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M/s. Covema Wood Plast Versus State Of Kerala And Ors.

2015 (3) TMI 1168 - KERALA HIGH COURT

Whether the goods transported by the petitioner were liable to be assessed to sales tax under the Central Sales Tax Act, 1956 - Petitioner had been granted permission to set up a unit at the CSEZ for manufacture and export of PVC Free Foam Sheets - Held that:- the Special Economic Zone is treated to be a foreign territory for the purposes of trade operations, duties and tariffs. Units like that of the petitioner are permitted to import capital goods without paying Customs Duty to the Special Eco .....

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y for the purposes of trade and tariffs, had not crossed the customs frontiers of India. It was for the said reason that they were retained in warehoused condition by the Department of Customs and Central Excise under bond. - The goods would become exigible to tax under either the CST Act or the KGST Act only after they cross the customs frontiers of India. In other words the goods would become taxable under the domestic enactments only after they are released for home consumption by the Cu .....

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Act of our country. Also the said taxable event of the goods clearing the customs barriers has not occurred in the case of the capital goods of the petitioner, in this case. Therefore the goods have not come into the territory of India. For the said reason they are not liable to be taxed under the CST Act. - Decided in favour of petitioner - W.P(C) NO: 25428 OF 2004 - Dated:- 3-3-2015 - K. SURENDRA MOHAN, J. For the Petitioner : Shri E.K. Nadakumar, K. John Mathai, P. Benny Thomas , P. Gopinath .....

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'CSEZ' for short). The same is a company incorporated under the Companies Act, 1956. It had set up the industrial unit in the CSEZ in the year 2001 for the manufacture and export of PVC Free Foam Sheets. Ext.P1 is a copy of the permission granted to the petitioner to set up the manufacturing unit on 29.5.2001. A copy of the green card issued to the petitioner is Ext.P2. For the purpose of their manufacturing process, the petitioner imported the necessary machinery, without paying any Cus .....

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er could not commence production. 3. In the above circumstances, as per Ext.P5 agreement dated 23.1.2004 the petitioner agreed to give the machinery on lease to the sixth respondent, another export oriented unit located in a similar Special Economic Zone in Rajasthan. For the purpose of transporting the machinery to Rajasthan, the petitioner submitted Ext.P6 application for permission to the fifth respondent. Ext.P7 is the sanction dated 24.5.2004 granted by the fifth respondent. The petitioner .....

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es Tax Act, 1963 ('KGST' Act for short). The said notices are Ext.P11. Ext.P11 notices were followed up with Ext.P12 alleging that Sales Tax under the CST Act was payable in respect of the goods. 4. The petitioner thereupon challenged the said proceedings before this Court in WPC 19871/2004. As per Ext.P13 judgment dated 7.7.2004 this Court directed the second respondent to pass final orders in the matter under Section 29A of the KGST Act. Accordingly, the matter was considered by the se .....

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of a Special Economic Zone is that of a foreign territory. The goods permitted to be brought into a Special Economic Zone without being charged with Customs Duty are meant to be retained within the said Zone itself, for being utilised there. As per the provisions of the Export-Import Policy, the petitioner is permitted to import capital goods without paying Customs Duty for their manufacturing activity within the Special Economic Zone. It is for the said purpose that the machinery in the presen .....

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he taxation laws of the country. For the above reason it is contended that, no tax is payable on the said capital goods. In view of the above, according to the counsel for the petitioner Exts.P11, P12 and P15 are unsustainable and liable to be set aside. The counsel also places reliance on the decisions of the Hon'ble Supreme Court to support his contentions. 6. A counter affidavit has been filed on behalf of respondents 2 and 3. According to the counter affidavit, the petitioner does not ha .....

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for exemption from the various enactments. In the present case the petitioner has not commenced production though he had imported the machinery to his unit. Therefore it is contended that this writ petition is only to be dismissed. 7. The Special Govt. Pleader (Taxes) appears for respondents 2 and 3. According to the learned Special Govt. Pleader, the petitioner is not a unit set up in Special Economic Zone and the sale of machinery items cannot be treated as sale of capital goods from the unit .....

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rned Central and State Government departments and every organisation in relation to the project. It is not in dispute that, the petitioner had imported machinery for the purpose of use in their unit for the manufacture of their products. Ext.P3 shows that, the goods are under bond with the Customs Department. Ext.P3 has been executed in favour of the Deputy Commissioner, Customs and Central Excise at CSEZ. The bond shows that, the Deputy Commissioner has granted permission for deposit of the goo .....

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one are entitled to exemption from Central Sales Tax as evident from paragraph 7.9, apart from the various other concessions granted. The expression "capital goods" is defined in Clause 9.10 which reads as under:- "9.10 'Capital Goods' means any plant, machinery, equipment or accessories required for manufacture or production, either directly or indirectly, of goods or for rendering services, including those required for replacement, modernisation, technological upgradatio .....

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the services sector." The above definition clearly shows that, the machinery, equipments and accessories required for manufacture, form capital goods, Clause c of Part 7.11 permits inter-unit transfer of capital goods, which provision reads as follows:- "c. Capital goods imported/procured may be transferred or given on loan to another SEZ/EOU/EHTP/STP unit with prior permission of the Development Commissioner and Customs authorities concerned." Appendix 14-II specifies the status .....

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to import capital goods without paying Customs Duty to the Special Economic Zone for the purpose of manufacture of their products. Such capital goods are also permitted to be transferred to other units located in similar Special Economic Zones with the permission of the fifth respondent. The petitioner has obtained Ext.P7 permission from the fifth respondent permitting such transfer. Ext.P5 is the agreement pursuant to which, the goods were being transported. Therefore, the goods that were expo .....

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omestic enactments only after they are released for home consumption by the Customs authorities after payment of Customs Duty. The said eventuality not having taken place yet, it is held that the goods have not become liable to tax under the Act that is relied upon. It is also worth noticing that the Special Economic Zones Act, 2005 is given an overriding effect over other enactments. Section 51 of the Act is reproduced hereunder for convenience of reference:- "51. Act to have overriding ef .....

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appointed day, be deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorised operations. (2) A Special Economic Zone shall, with effect from such date as the Central Government may notify, be deemed to be a port, airport, inland container depot, land station and land customs stations, as the case may be under Section 7 of the Customs Act, 1962 (52 of 1962) Provided that for the purposes of this Section, the Central Government may notify differ .....

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