceeded against under the Customs Act 1962 sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stigations - 2008 (3) SCC 674 which lays down that the special law will prevail over a general law. 3.23 The Commissioner erred in holding that the steel taken to the RTF by the Appellant is liable for confiscation under Section 111(i) of the Customs Act 1962. He erred in not appreciating that Section 111 (i) applies to dutiable or prohibited goods and that the goods in question are neither dutiable nor prohibited goods. Dutiable goods would by virtue of Section 2 (14) and (15) mean goods on which duty leviable under the customs Act 1962 has not been paid. The commissioner has himself held, while holding that the Section 28 is not applicable, that the duty on goods taken from SEZ to DTA is not duty leviable under the customs Act 1962. Consequently he ought to have held that such goods are not dutiable goods for the purpose of section 111(i). This is without prejudice to the Appellant's submission that even duty under the SEZ Act is not payable in the present case. The commissioner seriously erred in holding that in view of the expression "Unless the context otherwise requires" appearing in Section 2 of the customs Act 1962, duty in case of goods removed from SEZ to DTA would m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DECISION IN ESSAR STEEL LTD BY COMMISSIONER NOT CORRECT 3.26 The Commissioner has erroneously relied upon the decision of the Gujarat High Court in the case of Essar Steel Limited v UOI-2010 (249) ELT 3 to support his interpretation that in view of Section 51 of the SEZ Act the provisions of the Customs Act 1962 shall apply to a SEZ. There is nothing in the said judgment to support the interpretation the provisions of the Customs Act shall apply to a SEZ. On the contrary, the High court has clearly held that the taxable events in the two Acts are different. Accordingly where the levy/charge is created by one of the said two Acts, the provisions of the other Act are inapplicable to such levy/charge. DEMAND FOR INTEREST NOT TENABLE IN LAW 3.27 The Commissioner erred in ordering payment of interest despite his finding that Sections 28 and 28AB of the Customs Act 1962 - are not applicable in the present case. He erred in ordering payment of interest without indicating any provision of law in terms of which he has ordered payment of interest. Apart from the submission that no duty itself is payable in the present case, it is submitted that the SEZ Act 2005 by which charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle approval the Appellant may be acting under a bona fide belief and commenced use of the steel in construction of the RTF to complete the project in time for which huge work force had been mobilized and that there was delay in issuance of the formal notification for the additional land. In view of these findings the Commissioner ought not to have imposed any fine and penalty. 4. SUBMISSIONS IN RESPECT TO DEPARTMENT'S APPEAL 4.1 The Department has in its appeal contended that in respect of the duty which is payable under section 30 of the SEZ Act 2005 in respect of goods cleared from SEZ to DTA, the provisions of section 28 of the Customs Act, 1962 would apply and consequently interest is recoverable under section 28AB of the Customs Act, 1962 and further that penalty should have been imposed under section 114A of the Customs Act 1962. The said contention of the Department is untenable in law as explained below. 4.2 The charge for levy of customs duty on goods brought from SEZ to DTA is created not by Section 12 of the Customs Act 1962 but by the specific provisions of Section 30 of the SEZ Act 2005. Accordingly the power to assess and recover as also the powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustoms Act 1952 and penalty under section 114A of the Customs Act 1962 are not attracted in the present case. 6. Shri P.R.V. Ramanan, Special Counsel, appointed by the Revenue for arguing this matter submitted as under:- Without prejudice to the appeals filed by the Department, the findings recorded by the Commissioner are reiterated and specific attention is invited to the following aspects: A. 1 Section 4 of the SEZ Act reads as follows: "SECTION 4: Establishment of Special Economic Zone and approval and authorization to operate it to, Developer.- (1) The Developer shall, after the grant of letter of approval under sub-section (1.0) of section 3, submit the exact particulars of the identified area referred to in sub-sections (2) to (4) of that section, to the Central Government and thereupon that Government may, after satisfying that the requirements, under sub-section (8) of section 3 and other requirements, as may be prescribed, are fulfilled, notify the specifically identified area in the State as a Special Economic Zone: Provided that an existing Special Economic Zone shall be deemed to have been notified and established in accordance wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditional land including RTF was unauthorized and was without any permission sought or permitted under Rule 50. Therefore, the question of grant of permission to carry out construction activities in the additional land area did not arise. This position has also been clearly brought out in para 46.1 of the Show Cause Notice. Therefore duty as applicable on the goods for home consumption under Section 30 of the SEZ Act, 2005 read with Rules 25 34 of the SEZ Rules, 2006 is payable on such removals from the SEZ/permitted temporary storage place to the remaining additional land area which prior to 04.06.2007 was D.T.A. It is precisely for this reason that RPL had paid duty subsequently on the goods cleared initially without payment of duty. C.1 It is contended by the appellant that the goods remained in the DTA only temporarily and have eventually become part of the SEZ. Duty, if any, payable at the time of removal to DTA would be eligible to be paid back to RPL as drawback. The entire situation was revenue neutral and hence, the duty demand does not survive. C-2 In this connection, reliance has been placed by the appellant on the decision of the Tribunal in the case of Larse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uirement would be mandatory. It is the cardinal rule of the interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way. It is also settled rule of interpretation that where a statute is penal in character, it must be strictly construed and followed. Since the requirement, in the instant case, of obtaining prior permission is mandatory, therefore, non-compliance of the same must result in cancelling the concession made in favour of the grantee-the respondent herein" The ratio of this judgment is fully applicable to the facts of the case in hand. E.1 It is contended by the appellant that there was no machinery provision for recovery of duty under the SEZ Act and the SEZ Rules and in the absence of any machinery provision for recovery of duty under the SEZ Act and the SEZ Rules, the Commissioner ought to have dropped the demand particularly when he has held