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TMI Blog2018 (10) TMI 1372X X X X Extracts X X X X X X X X Extracts X X X X ..... ction declaring that the benefit of exemption from Central Excise shall be available to the manufacturer as long as goods are meant to be used for authorized operations and have been cleared, removed or dispatched directly to the SEZ Area from his factory (irrespective of the length and limb of the value chain). Issuing ARE-1 form and (b) Directing the Respondent No.3 to stamp and endorse Form ARE-1 in implementation of the obvious scheme of the SEZ Act that SEZ unit should have tax free goods. (c) Allow the petitioner to claim refund from Respondent No.1 of Central excise duties already reimbursed by the Petitioner to the manufacturers like Respondent No.5 and 6, through its vendors like Respondent No.4. (d) this Hon'ble Court be pleased to issue Writ of Mandamus or a Writ in the nature of Mandamus or any other appropriate Writ, Order or Direction requiring Respondent No. 1 & 2 to take all steps necessary to remove and resolve the dichotomy between the provisions of the SEZ Act and the Rules, if any and/or issue a clarification that the exemption from Central Excise shall be available to sub-contractors; and directing the Respondent No.3 to stamp ARE-1 forms in favour the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppointed by M/s.Torrent Energy Ltd., as EPC contractor for off shore supply and services. The petitioner in turn, in order to execute such a contract has appointed one M/s.Simplex Infrastructure Ltd., as a sub contractor. In order to carry out construction and civil works for the SEZ Unit, namely Torrent Energy Ltd., the petitioner as a contractor procures material, namely, steel, bars and cement from the respondent No.5 M/s. Tata Steel Ltd and respondent No.6 Ultratech Cement Ltd. In other words, for instance M/s.Tata Steel Ltd., would supply the steel rods for the purposes of manufacturing or process to be undertaken by the SEZ Unit, namely, Torrent to the subcontractor, respondent No.4 M/s. Simplex Infrastructure Ltd. Simplex Infrastructure while paying for such material would also be paying tax dues, such as excise etc., for such material. The contractor-Siemens who is such a contractor for the SEZ Unit, would receive such raw material from its sub-contractor for being sent to the SEZ Unit directly. On the amount of dues and taxes paid by M/s.Simplex Infrastructure as a subcontractor, when ARE-1 are sent to the Specified Officer for claiming exemption from the Central Excise be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uing ARE-1 form and (b) Directing the respondent No.3 to stamp and endorse Form ARE-1 in implementation of the obvious scheme of the SEZ Act that SEZ unit should have tax free goods." 4 The petitioner has prayed that the Company is entitled to the benefit of exemption from Central Excise since the goods which the manufacturer had supplied to them, though, through a sub-contractor, are meant to be used for authorized operations and have been cleared, removed or dispatched directly to the SEZ Area from their factory. Merely because the manufacturer's dispatch to the SEZ is linked through a chain of which a sub-contractor is a party, the benefit of exemption from Central Excise should not be denied to the contractor, i.e. the petitioner, since the goods are undisputedly getting to the SEZ area. 5 Mr.K.H.Kaji, learned senior counsel assisted by Mr. Manish Kaji, learned advocate for petitioner, in the background of these facts has drawn our attention to the various provisions of the Special Economic Zones Act, 2005. Drawing our attention to the preamble of the Act, Mr.Kaji has contended that the objective for creating a Special Economic Zone is to see that the goods are made avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n force, on goods imported into, or service provided, in a Special Economic Zone or a Unit, to carry on the authorised operations by the Developer or entrepreneur; (b) exemption from any duty of customs, under the Customs Act, 1962 (52 of 1962) or the Customs Tarrif Act, 1975 (51 of 1975) or any other law for the time being in force, on goods exported from, or services provided, form a Special Economic Zone or from a Unit, to any place outside India; (c) exemption from duty of excise, under the Central Excise Act, 1944 (1 of 1944) or the Central Excise Tariff Act, 1985 (5 of 1986) or any other law for the time being in force, on goods brought from Domestic Tariff Area to a Special Economic Zone or Unit, to carry on the authorised operations by the Developer or entrepreneur; (d) drawback or such other benefits as may be admissible from time to time on goods brought or services provided from the Domestic Tariff Area into a Special Economic Zone or Unit or services provided in a Special Economic Zone or Unit by the service providers located outside India to carry on the authorised operations by the Developer or entrepreneur; (e) exemption from service tax under Chapter V o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, and all the documents in such cases shall bear the name of the Developer or Co-developer along with the contractor or sub-contractor and these shall be filed jointly in the name of the Developer or Codeveloper and the contractor or sub-contractor, as the case may be: Provided also that the Developer or Co-developer, as the case may be, or the Special Economic Zone Unit shall be responsible and liable for proper utilisation of such goods in all cases.] 