9911796707
TMI Blog2021 (10) TMI 1090X X X X Extracts X X X X X X X X Extracts X X X X ..... by it to the Export Oriented Units (hereafter 'EOU'). Factual Context 2. The petitioner is a company, inter alia, engaged in generation of electricity, which is captively consumed and also supplied to other units in the Special Economic Zone (SEZ Units). The petitioner had submitted its proposal for seeking approval for its power generating unit in MBIL-SEZ. The said proposal was accepted and by a Letter of Approval dated 08.10.2009 (hereafter 'the LoA'), the Development Commissioner, Noida SEZ (Approval Committee) approved the same and extended all facilities and entitlements, as admissible to a unit in the Special Economic Zone (SEZ) subject to the terms of the SEZ Act and the Rules made thereunder, for undertaking "Authorised Operations". The said approval was subject to certain terms and conditions as stipulated in the LoA including that, the approval was valid for a period of one year from the date of issue, within which the petitioner was obliged to implement the project and commence production. It was also stipulated that the LoA would be valid for a period of five years from the date of commencement of production. It is relevant to note that the petitioner's proposal was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in the processing zone subject to certain conditions. The petitioner states that it has been operating under the said guidelines and, has been extended the O&M benefits subject to the condition proscribing duty free transfer of power to EOUs. 8. In the meanwhile, the petitioner submitted its proposal for a fresh Letter of Approval for a power plant unit in the non-conventional energy SEZ, MBIL-SEZ. The same was placed before the Approval Committee at its meeting held on 01.04.2016. The Approval Committee was of the view that a fresh Letter of Approval was not required as the petitioner's unit was already approved for power generation. However, it noted that O&M benefits were not allowed to the petitioner's unit during the period 01.04.2015 to 15.02.2016 under the 2009 Guidelines as restored by the Government of India by its letter dated 06.04.2015. Accordingly, it directed that the said O&M benefits be recovered from the petitioner. The Approval Committee also decided that the petitioner would be entitled to O&M benefits subject to the condition that duty free transfer of power to its EOU shall not be allowed. The said conditional approval was communicated to the petitioner by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt to raw materials and consumables for generation of power) for the period 01.04.2015 to 15.02.2016; and (b) whether the condition that no duty free benefits for transfers to EOU is contrary to the SEZ Act and the Rules made thereunder. 14. Insofar as the validity of the condition that no duty free benefits would be allowed for transfer of power to EOU is concerned, it is common ground that the interpretation of Rule 47(3) of the SEZ Rules is dispositive of the said controversy. Rule 47(3) of the SEZ Rules, is set out below: "47(3) Surplus power generated in a Special Economic Zone's Developer's Power Plant in the SEZ or Unit's captive power plant or diesel generating set may be transferred to Domestic Tariff Area on payment of duty on consumables and raw materials used for generation of power subject to the following conditions, namely:- (a) proposal for sale of surplus power received by the Development Commissioner shall be examined in consultation with the State Electricity Board, wherever considered necessary: Provided that consultation with State Electricity Board shall not be required for sale of power within the same Special Economic Zone; (b) norms for production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's unit was required to be demarcated as a non-processing area for the period 01.04.2015 to 15.02.2016, O&M benefits would not be available to the petitioner's unit. Third, it was contended that in terms of Sub-section (2) of Section 26 of the SEZ Act, the Central Government has the powers to prescribe the manner and the terms and conditions subject to which benefits under Section 26(1) of the SEZ Act are to be granted. Lastly, it was submitted that the Board of Approval was bound by the policy decisions. It is also stated that the Central Government had the power to issue directions on questions of policy and in terms of Section 9(6) of the SEZ Act, the Board of Approval was bound by the same. Before examining the scheme of the SEZ Act and before addressing the aforesaid issues, it would be relevant to refer to the relevant Guidelines. 17. As noted above, the petitioner had sought approval for its power generating unit in the 'processing area' of the MBIL-SEZ in terms of the 2009 Guidelines. The approval as sought for by the petitioner was granted by the LoA dated 08.10.2009. The petitioner was granted all the facilities and benefits as admissible to a unit in an SEZ, subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved by the Board of Approval as authorized operation to the Developer/Co-developer within the processing area, in such cases generation of power will be carried out as a unit without any separate demarcation of the area for that purpose. However, such unit will maintain separate accounts as a power generating unit. These units will enjoy duty free import of capital goods, raw materials and consumables for the generation of power and such duty free imports of capital goods, raw material and consumables etc. would be counted towards the NFE obligations of the unit. Constituents to whom it can supply power Such a unit can supply power to other SEZ Units located in the processing area of the same SEZ/SEZ units located in the processing area of other SEZs, facilities located in the non processing area of the same SEZ/ facilities located in the non processing area of other SEZs, facilities located in the processing area of the same SEZ/ facilities located in the processing area of other SEZs and DTA. iii) A single power plant in an SEZ A single stand alone power plant can be set up in an SEZ in which there would be no other units. Such a power plant will be treated as a unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pment Commissioners of SEZs 3. Ministry of Power, Govt. of India, Shram Shakti Bhawan, Rafi Marg, New Delhi 4. Department of Revenue{CBDT/CBEC) Govt. of India 5. DG, EPCES" 23. The aforesaid letter (also referred to as 'the First Letter') clearly indicates that the Government of India had decided to withdraw the 2012 Guidelines and restore the 2009 Guidelines without any additional condition. The aforesaid decision of the Government of India to withdraw the 2012 Guidelines would have no material impact on the petitioner insofar as the O&M benefits are concerned as undisputedly, it was entitled to the same in terms of the 2009 Guidelines. However, according to the respondents, the O&M benefits were no longer available to the petitioner by virtue of another letter of the same date (letter dated 06.04.2015) that was circulated to all the Development Commissioners of Special Economic Zones. The said letter is also referred to as the Second Letter. The contents of the said letter dated 06.04.2015 are at the centre of the controversy in the present petition. 24. The said letter is reproduced below: "No. P.6/3/2006-SEZ Government of India [Ministry of Commerce & Industry Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant, can be permitted in Processing Area as a unit, and it will be subject to NFE obligations. Such a power plant will be entitled to all the benefits covered under section 26 of the SEZ Act including the benefits of initial setting up maintenance and the duty free import of raw materials and consumables for the generation of the power. They can sell power to DTA on payment of customs duty as determined by DoR keeping in view the duty on installation, as well as O&M, and including service tax exemptions. xxxx xxxx xxxx vi. Those Power Plants In SEZs which were approved prior to 27.02.2009, and subject to issue of Power Guidelines and Provisions of SEZ Act & Rules, either as an infrastructure facility by Developer/Co-developer or as a unit in the Processing Area, will be permitted to operate. It is relevant that during period of installation of such plants, duty benefits on capital investment of mega power plants were available under the then prevalent policy guidelines even in the DTA area. Henceforth, such power plants will be allowed O&M benefits only with regard to the average monthly power supplied to entities within the same SEZ during the preceding year. Henceforth, no O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o, or a State Government which, has been granted by the Central Government a letter of approval under sub-section (10) of section 3 and includes an Authority and a Co-Developer." 30. It is also relevant to refer to the definition of the term 'entrepreneur' as defined under Section 2(j) of the SEZ Act. Section 2(j) of the SEZ Act reads as under: "2(j) "entrepreneur" means a person who has been granted a letter of approval by the Development Commissioner under sub-section (9) of section 15." 31. Section 3 of the SEZ Act contains provisions for the procedure for making a proposal to establish an SEZ Zone. Any person who intends to set up an SEZ is required to make a proposal to the State Government for the purpose of setting up the SEZ. The State Government may on receipt of the proposal shall forward the same with its recommendation to the Board of Approval within such period as may be prescribed in terms of Section 3(7) of the SEZ Act. The Board of Approval, upon receipt of the proposal, may approve the said proposal subject to such terms and conditions as it may deem fit to impose or modify or reject the proposal. In terms of Section 3(8) of the SEZ Act, the Central Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rove, modify or reject the proposal. It is also entitled to prescribe the terms and conditions subject to which a unit shall undertake the "authorised operations". The relevant extract of Section 15 of the SEZ Act is set out below: "15. (1) Any person, who intends to set up a Unit for carrying on the authorised operations in a Special Economic Zone, may submit a proposal to the Development Commissioner concerned in such form and manner containing such particulars as may be prescribed: Provided that an existing Unit shall be deemed to have been set up in accordance with the provisions of this Act and such Units shall not require approval under this Act. xxxx xxxx xxxx (3) The Approval Committee 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 the provisions of sub-section (8): Provided that in case of modification or rejection of a proposal, the Approval Committee shall afford a reasonable opportunity of being heard to the person concerned and after recording the reasons, either modify or reject the proposal. (4) An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2009 Guidelines, 2012 Guidelines and the 2016 Guidelines) that the effect and the import of the said guidelines was to render the operations being carried out by the concerned unit as unauthorised operations. The letter of approval has been granted specifying the authorised operations and the same cannot be altered by general guidelines, which at best qualify to be a policy decision by the Central Government. 