that Section 28 of the Customs Act, 1962 has no application to the present case. Reliance has been placed on certain decisions to say that in the absence of any machinery provision for recovery of duty, no proceedings can lie for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise Tariff Act, 1985, the Central Sales Act, 1956, the Foreign Trade (Development Regulation) Act, 1992 and the Finance Act, 1994 (in respect of service tax) and the enactments specified in the First Schedule to the Act, as the case may be: (underlined emphasis supplied) "Provided that...................." F.2 From the above, it would be quite clear that where an entrepreneur or developer does not utilize the goods or services on which benefits in the form of exemptions, drawback, etc. have been availed or fails to account for the same, in that event, besides action against him under the rule, action under the provisions of the Customs Act, 1962 other enactment can also be taken against him. It would, therefore, be incorrect to say that the Customs Authorities including the DRI have no jurisdiction to initiate investigations and to issue show cause notice. In the case of non-payment of customs duty for unauthorised removal of goods from the SEZ to the DTA, the DRI Officers who are also Customs Officers are competent to initiate action under Section 108 of the Customs Act, 1962 for recording statements of the persons concerned and for production of documents releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the DTA is taken as deemed import. It is precisely for this reason that the DTA buyer requires an import licence for obtaining goods from the SEZ as per provisions of rule 34 of the SEZ rules. H. Though the Commissioner has held that interest is not payable in terms of Section 28 AB of the Customs, nevertheless it is payable along with duty in addition to redemption fine under Section 125 (2) of the Customs Act, 1962 and also in terms of the conditions of Bond-cum-Legal Undertaking executed by RPL on 05/05/2006 and Double Duty Bond Executed by them on 20/10/2006. In this regard, the Commissioner has relied upon the judgment of the Hon'ble Bombay High Court in the case of Union of India Vs Valecha Engg. Ltd. - 2010 (249) ELT 767. No fault can be found with the Commissioner's order inasmuch as the customs Act, 1962 makes provision for such interest in Section 28AB. APPEALS FITED BY THE DEPARTMENT 12.1 The Commissioner has held that Sections 28, 28AB and 114A of the Customs Act 1962 have no application to the present case. It appears that the Commissioner has not appreciated the provisions of the SEZ Act and the SEZ Rules in proper perspective, particularly, the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2008 was issued by Govt. of Gujarat. It is his submission this fact is recorded in Paragraph 5 of the Developer's letter dt.03.08.2006 to Joint Secretary, Ministry of Commerce. It is his submission that by 03.08.2006, the developer had already come in possession of 1813 acres of vacant land out of which 1000 acres were ear-marked for allotment to the appellant (as a unit in SEZ); and balance 813 acres of land was to be kept by the SEZ developer for setting up infrastructure facilities. It is his submission the developer submitted an application to Ministry of Commerce, seeking formal notification for 1813 acres of land as multi-product SEZ and it was pointed out in the application that the map of entire area is of 2900 acres which included 1087 acres already notified and 1813 acres of additional land which was sought to be notified. It is his submission that in view of notification for land acquisition by Govt. of Gujarat and in light of the Memorandum of Understanding with the land owners and consequent transfer of vacant possession of land, in lieu of payment of part consideration, for all legal purposes, the land stood transferred in favour of the appellant under the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the goods outside SEZ was to ensure that there is no mis-use or diversion of goods for purposes other than for which it was procured, and it is also not the case of the Revenue that there was diversion of goods for any other purpose or use other than that for SEZ, which has been admitted by the adjudicating authority in the impugned order. He would submit that no Bill of Entry was required to be filed in view of specific permission granted under Rule 50(1)(e) of SEZ Rules, 2006 and there is absence of machinery provisions for the recovery of duty. It is also his submission that there is no jurisdiction of the Customs authorities to collect duty and the judgment relied upon by the Revenue in the case of Oswal Agricomm Ltd - 2011 (268) ELT 21 (Guj.), is distinguishable as the said judgment of Hon'ble High Court was rendered in the context of the case where the goods were imported outside India in contravention to Customs Act, 1962 read with Hardadous Rules, 2008 and hence not applicable in this case. 9. We have considered the submissions made at length by both sides and perused the records. 10. Though arguments were advanced on issues relating to jurisdiction of the Customs a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, the permission granted under Rule 50 will become redundant and any violation thereof will also be of consequence, in order to examine this contention, a few facts need to be noted. 13. The undisputed facts are that the Ministry of Commerce Industry, Department Of Commerce (SEZ Section) vide letter dt.31.03.2006, granted formal approval to Reliance Infrastructure Ltd (the Developer) to set up a product specific SEZ at Jamnagar over an area of 1087 Acres (440 Hectares of land). Since the application made by the Developer was for setting up a Multi-product SEZ, which at the relevant time required a minimum 1,000 Hectares of land, the Approval letter dt.31.03.2006 also contained an in-principle approval for expansion of the SEZ into a Multi-product SEZ as and when minimum area of 1000 Hectares came to be acquired. The relevant clause of the letter dt.31.03.2006 is extracted below: "I. Proposal and project details:- To set up SEZ for petroleum and petrochemicals over an area of 1087 Acres (440 Hectares) with an in-principle approval for its expansion into multi-product SEZ as and when the minimum area of 1000 Hectares is acquired by the Developer at Jamnagar district i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. 