27. Import and Procurement :- (1) A Unit or Developer may import or procure from the Domestic Tariff Area without payment of duty, taxes or cess or procure from Domestic Tariff Area after availing export entitlements or procure from other units in the same or other Special economic Zone or from Export Oriented Unit or Software Technology Park unit or Electronic Hardware Technology Park unit or Bio-technology Park unit, all type of goods, including capital goods (new or second hand), raw materials, semi-finished goods, (including semi-finished Jewellery) component, consumables, spares goods and materials for making capital goods required for authorized operations except prohibited items under the Import Trade Control (Harmoni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omestic Tariff Area. (6) A gem and jewellery Unit may also source on outright purchase basis or loan basis, gold or silver or platinum through the Nominated Agencies and where such sourcing is on loan basis, the same shall be subjected to the conditions applicable to such transactions under the provisions of the Foreign Trade Policy in force: Provided that the conditions applicable to loan transaction shall not apply where the Unit converts such loan into outright purchase by paying the outstanding loan amount and interest within the period for export prescribed under the Foreign Trade Policy applicable to the loan transaction. (7) the goods already imported or shipped or arrived before the issue of Letter of Approval shall be eligible for duty free clearance provided customs duty has not been paid and goods have not been cleared from Customs or cleared and placed in the Bonded Warehouses. (8) No import or export of rough diamonds shall be permitted unless the shipment parcel is accompanied by Kimberley Process Certificate issued by the Development Commissioner. (9) Where goods or parts thereof, imported or procured from Domestic Tariff Area are found to be defective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a Unit or Developer shall clear the goods, as in the case of exports, either under bond or as duty paid goods under claim of rebate on the cover of [Are-1 referred to in Notification number 42/2001- Central Excise (NT), dated 26th June, 2001 and ARE-2 referred to in Notification number 21/2004-Central Excise (NT), dated 6th November 2004] in quintuplicate bearing running serial number beginning from the first day of the financial year. (2) Goods procured by a Unit or Developer, on which Central Excise Duty exemption has been availed but without any availment of export entitlements, shall be allowed admission into the Special Economic Zone on the basis of ARE-1. (3) The goods procured by a Unit or Developer under claim of export entitlements shall be allowed admission into the Special Economic Zone on the basis of ARE-1 and a Bill of Export filed by the supplier or on his behalf by the Unit or Developer and which is assessed by the Authorized Officer before arrival of the goods: Provided that if the goods arrive before a Bill of Export has been filed and assessed, the same shall be kept in an area designated for this purpose by the Specified Officer and shall be released ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lieu of drawback or Duty Entitlement Pass Book credit against supply of goods by Domestic Tariff Area supplier to Special Economic Zone developers shall be admissible even if payment is made in Indian Rupees. Reimbursement of duty in lieu of drawback against supply of goods to Special Economic Zone developer shall be made as per the procedure prescribed by the Central Government.] (9) A copy of the Bill of Export and ARE-1 with an endorsement of the Authorized Officer that the goods have been admitted in full in the Special Economic Zone, shall be treated as proof of export. (10) Where the goods are to be procured by a Unit or Developer from a Domestic Tariff Area supplier who is not registered with the Central Excise authorities, or is a trader or merchant exporter, the procedure under Subrule( 1) and (2) above shall apply, mutatis mutandis, except that the goods shall be brought to the Special Economic Zone under the cover of an Invoice and the ARE-1 shall not be required. (11) The Unit or Developer may also procure goods from Domestic Tariff Area without availing exemptions, drawbacks and concessions on the basis of invoice or transport documents, issued by the supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be allowed to be transferred to the receiving Unit or Developer under transshipment permit; (iii) there shall be no requirement to file any additional documents or bond(s) for the purpose of transshipment of goods and the transshipment permission shall be stamped on the Bill of Entry itself; (iv) the supplying Unit shall submit the re-warehousing certificate to the Specified Officer having jurisdiction over the supplying unit within forty five days, failing which the Specified Officer of the supplying Unit shall write to the Specified Officer having jurisdiction over the receiving Unit or Developer for demand of duty from the receiving Unit or Developer. (v) where the supplying and receiving Units or Developer are located in the same Special Economic Zone, the provisions of sub rules (i) to (iv) shall not apply and the movement of goods shall be recorded in the regular books of accounts of the receiving Unit or Developer and the supplying Unit and no Bill of Entry shall be required to be filled. (16) Procurement of cut and polished diamonds and precious and semi-precious stones from Domestic Tariff Area.