Does DTA-SEZ trade attract customs, Govt asks SC

The Government has sought the Supreme Court's intervention in deciding whether goods sent from a unit in a domestic tariff area to another unit in a special economic zone (SEZ) will attract customs duty.

The Ministry of Commerce had dragged the Essar group to court alleging that iron ore pellets and calibrated iron ore supplied by an Essar unit to the Essar SEZ, Hazira, are goods exported from India for the purpose of such levy.

A bench headed by Justice S H Kapadia, however, adjourned the matter till April 9.

The petition filed by the Ministry has challenged the Punjab and Haryana High Court's interim order that allowed Essar Steel to continue its arrangement without paying customs duty on goods supplied from its domestic tariff area (DTA) unit at Vizag to the Hazira SEZ unit.

The High Court had ordered that Essar was not liable to pay customs duty in the absence of any specific provisions under the SEZ Act, 2005, to levy customs duty or any corresponding amendment in the Customs Act, 1962.

According to the Government, the Directorate of Revenue Intelligence had found that ESTL (the Essar unit) had been supplying iron ore and calibrated iron ore to Essar Steel without paying export duty and the goods were to be termed as export.

It also stated that customs duty was not exempted for goods supplied from a DTA to an SEZ unit.

According to the Government, SEZs are to be considered territory outside India, and goods supplied to a unit in an SEZ are treated as exports and the corresponding benefits such as excise duty exemptions on goods from a DTA to SEZ units, drawbacks facilities, etc are also provided.

"...If the export implies only export out of India, then supplies to SEZs from DTA would not be export out of India and no rebate under these rules would be admissible," the petition stated.

Essar had moved the High Court seeking to restrain the Government from levying and demanding export duty on goods sent from ESTL to the Essar SEZ on the grounds that the SEZ Act was a complete Act and there was no provision for levying such export duty on the goods supplied to a unit in an SEZ.

Essar had stated that the SEZ unit was located in India and, therefore, supplies to such a unit cannot be considered goods exported from India.