16. Another set of facts which need to be mentioned relate to the disclosures made by the appellant and the Developer. While applying for final approval in respect of this additional area of the land, the Developer had in its letter dt.03.08.2006 informed Ministry of Commerce that the appellant wanted to start construction activities in the additional land immediately, since a workforce of over 30,000 had been mobilized and any further delay could delay the commencement of the refinery. Having so informed the Ministry of Commerce, the appellant started moving construction steel material such as M.S. Steel, Tor Steel etc. from the notified zone area to the additional area located at that time in the DTA. Such movement of steel construction material took place only after 03.08.2006 in terms of various permissions which the appellant applied for and obtained from the specified officer in terms of Rule 50(1)(e) of the SEZ Rules, 2006. On 18.10.2006, besides seeking approval for removal and storage of duty-free inputs outside the SEZ, the appellant also sought permission of the specified officer to continue with the construction activities in relation to the duty-free goods sought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to any fault of the assessee; d) The steel items in question were removed from the SEZ to the specified storage point located in the additional area only after 03.08.2006, when a formal application and request had been submitted to the Ministry of Commerce for notifying the additional area to be a part of the original SEZ by giving particulars of the specific land parcels comprising the additional area. e) The Notification dated 04.06.2007 by which the additional area was notified was not a stand-alone or independent Notification, but one in continuation of the first Notification dated 19.04.2006. The said Notification clearly refers to the notified land as "Additional area" and says clearly that the same was being notified to be included as a part of the existing SEZ. f) The SEZ Scheme does not contemplate different 'appointed days' for different land parcels comprising an SEZ. Once an additional piece of land is notified to be a part of an existing SEZ, the provisions of the SEZ Act will apply in respect of that additional area as if the same was always part of the SEZ. The provisions of Section 4 (1) of the SEZ Act, 2005 read with the definition of the term 'ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the earlier Notification. For coming to this conclusion, we have taken note of the language employed in the Notification dated 04.06.2007, which we are extracting below: "S.O. 873 (E).....And whereas the Central Government, in exercise of the powers conferred by sub-section (1) of Section 4 of the Act read with ... has notified the total area of 440.08 Hectares at Jamnagar ... vide Notification No.S.O.568(E), dated 19.04.2006; And whereas ..... Now, therefore, in exercise of the powers conferred by second proviso to sub-section (1) of Section 4 of the Act...., the Central Government hereby notifies an additional area of 784, 0296 hectares at Jamnagar ... to be included as a part of that SEZ, ..." (Emphasis provided) 20. The use of the word "Additional area" as well as the words "to be included as a part of that Special Economic Zone" impel us to take the view that the Notification dated 04.06.2007 should take effect from 19.04.2006, when the original Notification was issued. We also agree with the assessee's submission that the Scheme of the SEZ Act contemplates only one "appointed day" for a particular SEZ. This becomes clear from the definition of 'appointed day' in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a particular SEZ. Thus, in our considered view, even in respect of an additional area notified in terms of the second proviso of section 4 (i), the "appointed day" will be the same as that of the originally notified land. Thus, in respect of the SEZ, where the assessee's unit is situated, the appointed day is 19.04.2006 and not 04.06.2007. In view of the Scheme of the SEZ Act, as also the facts noted above, we have to hold that the action of notifying an additional area to be a part of the SEZ will have the effect of deeming that additional area to be a part of the existing SEZ from the date of the initial Notification. Any other interpretation would be not in consonance with the SEZ Scheme and will also lead to a manifestly unjust and inequitable result of denying an assessee the benefit of duty exemption when admittedly the goods in question were used for the setting up of the SEZ Unit and not for any other purpose. 23. We also find that the ratio of the judgement of Hon'ble Supreme Court in the case of M.P.V. Engg. Industries - 2003 (153) ELT 485 (SC) supports our view taken on this subject. Their Lordship in the said judgment in Para 11 has settled the law as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the benefit of SSI Exemption under the Excise laws was to be construed from the date of receipt of certificate from the authorities or from the date of application. In our view, the ratio laid down by the Hon'ble Apex Court will fully apply to the present case. 25. In yet another case of Yokogawa Bluestar Ltd - 2001 (129) ELT 598 (Kar.), Hon'ble High Court of Karnataka was considering the effect to be given to an exemption notification issued after some delay to regularize the concessional import under the EPCG scheme already announced in the EXIM Policy which was notified as per Imports Export (Control) Act, 1947. Their Lordship; while upholding the judgment of single member, recorded as under: "6. The admitted facts reveal that the Govt. of India issued a notification in the matter of Export and Import policy for a period of 5 years in terms of the power granted to the respondents. The said policy is to be effective for a period of 5 years. The writ petitioner acting upon the said policy imported capital goods and sought for concessional Customs Duty which has also been granted after being satisfied by the respondent. It is only after audit objection a show cause notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of M.P.V. Engineering - 2003 (153) E.L.T. 485 (Supreme Court) to support his contention that the benefit as SEZ unit is available to the appellants with effect from the date on which application was made before the competent authority and not from the date when such approval was given. On the other hand learned SDR submits that in the absence of specific provisions in the law and as rightly observed by lower authorities, such benefit cannot be extended. 3. I have considered the submissions made by both the sides. Learned Commissioner (Appeals) has rejected the claim of the appellants with the following observations :- "3................ However, I have considered their submissions and have examined the matter. It is a fact that the appellant had procured the impugned excisable goods on payment of duty on 07/10-6-2006 that is before grant of approval to them for setting up a SEZ unit for authorized operations. Unless they are in possession of this Letter of Approval, exemption and benefits provided under Section 26 of Special Economic Zones Act 2005 or Rule 27 of the Special Economic Zones Rules 2006, would not be applicable. The appellant obtained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry much applicable and therefore, on this ground itself appeal has to be allowed, since goods have been received after application has been made but before approval and therefore, refund has to be granted. Accordingly, appeal is allowed with consequential relief to the appellants." 