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TMI Blog2020 (5) TMI 524X X X X Extracts X X X X X X X X Extracts X X X X ..... f the impugned Guideline, the petitioner was required to procure High-Speed Diesel Oil (HSD) on payment of excise duty during the period in dispute between 1.4.2015 and 15.02.2016. 3. Since the petitioner had procured HSD Oil from Indian Oil Corporation Ltd. (IOCL)without payment of excise duty between 1.4.2015 and 3.10.2015, the 2nd respondent, the Development Commissioner, MEPZ, Chennai- 45 has issued the impugned SCN dated 30.3.2016 bearing reference No. 25/SO/2015-MP EZ-SEZ to the petitioner and has called upon the petitioner to pay a sum of Rs. 11,13,78,979/- in terms of Rule 27(3) of Special Economic Zone Rules, 2006 read with Section 26 of the Special Economic Zones Act, 2005. 4. The petitioner has therefore challenged the aforesaid show cause notice dated 30.3.2016 bearing reference No. 25/SO/2015-MPEZ- SEZ (hereinafter referred to as the impugned show cause) issued by the 2nd respondent, the Development Commissioner, MEPZ, Chennai- 45 in W.P.No 25838 of 2016. 5. The petitioner is a Co-Developer of Information Technology/Information Technology Enabled Services located in a Special Economic Zone (SEZ) in Pour, Chennai. 6. The petitioner was approved as a co-developer by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the impugned 2015 Guideline has been partly restored. 13. It is therefore submitted that all procurement after 16.9.2016 are without payment of tax. It is therefore submitted that benefit of Guidelines dated 16.9.2016 should be allowed retrospectively. Under these circumstances, it is therefore submitted that even if the impugned 2015 Guidelines in valid, it is liable to be read down. Consequently, the demand proposed in the impugned show cause notice is liable to be quashed. 14. Learned counsel for the petitioner relied on the following case laws: i. GMR Aerospace Engineering Ltd. V. UOI - 2019VIL-489-TEL ii. Mahavir Prasad & Ors. - (1999) 8 SCC 266. iii. Jindal Stainless Limited Vs. UOI - 2017(51) S.T.R. 130(Del.) 15. The respondents have filed a detailed counter wherein it has been stated that exemptions, concessions and drawback incentives etc. as provided for in Section 26(1) of the SEZ Act, 2005 are subject to conditions prescribed. It is submitted that the Central Government may prescribe the manner in which, and the terms and conditions subject to which, the exemption, concession, drawback or other benefits shall be granted to the developer or entrepreneur under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Order. The impugned guideline restores the position in 2009 Guidelines. 23. In 2009, the 1st respondent issued 2009 Guidelines dated 27.02.2009 under section 5 of the SEZ Act, 2005 read with Rule 12 of the Special Economic Zone Rules, 2006,. As per the aforesaid guidelines, a power plant to be set up by a Developer in a SEZ as a part of infrastructure facility was to be located in the Non-Processing area of SEZ and the developer which included co-developer like the petitioner were entitled to only certain fiscal benefits for initial setting up. 24. It clarified that no fiscal benefit would be admissible for operations and maintenance under rule 27(3) of the SEZ Rules, 2006. It also further stipulated that there will be no obligation to achieve positive Net Foreign Exchange Earning (NFE) for such power plants. 25. However, the 2009 Guideline was modified by 2012 Guideline dated 21.3.2012. Importantly it gave certain relaxation and stated as follows:- "i) Such a power plant set up in a processing area will be entitled to all the benefits available to developers/co- developers, including fiscal benefits under section 26 of the SEZ Act, 2005 including benefits for initial set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Utilities Ltd., Co-developer, DLT IT/ITES situated in the processing area of M/s. DLF IT/ITES SEZ should not be considered as situated in Non processing area in as much as the Co Developer viz., M/s. DLF utilities Ltd., have failed to adhere to the conditions stipulated in the Ministry's guidelines dated 27.02.2009 as discussed above; ii. The exemption for Central Excise duty on the High Speed Diesel procured from DTA should not be held as ineligible as discussed above in terms of Rule 27(3) of SEZ Rules, 2006 read with Section 26 of the SEZ Act, 2005; iii. An amount of Rs. 11,13,78,979/- (Rupees Eleven crores thirteen lakhs seventy eight thousand nine hundred and seventy nine only) towards the Central Excise duty involved on