- A gem and jewellery Unit may procure cut and polished diamonds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as reproduced herein are read in context of the Rules, it is undisputed that the seller of the goods, the supplier namely the respondents No. 5 and 6 supply such goods directly to a Special Economic Zone Unit. The supply of such goods is undertaken to the Special Economic Zone Unit by the Sub-contractor, i.e. respondent No.4 on behalf of the petitioner-contractor for being used by the Developer or the Unit which is a Unit in a Special Economic Zone. Pressing into service provisions of Section 7 and Section 26 of the Act, it is Mr.Kaji's submission that once it is undisputed that the goods or services are procured from the Domestic Tariff Area by the Special Economic Zone Unit i.e. the Torrent, such goods are exempted from taxes or duties. The exemption from Central Excise is available under Section 26(c) of the Act. It is undisputed that the goods are dispatched directly to the Special Economic Zone Unit. 9.1 Reading the provisions of Rule 10, Mr.Kaji submitted that the proviso unequivocally makes it clear that the exemptions and drawbacks which are available to a Developer or a Co-developer, in this case Torrent Energy Limited, shall also be available to a contractor including t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to exemption from Central Excise. The action of the Specified Officer of not endorsing the ARE-1 so as to enable the petitioner to claim exemption is in accordance with the provisions of the Act. Exemption conferred under Section 26 is subject to fulfillment of conditions. Rule 27 and 30 specifically provide that certain conditions need to be complied with for filing of ARE-1 and in absence of such a compliance merely because the petitioner had to reimburse the excise duty billed to the respondent No.1, the petitioner cannot claim such exemption. 11 Having considered the submissions of learned advocates for the respective parties, from reading of the Statement of Objects and Reasons of the Special Economic Zones Act, 2005, it is evident that one of the prime objectives of creation of such zones was to make available goods and services free of taxes and duties supported by integrated infrastructure for export production, expeditious and single window approval mechanism. For such implementation, Units were to be set up in such zones. The term "Unit" as defined under Section 2(zc) of the Act would mean a Unit set up by an entrepreneur in such Special Economic Zone. 11.1 In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempt from payment of taxes, duties or cess under all enactments specified in the first Schedule. Chapter III provides for constitution of Board of Approval. Duties and powers of the Board are to ensure orderly development and to promote Special Economic Zones. Development Commissioner of an SEZ is an Ex-Officio Member of the Board who is the nodal officer of an SEZ appointed to carry out functions under chapter IV of the Act. Chapter V provides for constitution of the Approval Committee which functions for various purposes under the Board's supervision. A person who intends to set up a Unit in an SEZ needs to file a proposal with the Development Commissioner who is the Chairperson of the Approval Committee. What emerges from the basic sections as briefly referred to hereunder is that: (a) A Special Economic Zone is set up either under the aegis of the State Government, Central Government or by a Developer or a Co-Developer. (b) The Board, constituted under the Act, approves setting up such an SEZ. (c) An "Entrepreneur" can in such an SEZ, be allocated space for such a "Unit". 12.1 In other words, a "Unit" set up by an entrepreneur is an entity and part of a larger picture, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng with the Contractor and these shall be filed jointly in the name of the unit and the contractor. 15 Rule 34 reads about utilization of goods admitted into the Special Economic Zone. According to this Rule, the goods admitted to the SEZ shall be used by the Unit or the Developer only for carrying out authorized operations, but if such goods are utilized for purposes other than for such operations, or if the Unit or the Developer fails to account for goods as provided under the Rules, duty shall be chargeable on such goods as if these goods have been cleared for home consumption. Rule 30 provides for procedure for procurements from the Domestic Tariff Area. Sub-rule (9) of Rule 30 provides that a copy of Bill of Export and ARE-1 with an endorsement of the Authorized Officer that the goods have been admitted in full in the Special Economic Zone, shall be treated as proof of export. 16 From the facts on hand, it is evident that Torrent Energy Limited was the SEZ "Unit" and the identity entitled to exemption. Reading Section 26 with Rule 27 of the Rules suggests that, when raw materials are procured for such a unit, such exemptions shall be allowed to a Unit and such benefit shall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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