28. In the light of the above-referred decisions and judgments, we hold that the Notification dated 04.06.2007 should relate back to 19.04.2006. In view of this, the construction activities conducted in the additional area will have to be deemed as carried out within the SEZ. The permission granted under Rule 50 (1) (e) as also the conditions laid down therein will become irrelevant in view of the subsequent action of notifying the additional area as part of the existing SEZ. 29. Though the assessee is entitled to succeed only on the above reasoning, we would also like to record our findings on some other points raised by both sides. 30. We note that the finding that the assessee violated the terms of the permissions granted under Rule 50 (1) (e) of the SEZ Rules, 2006 cannot sustain, if the additional area in the DTA is deemed to be SEZ from 19.04.2006. The effect of treating the Additional Area a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above-referred rule is to ensure that the goods which are permitted to be cleared to the DTA are returned back to the SEZ, so that they are ultimately used only for the required purpose of undertaking "authorized operation" within the SEZ. The "authorized operation" within the SEZ, insofar as the assessee is concerned, is the activity of refining Crude oil so as to obtain various Refined end-products such as gasoline, diesel etc. If the goods which were removed from the Zone to the DTA were ultimately received back into the SEZ and were finally used only for SEZ's authorized operation, the object behind the permission stood achieved and fulfilled. In the present case, the steel materials were used for the purpose of construction of storage tanks in the RTF. Such storage tanks were still under construction on 04.06.2007, when the additional land was notified to be part of the SEZ. As such, neither the storage tanks nor the steel materials used for their construction had been used or utilized for any purpose other than the originally contemplated purpose of setting up a refinery in the SEZ. We also take note of the fact that before effecting any removal of goods in terms of the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion granted under rule 50 (1) (e) of the SEZ Rules, 2006. 35. The appeals filed by the Revenue in this case are, as already recorded by us, against the findings of the learned Commissioner that provisions of Sections 28, 28AB and 114A of Customs Act, 1962, have no application to the present case. We find that the said appeals are liable to be rejected as once we take the view the entire area to which the goods were removed were declared as SEZ, the provisions of SEZ which deal with recovery of duty on removal of goods to the DTA will become inapplicable as the disputed movement of goods would be within the SEZ and not one from the SEZ to the DTA. The provisions made in the SEZ Act for payment of duty applies only to cases of the goods being removed from SEZ to the DTA, and not otherwise. The appeals filed by the Revenue are therefore liable to be rejected. 36. Even if a view was to be taken that the provisions of section 28 of the Customs Act are attracted, such a view will not be of any avail to the Revenue as any demand for duty under section 28 would be clearly time barred in view of the following admitted facts which are recorded in para 99.5 of the impugned Order and whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot arise. We, therefore, hold that the Revenue's appeals have no merit and are liable to be rejected. 38. In view of the foregoing, we set aside the impugned order and allow the appeals filed by the assessee and the individuals and reject the appeals filed by the Revenue. (Pronounced in court on ......) B S V Murthy, J. M V Ravindran, J. PER : B S V Murthy 39. On going through the order recorded by the respected learned brother Member (Judicial), I find myself unable to agree with the same and therefore propose to record a separate order as under: 40. Since the facts and arguments have been reproduced by the learned brother, I do not propose to reproduce them again except in places where I find that the facts have not been presented before us correctly or interpreted correctly. 41. The first conclusion is that the Notification dt. 04/06/2007 issued by the Central Government including additional land area and covering SEZ to multi product SEZ relates back to 19/04/2006. Therefore, the construction activities conducted in the additional area are deemed to have been carried out within the SEZ. Therefore the permission granted under Rule 50(1)(e) of SEZ Rules, 2006 as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relates to the subsequent steps to be taken after the LOA is granted. The sub-section (1) of Section 4, first paragraph reads as under: "The developer shall, after the grant of Letter of Approval under sub-section (10) of Section 3, submit the exact particulars of the identified area referred to in sub-sections (2) to (4) of that Section, to the Central Government and there upon that Government may after satisfying the requirements, under sub-section (8) of Section 3 and other requirements, as may be prescribed, are fulfilled, notify the specially identified area in the State as an SEZ. As can be seen, the terms on LOA, 'identified area' and 'notification of identified area' have great significance and all are legal terms. Obviously under Section 8, the Central Government prescribes the requirements such as minimum area of land and other terms and conditions to be fulfilled and only after satisfying with all the requirements of sub-section (8) of Section 3 relating to minimum area, terms and conditions, are fulfilled, the notification is made. This would show clearly that the Act contemplates several steps to be taken by the Board of Approval and the Central Government at each sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gar Infrastructure Ltd. on 10/01/2007, (d) approval of conversion of SSSEZ into a Multi-product SEZ on 09/05/2007 and finally (e) notification of additional area to be included as part of the SEZ. 50. From the fact that the developments from 19/04/2006 to 09/05/2007 have been elaborated in the notification and the notification specifically contains approval for conversion of SSSEZ to Multi-product SEZ and transfer of approval to another company etc. would show clearly that any change in the area, in the character, in the name and the coverage is required to be notified. In this case the SSSEZ became Multi-product SEZ on 04/06/2007, The area covered by the SEZ was enhanced by 784.042 hectares on 04/06/2007, The developer also was changed and this has been approved in the meanwhile and this was also notified on the same day. This shows that the nature of the SEZ and the land coverage of the SEZ had to be notified and a LOA or an earlier notification as an SEZ would not serve the purpose. It has to be noted that based on the notification issued by the Central Government, several benefits which accrue to the SEZ as well as the units located in the SEZ are to be extended. When multipl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim SEZ benefit from the appointed day which will again result in legal complications. 