TMI Blog2017 (2) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... r carrying out the provisions of this Act under Section 55 of the Act. In sub-Section (2) of Section 55, it is made clear that certain matters are required to be covered while framing the Rules. The relevant conditions of the policy of 2013 are not in consonance with the Rules since none of the Rules prohibit the unit established in SEZ to remove the goods in DTA. Under Section 55 (3) of the SEZ Act, no rules are amended and, therefore, when the petitioner units are following the rules, particularly, Rule 53 of the Rule and in accordance with Section 30 of the Act and paying the custom duty in foreign currency, there was no need to impose conditions as per the guidelines of 2013. When Section 30 itself provides the payment of custom duty with regard to removal of goods manufactured in SEZ to Domestic Tariff Area and the conditions specified in the Rules, there is no reason for the Authority to issue a Policy with regard to plastic manufacturers only and compelling them to remove the goods out of India. Petition allowed - decided in favor of petitioner. - SPECIAL CIVIL APPLICATION NO. 6107, 6117, 6167, 6172, 6107, 6108, 6109, 6171, 6110, 6172 of 2015 With CIVIL APPLICATION ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erent types of manufacturing units which were subsequently incorporated under the SEZ Act. Accordingly, a Resolution was issued by the Government of India on 1.11.2000, as far as Kandla Free Trade Zone is concerned. As per the said publicity made by the Government of India, the units which were in existence in Special Economic Zone on 1.11.2000, is to be a positive Net Foreign Exchange earner within a period of 3 years, as well as, permitted to sell of the manufactured goods in Domestic Tariff Area (DTA) on payment of full custom duty subject to import policy in force. The petitioners having found attractive benefits, continued to manufacture the plastic raw material and to sell the products in domestic tariff area subject to the exports policy existence at the relevant time. 3.3 The Parliament of India enacted SEZ Act in the year 2005 and most of the provisions of the SEZ Act came into force on 10.2.2006. Most of the Rules of the SEZ Rules also came into force on 10.2.2006. The units of the petitioners were treated as existing units as per Section 2 (l) of the SEZ Act and, therefore, the SEZ Act and the SEZ Rules were and are applicable to the petitioners. 3.4 As per Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the business of manufacturing recycled plastic raw material from imported plastic scrap or waste established in SEZ Area. By the said Policy, all the units have been compelled to follow the conditions referred in the said Policy. As per certain terms and conditions, the Units have been restrained from carrying out any broad band activity with regard to unrelated products, all the manufactured goods are required to be physically exported out of country gradually from second year onwards and from fifth year onwards, 100% of goods manufactured in the SEZ is to be physically exported. Some penal actions have also been referred in the Policy for breach of any conditions. 3.8 Having found the practical incapability of the units to physically export the manufactured goods, made several representations to Union of India and brought to the notice that if the sale in DTA is not permitted, the units are likely to be closed and there would be unemployment of 5,000 workers who are working in such 40 units. The petitioners did file their objections in detail, however, had executed a bond since the petitioners intended to continue the manufacturing work. Since the respondent No.1 did not w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd without modifying the Rules, the conditions have been imposed by the impugned Policy qua the units who are manufacturing recycled plastic raw material from the imported plastic scrap. 4.2 In support of his submissions, Mr. Thakore has relied upon a decision of the Hon'ble Supreme Court in the case of Captain Sube Singh and others v. Lt. Governor of Delhi and others, (2004) 6 SCC 440 . He would submit that when a Statute itself vests certain powers to be exercised in a particular manner and method, the authorities is bound to follow the statutory provisions and cannot vary or add conditions which are contrary to the provisions of the concerned Act and Rules. He has also relied upon the decision in the case of CIT, Mumbai v. Anjum M. H. Ghaswala and others, (2002) 1 SCC 633, Dhanajaya Reddy v. State of Karnataka, (2001) 4 SCC 9 , which are relied upon by the Hon'ble Supreme Court while deciding the case of Captain Sube Singh (Supra). 4.3 He would further submit that the object of establishing the units in SEZ is to fetch maximum foreign currency which is being followed by each of the petitioner unit by following Rule 53 i.e. getting positive NFE. He would submit th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was to get more foreign exchange revenue by maintaining positive NFE. He would submit that when the unit established in SEZ is carrying on transaction in foreign currency and when it sells the product in DTA, he has to pay the custom duty provided under Section 30 of the SEZ Act. 4.8. By taking me through the meaning of export defined under Section 2 (m), he would submit that export includes supply of goods or providing services from one unit to another unit or developer in the same different Special Economic Zone, that means even if the goods produced in SEZ can be sold to another unit established in Special Economic Zone and, therefore, imposing condition No.10 i.e. asking a unit to fully export the goods is contrary to the meaning given in the statute and therefore also, said condition is required to be quashed and set aside. He would submit that when letters of approval were issued in favour of the units, the same conditions which are referred in the policy, have been imposed which are required to be quashed and set aside in view of the specific provisions made in SEZ Act and SEZ Rules. 4.9 He would further submit that the policy is arbitrary, unreasonable and violati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it that the plastic raw material produced from the imported recycled plastic would be available to public at huge quantity at a cheaper rate and, therefore, the conditions imposed by the Central Government by issuing a Policy would create such a situation that the public in India shall get the finished goods at a higher price. He would further submit that condition Nos.16, 17, 18, 21, 22, 24 and 25 imposed under the letter of extension are illegal, beyond the powers of the authorities and contrary to the SEZ Act and SEZ Rules. The grounds raised above are applicable to the said conditions and are reiterated in connection with the conditions imposed under the letter of extension. That no terms and conditions can be imposed on units on the basis of a policy and the action of respondent No.3 of doing so is contrary to the SEZ Act and SEZ Rules. So far as condition No.17 is concerned, the said condition is also contrary to Section 16 of the SEZ Act considering that under Section 16 of the SEZ Act, the Approval Committee may cancel the letter of approval only if it has reason or cause to believe that the entrepreneur has persistently contravened any of the terms and obligations subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of employment opportunities, development of infrastructure facility etc. 5.1 He would further submit that a Board of Approval has been constituted under Section 8 of the Act and Section 9 imposes duties, powers and functions of the Board and, therefore, the Board can perform such functions which may be assigned to it by the Central Government. He would submit that under Rule 18 (4) of the SEZ Rules, the Board of Approval is empowered to take a decision about the extension of letter of permission or approval (LOA). The conditions can be imposed upon the units. He would submit that the Board would have rejected the extension of letter of approval in the year 2013 i.e. subsequent to the Policy in question. He would submit that the Board is empowered to reject the extension of LOA under Rule 18 (4) of the SEZ Rules. Therefore, the submission made on behalf of the petitioners that no such conditions should have been imposed have no bearing in the eyes of law. He would submit that there is no conflict between prescribing certain percentage of physical export including 100% export at the end of 5 year with the provisions of the SEZ Act and SEZ Rules. He would further submit that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A to each unit. 7. Before the enactment of the SEZ Act, 2005, import and export of goods and services were controlled by several Acts. The Government of India had also demarcated certain area as Export Processing Zone (EPZ). In the year 2000, the Ministry of Commerce and Industry, Government of India announced its first Special Economic Zones in India to boost the exports. By publishing a news item in details, Kandla, Santacruze (Mumbai), Kochi and Surat were converted from EPZ to SEZ from 1.11.2000. The public advertisement suggest that the intention of the Union of India to introduce or to convert EPZ to SEZ was to have the fullest benefit with regard to export potentials of the Units already established in EPZ or intended to establish new type of different manufacturing units in SEZ. It was declared that the Units in SEZ should be positive Net Foreign Exchange earner and was also permitted the domestic sale on full duty subject to import policy in force in the year 2000. It was also declared that unlike EPZ, no minimum export performance or Net Foreign Exchange earning prescribed percentage of exports would be necessary. Unlimited DTA sales on full duty was also permitted acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent extension is valid till 31.10.2006. It was further informed that since no industry can function on ad-hoc extensions a final view needs to be taken in this matter. The Member CBEC opined that number of issues relating to non-adherence to environmental norms keep coming up and that moreover these units do not have any export potential and that therefore there is no reason for allowing continuation of these units under the SEZ scheme. It was however informed that the very same issues were considered by the Export Promotion Board in March 1998 under the Chairmanship of Cabinet Secretary and it had been decided that no new units will be allowed to be set up in EPZ and EOUs. DGFT also has in consultation with the Ministry of Chemicals and Petrochemicals and Ministry of Environment Forests issued detailed guidelines governing these imports vide Public Notice 392(92-97) dated 01.01.1997 which is binding on SEZ units also. It was further informed that imports by these SEZ units are not eligible for no routine examination norm of the SEZ Policy and are examined as prescribed. It was also informed that the finished products of these units (primarily agglomerates and recycled gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to duties of customs including anti-dumping, countervailing and safeguard duties under the Customs Tariff Act, 1975 (51 of 1975), where applicable, as leviable on such goods when imported; and (b) the rate of duty and tariff valuation, if any, applicable to goods removed from a Special Economic Zone shall be at the rate and tariff valuation in force as on the date of such removal, and where such date is not ascertainable, on the date of payment of duty. 15. The Central Government is empowered to make Rules by notification for carrying out the provisions of this Act under Section 55 of the Act. In sub-Section (2) of Section 55, it is made clear that certain matters are required to be covered while framing the Rules. As far as present case is concerned, Sections 55 (2) (o) and 55 (2) (za) of the SEZ Act are relevant and read as under :- 55. Power to make Rules :- (1) The Central Government may, by notification, make rules for carrying out the provisions of this Act. (2) In particular, and without prejudice to the generality of the foregoing power, such rules may, provide for all or any of the following matters, namely :- (a) to (n) ................... ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Free Foreign Exchange received from overseas; 19. Section 55 of the SEZ Act empowers the Central Government to make Rules for carrying out the provisions of the Act. However, any rule made by the Central Government is required to be placed before each House of Parliament as provided under sub-Section (3) of Section 55. Section 55 (3) of the SEZ Act reads as under :- (1) (2) ............................. (3) Every rule made by the Central Government under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule. 20. Now, as per the re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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