the quantity of 10856 KLs of High Speed Diesel procured by them from DRA under ARE-1s during the period from 01.04.2015 to 03.10.2015 and detailed in the Annexure to this notice should not be demanded in terms of Rule 27(3) of SEZ Rules, 2006 read with Section 26 of the SEZ Act, 2005 as discussed above; iv. Why interest at appropriate rates on the amount of exemption availed by them should not be demanded in terms of Section 28AA of the Customs Act, 1962 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , those power plants not having the capacity of the mega power plant, as given in DoR Notification No. 21/2002-Customs dated 1.3.2002 will be required to pay duty for sale in DTA, on account of duty-free import of capital goods as determined by DoR." 30. As far as exemptions under the Special Economic Zones Act, 2005 is concerned, there are two provisions which grant exemptions to Developers/Co-Developers in a Special Economic Zones. They are Section 7 in Chapter II and Section 26 in Chapter VII of the Act. They are reproduced below: Special Economic Zones Act, 2005. Chapter II: EXEMPTION FROM TAXES, DUTIES OR CESS. Chapter VII: SPECIAL PROVISION FOR FISCAL ECONOMIC ZONES. Section 7: Any goods or services exported out of, or imported into, or procured from the Domestic Tariff Area by, - (i) a Unit in a Special Economic Zone; or (ii) a Developer; shall, subject to such terms, conditions and limitations, as may be prescribed, be exempt from the payment of taxes, duties or cess under all enactments specified in the First Schedule. Section 26: (1) Subject to the provisions of sub-section (2), every Developer and the entrepreneur shall be entitled to the following exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loper shall, subject to such terms, conditions and limitations, as may be prescribed, be exempt from the payment of taxes, duties or cess under all enactments specified in the First Schedule. 32. In the First Schedule only the following enactments are specified: 1. The Agricultural Produce Cess Act, 1940 (27 of 1940). 2. The Coffee Act, 1942 (7 of 1942). 3. The Mica Mines Labour Welfare Fund Act, 1946 (22 of 1946). 4. The Rubber Act, 1947 (24 of 1947). 5. The Tea Act, 1953 (29 of 1953). 6. The Salt Cess Act, 1953 (49 of 1953). 7. The Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955). 8. The Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957). 9. The Sugar (Regulation of Production) Act, 1961 (55 of 1961). 10. The Textiles Committee Act, 1963 (41 of 1963). 11. The Produce Cess Act, 1966 (15 of 1966). 12. The Marine Products Export Development Authority Act, 1972 (13 of 1972). 13. The Coal Mines (Conservation and Development Act, 1974 (28 of 1974). 14. The Oil Industry (Development) Act, 1974 (47 of 1974). 15. The Tobacco Cess Act, 1975 (26 of 1975). 16. The Additional Duties of Excise (Textile and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same Special Economic Zone or a different Special Economic Zone; 38. An export is said to take place within the meaning of section 2 (m) of the Special Economic Zones Act, 2005 under the following circumstances:- "i. if goods are taken out or services supplied are exported by land, sea or air or any other mode, whether physical or otherwise from a Special Economic Zone; or ii. if there is a supply of goods or provision of services to unit or a developer situated in Special Economic Zone by a unit situated in Domestic Tariff Area ; or iii.in the case of supply of goods or there is a provision of service from one unit to another unit or Developer, within the same or different Special Economic Zone." 39. Thus, supply of goods from a Domestic Tariff Area qualifies as an "export". Therefore, a supplier in DTA can supply HSD without payment of duty. 40. Receiving of goods or service intra-unit or intra-developer from another unit or developer of the same Special Economic Zone or a different Special Economic Zone also qualifies as an import. Similarly receipt of goods or services by a Unit or it Developer in SEZ from a place outside India by land, sea or air or by any other mode, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15(3), the Approval Committee [constituted under Section 13(1)] may, either approve the proposal without modification, or approve the proposal with modifications subject to such terms and conditions as it may deem fit to impose, or reject the proposal in accordance with section 15(8)of the Act. 47. Thus, the "authorized operations" contemplated in Section 4(2) is the operations which the Central Government i.e. the 1st respondent may authorise a Developer. The Petitioner was given such a final approval and authorisation by the 1st respondent vide approval dated 7.10.2008 to locate 48MW capacity power plant in the "processing area". 