53. The provisions of Section 3 and Section 4 of SEZ Act are very clear. A developer is required to make an application; this application would be considered by the Board; if the Board is satisfied approval is forwarded to the Central Government; the Central Government forwarded to the Central Government; the Central Government receipt of acceptance and after satisfying with all the requirements and terms and conditions have been fulfilled, Central Government issues the notification. It has to be noted that Section 4 of SEZ Act in the 2nd proviso provides for notification of additional area subsequently to be included as a part of that SEZ. If the additional area is required to be treated as the one which was part of the SEZ on the appointed day, either the notification would have to say specifically so or statutory provisions have to be there. No notification can be given retrospective effect without authority of law, the claim of the appellants if accepted, would mean, the notification dt. 04/06/2007 would be effective from 19/04/2006. I have already explained why the notification is require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts have to be in petroleum and petro-chemical sector. As regards units in other sectors, the appointed day would be 04/06/2007 whether they are located in additional area or in the area located prior to 04/06/2007, There is no basis for concluding otherwise except that such a conclusion would be convenient for the appellants. 56. One of the reasons for coming to the conclusion that the appointed day has to be only one and has to be taken as 19/04/2006 is the appellant's submission "any other interpretation would not be in consonance with the SEZ Scheme and will also lead to manifestly unjust and inequitable result of denying an assesses the benefit of duty exemption when admittedly the goods in question were used for the setting up of the SEZ unit and not for any other purpose". 57. I have already shown that even this conclusion would not be in consonance with the statutory provisions and SEZ Scheme and can lead to unwanted results and complications. The interpretation as argued by the appellants no doubt would appear to be very reasonable and leading to a very satisfactory and appropriate conclusion in this case. But that would be for the appellants only and it cannot be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en their consent to the Government as well as to us. MOUs have been signed by us with the land owners and part consideration has also been paid to the land owners. We have been given peaceful and vacant possession of this land. The only thing that remains is the transfer of land in our name in the Revenue Records. For all legal purposes, the land has been transferred to us and we own the land. This is supported by Section 53A of the Transfer of Property Act, wherein payment of consideration and transfer of possession of the land is deemed to be transfer of the land." 60. Further on going through the letter we find that in paragraph 12, the appellants have stated "we are in possession of aforementioned land and are in process of taking development rights from all the land owners". If appellants were already having possession and why the appellant had to take development rights from the land owners is a question which rightly comes to the mind. Further if there is no dispute between the land owner and the purchaser, naturally the appellants will be able to take whatever steps they want to take on the land which is going to be purchased by them. For this purpose Transfer of Property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of approval is issued, the developer cannot allot the land to any SEZ unit. In this case RIL located the additional land and allowed RPL to mobilize the workforce and made contrary claims in their letter. 62. Para 13 of the above letter also is very relevant. According to this para the appellants have requested approval of contiguity relaxation, formal approval for 1813 acres of land of multi product and have also promised that they would be submitting the development rights and sought issue of notification. The very fact that the appellants sought issue of notification would show that the appellants themselves believed that a notification by Central Government approving the multi product SEZ and notifying the additional land is required, which in my opinion, is the correct understanding of the law. 63. An impression was also given that an application for formal notification of the additional land was made on 03.08.2006 wherein the additional area was identified by giving process of certificate numbers etc. It was also submitted that the notification took 10 months to be issued. This would give an impression that the delay occurred on the part of the Government and appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was whether the assessee was a small scale industry in accordance with the rules. In that case assessee was a SSI unit on the date of application in accordance with the rules. Therefore the Hon'ble Supreme Court came to the conclusion that benefit will accrue to a unit found to be a small scale unit from the date on which the application was made for grant of registration certificate. The Hon'ble Supreme Court held that such a unit should not be deprived the unit to which otherwise entitled merely because authorities took time in disposing of the application. 65. In this case, during the period when the indigenous/imported goods were removed for construction work, the land has not been notified as SEZ. No evidence has been produced that the Board of Approval had approved RPL as a SEZ unit as required under Section 15 of SEZ Act. Neither the land was notified nor the unit was approved by the concerned authorities as required under SEZ Act, On the date of application i.e. 03.08.2006, I have already considered and found that land acquisition process itself could not have been over. The letter itself admits that they are seeking development rights from the authorities. No proof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... removal of goods from SEZ was only for temporary storage for the specified area, Removal to other areas was not covered by the permission. Further officers in the SEZ also clarified that the additional area/RTF was not SEZ at the material point of time, The very fact that specified officer gave permission for temporary storage points to the belief on the part of the appellant as well as the RPL and also the officers in SEZ that everyone believed and understood that additional area was not SEZ till notified. Neither 25 acres nor 416.47 acres for which permission was granted for temporary storage was included in the RTF area and therefore the activities undertaken in the additional area were totally unauthorized and not covered by permission. No permission was given for construction activity and the specified officer has also clarified as brought out by the Commissioner in the findings in the order. As regards revenue neutrality, no