No export duty on goods transfer from DTA to SEZ: SC

The Supreme Court today said transfer of goods from Domestic Tariff Areas (DTA) to Special Economic Zones (SEZ) is not subject to export duty.

The Supreme Court was hearing a plea filed by the Centre challenging an order of the Gujarat High Court barring export duty on goods supplied to export-oriented SEZs from DTA.

A Bench comprising Justice D K Jain and Justice H L Dattu dismissed the plea of the Centre that any transfer of goods from a DTA to an SEZ falls within the meaning of an export.

Passing an order on the plea of Essar Steel, the Gujarat High Court had on November 11, 2009, held that the export duty on the goods supplied by any firm from a DTA to an SEZ was not justified. This judgment was appealed by the Centre in the Supreme Court.

During the proceedings in the Apex Court, senior advocates C A Sundaram and Mahesh Aggarwal, appearing for the Essar group firm, opposed the Centre's contention.

The dispute revolves around the period between August, 2007, and January, 2008, when Essar supplied 6 lakh metric tonnes of iron ore pellets from its Vizag-based unit to an SEZ unit at Hazira in 12 shipments. The firm did not pay any export duty on the supply of the iron ore pellets from the DTA unit to the SEZ unit.

When this came to the notice of the Director General of Revenue Intelligence, it issued a show cause notice to the company asking why it should not pay export duty of Rs 16.5 crore.

Later, the Kandla SEZ also issued a circular that all such supplies to SEZs from DTAs would be subject to export duty at 20 per cent of advalorem.

On July 9, 2008, the Special Officer, Essar Special Economic Zone, Hazira, directed the company to pay export duty on the iron ore pellets supplied to its SEZ unit.

Following the directive, Essar approached the High Court and filed a writ petition challenging all the directions. The court allowed the appeal and quashed all letters and notices issued by the department in this regard.