48. As per section 15(8) the Central Government may prescribe the terms and condition, subject to which a Unit shall undertake the authorised operation and the obligations and entitlements. 49. The impugned Guidelines of 2015 which has been purportedly issued under section 5 of the Act sought not only restricts the future location/setting up of the power plant only in a Non-Processing Area but also stated that those power plants which were already in existence and were located/situated in the Processing Areas of SEZs shall be demarcated as Non-Process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es such as refrigeration, cutting, polishing, blending, repair, remaking, re-engineering and includes agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining. Since the definition of manufacture being very wide, both generation of power and supply qualifies as manufacture and supply of services respectively being the petitioner. 55. The power that is exercised by the Central Government under section 15(8)(b) of the Special Economic Zones, 2005 is different from the power vested with the Central Government to issue guidelines under section 5 and 6 of the said Act. 56. The power to issue Guidelines under Section 5 of the Act by the Central Government cannot be in confused with the power to demarcate an area within a Special Economic Zone under Section 6 of the Act or the power to be exercised under section 15(8)(b) of the Act. 57. Further, it is not as if the petitioner was entitled receive goods for its authorised operation in the proceeding area under 2012 Guidelines dated 21.03.2012 of the 1s respondent. The said Guideline merely recognised the principal in the Act that a unit in a Domestic Tariff Area ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EZ Rules,2006 reads as under: "30. Procedure for procurements from the Domestic Tariff Area.- "(1) The Domestic Tariff Area supplier supplying goods 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 the 26th June, 2001 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 Authorised 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 purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided that the reimbursement of duty in 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 Authorised 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 sub-rules (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 tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed Bill of Entry, the goods shall be allowed to be transferred to the receiving Unit or Developer under transhipment permit; (iii) there shall be no requirement to file any additional document or bond(s) for the purpose of transhipment of goods and the transhipment 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) and (iv) shall not apply and the movement of goods shall be allowed and such transactions 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 filed. (17) Procurement of cut and polished diamonds and precious and semiprecious stones from Domestic Tariff Area -A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not be said that while issuing Notification No. 44/96 of 01/03/1994, the exemption in respect of the said item which was operative was either withdrawn or revoked. The action was taken only with the view to rescinding several notifications and by issuing a composite notification. The policy remained as it was and in view of the demands being made by the Department, a representation was made by the industries and on being satisfied, the central government issued a clarificatory Notification No. 95/94 on 25.4.19 94. It was held to be not a new notification granting exemption for the 1st time in respect of parts of power driven pumps to be used in the factory of manufacture of pumps but clarified the position and made the position explicit which was implicit". 68.The Hon'ble Supreme Court there held that the notification was clarificatory and was therefore retrospective nature in the light of the decision of the Honourable Supreme Court in Collector of Central Excise versus Woodcraft Products Limited (1995) 3 SCC 454 69. Further, Rule 47(5) of the Special Economic Zones Rules, 2006 has been inserted vide GSR 772 (E) dated 5.8.2016 with effect from 8.8.2016. As per the above p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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