provisions of law providing for the same and no provisions of law which provide that in the case of activities undertaken in DTA, refund will be available subsequently have been shown. In any case what is required to be examined for determination as to w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vice-president of RIL would also show the understanding of the appellants during the relevant time. "xiii. The RTF area was not a notified area under the SEZ Act then. As stated in his statement dtd. 28.05.2007, in May, 2007 they got a formal approval for declaring the additional area of 733 hectares covering various land survey numbers of village Navagam, Kanalus and Padana as SEZ. In this 733 hectares, they had planned for the construction of 69 tanks and 09 Horton Spherical tanks and other infrastructural facilities. xvii. To be precise by the word SEZ he meant the RSEZ being developed on 1087.44 hectares and the additional areas proposed for notification and, certain areas which were yet to be acquired/proposed/notified. xix. He submitted three sheets containing layouts of the WBS as explained above. The sheets marked as A and B were the WBS for SEZ being developed and the sheet marked as C was the WBS of the existing refinery and was titles as 'DTA'. All the three sheets bore the title of 'Jamnagar Export Refinery Project' and the date of 01/03/2007 i.e. the date of revision of the WBS" 70. Further the statement of Shri D.N. Dheer, General Manager (Exim cleara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of applicable duty. When the goods were cleared to the RTF area after filing of bill of entry, the physical movement of the goods took place only under OGPs manually issued by the stores department and which were also countersigned by the SEZ Customs officer. In these cases, no Internal Gate Pass or an Inter Site Material Transfer Gatepass was issued. xiii) The subsequent filing of bill of entry and payment of applicable duty in respect of goods already cleared to the RTF area prior to 04.06.2007 on the basis of the construction forecast and progress reports received from the contractors was done on the instructions of Shri V.K. Gandhi, Senior Vice-president (Non Technical) of their company. xiv) They had till 06.06.2007, in all filed 15 bills of entry in respect of the clearance of Steel Plates, TOR Steel, Structural Steel, Pipes and Fittings and Furniture to the RTF area and paid a total duty of Rs. 20.81 crores. xv) Regarding bill of entry no. 488 dated 06.06.2007, he stated that this bill of entry was filed by them for payment of duty in respect of the 10800 MTs of steel plates cleared prior to 04.06.2007. As in the case of the other bills of entry filed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se break up for all the goods issued to the various users in the RTF area and other areas now notified as SEZ vide notification dated 04.06.2007, within a week's time. xx) The differential duty of Rs. 15 crores deposited on 12.06.2007 by them was towards the clearance of the goods mentioned in the aforesaid summary sheet in column No. 12 showing the particulars of the deposit of duty. xxi) According to the said summary sheet produced by him, a total amount of Rs. 46.28 crores was payable as duty; out of which Rs. 20.80 crores was paid by them under 15 bills of entry (including bill of entry No. 488 dated 06.06.2007 for Rs. 5.59 crores) and the balance of Rs. 25.50 crores was paid by them under TR6 challans dated 12.06.2007 and 25.06.2007." 71. It is also pertinent to note that once the DRI took up the investigation, RPL neither disputed quantity nor the value of the goods or the amount of duty involved. Even before us also either in the appeal memorandum or during arguments the quantum of duty was not raised as an issue. 72. In this connection the submission of the learned special consultant for the Revenue that in terms of Rule 25 and 34 of SEZ Rules 2006 RPL ought t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the present case. I agree with the submission of the learned special consultant that the Commissioner has not appreciated the provisions of SEZ Act and SEZ Rules in proper perspective. According to the sub-section (2) of Section 53 of the SEZ Act, SEZ is deemed to be a port, airport, inland container depot, land station and land customs station, as the case may be, under Section 7 of the Customs Act, 1962. According to Section 7 of the Customs Act, 1962, the Central Board of Customs by notification, appoint, the ports and airports which alone shall be customs ports or customs airports and so on. Therefore, it is clear that SEZ has to be treated as a port. 76. Further, it is settled law that goods brought into DTA from SEZ is deemed to be import. Once these two factors are considered, any removal of goods from port to DTA has to be in accordance with law, i.e. after filling a Bill of Entry and getting the same assessed. All the parties concerned in this case have understood the provisions correctly which is reflected by fact that the Bills of Entry, in fact, were filed and part of the duty was paid even though not properly. Once the legal procedural aspect that a Bill of Entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have been brought out and therefore, the applicability of provisions of Customs Act, 1962 cannot be questioned. 79. In view of the above discussion, the contention of the appellants that the DRI officer has no jurisdiction to investigate the case cannot be sustained. Further, the view taken by the Commissioner that Sections 28 28AB are not applicable also cannot be sustained. In these circumstances, the appellant shall be liable to pay duty on the goods which were cleared without payment of duty to the DTA prior to 4.6.2007 (the date of issue of notification by the Government of India) with interest. It is made clear the duty is payable on all the goods which were found to have been cleared and used for construction and taken out of the area permitted for storage prior to 4.6.2007 with interest. From the orders, is not clear whether the duty amount demanded/paid is on the entire quantity including the quantity used for construction and quantity found as such or only the quantity used for construction. As regards the quantity not used for construction and lying as such in the permitted storage area of the additional land notified by the Government of India, the discussion in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the penalty or the appellants, the learned brother has already taken a view that no penalty is imposable. Even though, I have taken a view that duty is payable, several mitigating factors in this case which compel me to take a view that this is not a case where penalty under Section 112 needs to be imposed. Mitigating factors: (a) The contention that the area became SEZ subsequently, and therefore, appellants were entitled to a bonafide belief that they were eligible for clearing the goods without payment of duty have been accepted by the Member (Judicial) which would show that it cannot be said that the appellant have rendered the goods liable for confiscation. (b) The appellants were paying duty from time to time, since the process of getting approval of additional area was in progress. From the sequence of events, it appears to me that the appellant did not pay the entire duty and went on paying duty from time to time in the hope that any day, the approval would come and thereafter, they would not be liable to pay duty. This also would show that the appellants did not intend not to pay duty but were trying to pay the minimum amount possible. (c) I have alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oms officer have jurisdiction to investigate the case and demand duty as held by the Member (Technical) or the issue is irrelevant and need not be considered as held by the Member (Judicial). 