40. It is next contended that the Central Government is entitled to demarcate processing areas and non-processing areas and the unit established by the petitioner had ceased to be a unit in the processing area whereby rendering it ineligible for O&M benefits. The said contention is also not supported by the scheme of the SEZ Act. 41. Section 6 of the SEZ Act requires that the Central Government may demarcate the areas falling within the SEZ into the processing area and non-processing areas. Section 6 of the SEZ Act is set out below: "6. The areas falling within the Special Economic Zones may be demarcated by the Central Government or any authority specified by it as- (a) the processing area for setting up Units for activities, being the manufacture of goods, or renderi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to restore the 2009 Guidelines and further directs that the same would "henceforth, be the basis for relevant policy and operational decisions". There is no ambiguity in the language of this letter. The use of the word 'henceforth' clearly indicates that the decision as communicated in the said letter is required to be applied prospectively and the 2009 Guidelines would be the basis for all relevant policy and operational decisions. 46. It appears that this letter was forwarded under the cover of the Second Letter. This letter as noted before is at the centre of the controversy. The last line of the first paragraph of the Second Letter indicates that the copy of the communication regarding the decision of the Government to withdraw the 2012 Guidelines and restore the 2009 Guidelines is enclosed. It is thus apparent, that the First Letter was sent under the cover of this letter. Insofar as the first paragraph of this letter is concerned, there is no controversy. The second paragraph of the Second Letter also indicates that the communication contained therein is pursuant to the Government's decision as communicated under the First Letter dated 06.04.2015. This is clear from the open ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uidelines, a power plant could be set up by the developers/co-developers as a part of the infrastructure facilities only in the non-processing area of the SEZ. However, under the 2012 Guidelines this condition was relaxed and therefore, with the reinstatement of the 2009 Guidelines such units would now require to be placed in the non-processing area. The Second Letter thus, would be applicable only to such units and not the ones that were other-wise permissible to be established in the processing areas under the 2009 Guidelines. 49. It is essential to note that one of the principal difference between the 2009 Guidelines and the 2012 Guidelines is that, whereas under the 2009 Guidelines, a power plant set up by a developer/co-developer as a part of infrastructure facility was required to be placed only in a non-processing Area of the SEZ and would not be entitled to any O&M benefits. However, a power plant or unit set up within the SEZ to generate power as a product or as a captive power plant could be located in a processing area and if this was done, the power plant would be entitled to fiscal benefits under Section 26 of the SEZ Act. The 2012 Guidelines expanded the benefit. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prejudice to the generality of the provisions contained in sub-section (1), the powers and functions of the Board shall include - (a) granting of approval or rejecting proposal or modifying such proposals for establishment of the Special Economic Zones; (b) granting approval of authorised operations to be carried out in the Special Economic Zones by the Developer; (c) granting of approval to the Developers or Units(other than the Developers or the Units which are exempt from obtaining approval under any law or by the Central Government) for foreign collaborations and foreign direct investments, (including investments by a person resident outside India), in the Special Economic Zone for its development, operation and maintenance; (d) granting of approval or rejecting of proposal for providing infrastructure facilities in a Special Economic Zone or modifying such proposals; (e) granting, notwithstanding anything contained in the Industries (Development and Regulation) Act, 1951, a licence to an industrial undertaking referred to in clause (d) of section 3 of that Act, if such undertaking is established, as a whole or part thereof, or proposed to be established, in a Special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded in terms of Section 10 of the SEZ Act. 53. However, the Board of Approval cannot for the purpose of cancelling a letter of approval, re-demarcate the processing areas and non-processing areas in an SEZ. Demarcation of such areas is not to be done for the purpose of cancelling existing letter of approvals. 54. Section 26 of the SEZ Act provides for certain exemptions, drawbacks and concessions available to developers and entrepreneurs. Sub-section (2) of Section 26 of the SEZ Act also provides that the Central Government may prescribe the manner and the terms and conditions subject to which the exemptions, concessions, drawback or other benefits shall be granted to a developer or an entrepreneur under Section 26(1) of the SEZ Act. Chapter IV of the SEZ Rules prescribes the terms and conditions for availing exemptions, drawbacks and concessions and there is no dispute that the petitioner would require to meet those terms and conditions. As noted above, the controversy in this case is not regarding the petitioner complying with any terms and conditions for grant of concessions under Section 26(1) of the SEZ Act. Such concessions are available by virtue of Section 26 of the SEZ ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