3. Whether the appellants can be said to have violated the terms of permission granted for storage of steel items by removing for construction as held by the Member (Technical) or they cannot be said to have violated the conditions as held by the Member (Judicial). 4. Whether limitation as a ground was not raised by the appellants and the same need not be considered as held by the Member (Technical) or needs to be considered as held by the Member (Judicial). 5. Whether demand can be said to be barred by limitation as held by the Member (Judicial) or demand is not barred by limitation as held by the Member (Technical). 6. Whether the matter is required to be remanded for re-quantification of duty as held by the Member (Technical) or no duty is to be demanded as held by the Member (Judicial). (pronounced on 10/6/13) B S V Murthy, J. M V Ravindran, J. PER : H K Thakur 85. As per Order F.No.01(35)D.O.O./CESTAT/2012, dt.02.07.2013, of the Hon'ble President, CESTAT, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his submissions coupled his arguments on the lines of reasons recorded by Member (Technical) and emphasized that the view taken by Member (Technical) is correct. On the other hand, Advocate Shri J.C. Patel emphasized that the view taken by Member (Judicial) is the correct interpretation of law, as Notification No.S.O. 873 (E), dt.4.6.2007 issued by Ministry of Commerce Industry will relate back to 19.04.2006 when Notification No.S.O.568(E) was issued. It was his argument that once it is held that notification dt.4.6.2007 is considered relating back to 19.4.2006 then there is no question of any unauthorized operation and accordingly the view taken by Member (Judicial) on various points of difference will be the correct interpretation of law. Sufficient time was taken by both sides in explaining the facts of the case and co-relating the same with the provisions contained in Section 2(a), 2(b), 2(m), 2(za), 3, 4, 11, 12, 21, 22, 30, 51 to 53, 54 and 57 of the Special Economic Zones Act, 2005 (SEZ Act 2005) and Rules 2(c), 2(za), 2(zb), 2(zd), 5(2)(d), 6, 7, 8, 15, 25, 27, 29, 34, 37, 47 to 51, 75 76 of the Special Economic Zones Rules, 2006 (SEZ Rules, 2006), explaining their res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sting SEZ under Second Proviso to Section 4(1) of the SEZ Act. 2005 Appellants relied upon the following case laws in support of their arguments that notification issued on 4.6.2007 will relate back to earlier notification dated 19.4.2006. (i) CCE Vs. MPV Engineering Industries [2003 (153) ELT 485 (SC)] (ii) Santadas Idanmal Company Vs. UoI [1981 (8) ELT 561 (Del.)] (iii) UoI Vs. Yokogawa Bluestar Ltd. [2001 (129) ELT 485 (SC)] (iV) Zydus Mayne Oncology Pvt. Ltd. [2010 (262) ELT 280 (Tri.Ahmed)] 88.3 On the above issue of relating back of the notification, it was the main argument of the Special Counsel appearing on behalf of the Revenue that notification issue on 19.4.2006 was Sector specific SEZ for petroleum and petrochemical units whereas notification issued on 4.6.2007 was for multi-product SEZ and that both these categories of SEZ represent separate class of SEZ as per the definitions given in Rule 2(za) and 2(zb) of SEZ Rules, 2006. It was his argument that multi-product SEZ came into existence only after 4.6.2007 and all the operations of construction done the area not notified will be considered as unauthorized operations when provisions of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dt.4.6.2007 will not relate back to 19.4.2006. It is a well accepted legal proposition that in the case of a conflict between a provision contained in an Act and the one contained in the Rules made under that Act, the provisions contained in the Act will prevail over the Rules and it cannot be said that before 16.3.2007 when Rule 5(2)(d) was added, there was no provision for conversion from one category of SEZ to another category of SEZ. Prescribed Rules and procedures are made only to implement and operationalise the provisions of the Act. In view of the above observations and the case laws relied upon by the appellants, I agree with the view taken by Member (Judicial) that notification dt.4.6.2007 will relate back to 19.4.2006 in view of the Second Proviso to Section 4(1) of SEZ Act 2005, read with the case-laws listed in Para 88.1 above. 88.4 The provisions regarding removal of goods from SEZ area to DTA without payment of duty are contained in Rule 50 51 of SEZ Rules, 2006. It is the argument of the appellants that they approached the Authorized officer under Rule 50(e) of the SEZ Rules, 2006 for temporary storage of goods outside SEZ area and for construction activities. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 and SEZ Rules, 2006 as per recovery provisions contained in Rule 34 and Rule 51(5) of the SEZ Rules, 2006. Such duties, if any payable by the appellants, could have been recovered from the main appellant by enforcing the general bond executed by the appellant with SEZ Authorities, as observed by Member (Technical) in Para 80 and 83 above. The SEZ Act 2005 and SEZ Rules, 2006 is a self contained piece of legislation to be implemented exclusively by the Approval Committee and the SEZ Development Commissioner of SEZ under the Commerce Ministry. Further, whether the operations regarding sending goods to DTA and their use in further construction, under intimation and approval of the appropriate authority, will be 'Authorized Operations' or the appellants should be served with a demand of Customs/Central Excise duties is adequately covered within the domain of the SEZ Act 2005 and SEZ Rules 2006. 88.5.1 Before the creation of the SEZ Act 2005, the working of Special Economic Zones was regulated by the provisions contained in Chapter XA of Customs Act, 1962. As per Notification No.S.O. 320(E) dt.14.03.2006, issued under Section 52(1) of SEZ Act 2005, the provisions of Chapter XA of Cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orized Operations under the SEZ Act 2005 or the SEZ Rules 2006 or was an activity of clandestine clearance with intention to defraud Government exchequer and without the knowledge of the appropriate authorities created under the SEZ Act 2005. Further, this distinction with respect to clandestine removal is required to be made in the light of the 'Statement of Object Reasons' contained in the beginning of the SEZ Act 2005 and is reproduced below: "Statement of Objects and Reasons:- The Government of India had announced a Special Economic Zone Scheme in April, 2000 with a view to provide an internationally competitive environment for exports. The objectives of Special Economic Zones include making available goods and services free of taxes and duties supported by integrated infrastructure for export production, expeditious and single window approval mechanism and a package of incentives to attract foreign and domestic investments for promoting export-led growth. 2. There are at present eleven functioning Special Economic Zones. While seven Zones have been set up by the Central Government, four by the private/joint/State sector. In addition, approvals have been given fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc. With the above objectives in sight and elaborate provisions contained in the SEZ Act 2005 and SEZ Rules 2006, a liberal view is required to be taken, and that too by the appropriate authorities under the SEZ Act 2005 and the SEZ Rules, 2006, whether an act or omission done by the appellants could be 'Authorised Operations' or a clandestine activity requiring strict action. Even after a view is taken that operations undertaken by the appellants were not within the scope of 'Authorized Operations' it is required to be seen whether the operations undertaken by the appellant call for a only payment of appropriate duties and interest or would attract severe action under the SEZ Act 2005 or the Customs Act, 1962. In order to protect the genuine Special Economic Zones and Units a consultation machinery has been provided between different agencies as per the provisions contained in Section 12(1)(c), read with the first proviso to Section 22 of the SEZ Act 2005. Such provisions for mutual consultations are essential for the working environment intended for Special Economic Zones as one of the functions of SEZ Development Commissioner, under Section 12 of the SEZ Act 305, is to guide the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 2005 and Rules made thereunder, the following situations can exist where duties of Customs/Central Excise can be demanded from a SEZ or the units working in a SEZ. (i) Removal of goods on DTA sales on payment of duties under Rule 47 of the SEZ Rules 2006. (ii) Duties on goods received duty free by SEZ but not utilized for 'Authorized Operations' or not accounted for properly as per Rule 34 and other Rules of SEZ Rules, 2006. (iii) Temporary removals of goods under Rule 50 51 of the SEZ Rules 2006 or removals within the SEZ area when not accounted for properly or not brought back to SEZ within the stipulated period allowed by the 'Authorized Operations'. (iv) Clandestine removal of goods, received duty free in the SEZ to DTA or clearances without the knowledge/intimation of the appropriate authorities under the SEZ Act 2005 and the Rules made thereunder. The situations mentioned at (i), (ii) and (iii) when taken in consultation/under intimation to the appropriate authorities of the SEZ Act 2005 and Rules will come exclusively in the domain of the authorities created under the SEZ Act 2005 and the Rules made thereunder. However, for the situation mentioned a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be required. 89.3 From the above facts available on record, it is evident that all operations were undertaken by the appellants with the knowledge and approvals of the appropriate authorities under the SEZ Act 2005 and the SEZ Rules 2006. The operations undertaken by the appellants will be covered by the situations mentioned at (i), (ii) and (iii) of Para 89.1. In case, Revenue was of the opinion that action under the Customs Act, 1962 was required then there was a need for discussions between the appropriate authorities created under the SEZ Act 2005 and the investigating agency as per the provisions contained in the First Proviso to Section 22, read with Section 51 of the SEZ Act 2005. This aspect of consultation with the Development Commissioner/Officer has also been touched upon by Member (Technical) in Para 80 of his reasoning that such removals could have been regularized by Development Officer and that Customs officers could have waited before proceeding further. In the absence of any approval taken by investigating agency under Section 22 and due to the fact that all operations undertaken by the appellants was after approvals and intimations to the appropriate author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was raised under Para 42 of their reply dt.15.7.2008 made in response to the show cause notice. It is seen from Para 42 of appellant's reply to the show cause notice that the issue of time bar, in fact, was raised without prejudice to their claim on jurisdiction of Section 28 of the Customs Act, 1962. This fact of raising the time bar issue is also getting reflected in Para 70 (xxxix) of the Order-in-Original issued on 27.4.2008. Therefore, I agree with Member (Judicial) on this point that issue of time bar was raised by the appellants and needs reconsideration. 92. Point No.5: "Whether demand can be said to be barred by limitation as held by the Member (Judicial) or demand is not barred by limitation as held by Member (Technical)." Appellants have argued in these proceedings that period of demand is from April 2006 to June 2007 whereas the demand show cause notice has been issued on 20.12.2007 after a normal period of six months applicable during the relevant period, under Section 28 of Customs Act, 1962. It is appellant's case that even Member (Technical) has held that there was no intention to evade duty and Section 114A penalty has also held by Member (Technical) to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer. In view the above, it cannot be said that there is no machinery to recover the duties of Customs/Central Excise under the SEZ Act 2005 and the Rules made thereunder and the Bond-cum-Legal undertaking, given by the appellants to the authorities implementing the SEZ Act 2005 and the SEZ Rules 2006, is available to enforce the dues if utilization of duty free goods received is not satisfactorily explained and such recovery will not be time barred, However, this power to invoke and enforce the Bond-cum-Legal undertaking, is available only to the appropriate authorities working under the SEZ Act 2005 and the SEZ Rules 2006 and cannot be made use of by other authorities working under the Customs Act, 1962 to demand duties under Section 28 that acts. 92.2 In the light of the observations made in Para 92.1, I agree with Member (Judicial) that demand will be time barred if duty was demanded under Customs Act, 1962 because all the operations have been undertaken by the appellants with the approvals and intimations to the appropriate authorities working under the SEZ Act 2005. 93. Point No.6: "Whether the matter required to be remanded for re-quantification of duty as held b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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